The transportation capacity is tight, the demand for China-Europe railway services suddenly surges, and the price of air cargo charter reaches a new high

Although ocean shipping still occupies the C position in cross-border trade, due to multiple factors such as the epidemic, shipping timeliness, shipping capacity, and container shortages, some of the goods flow to China-Europe express trains and air freight. But the latter two also have different troubles.

▍After the Suez Canal incident, the demand for China-Europe rail services suddenly surged

From the 23rd to the 29th, the Suez Canal was blocked for a week. Affected by this, some domestic international logistics service platforms have recently received inquiries about China-Europe Express trains, which has doubled the number before.

According to Marco Reichel, Asia-Pacific business development director of international logistics company Crane Worldwide Logistics, before the week-long Suez congestion, the space for trains to Europe was already tight.

He said: "Our capacity in late March and throughout April has been very limited, and now we expect that capacity will be sold out before May."

He added: "As demand increases, we expect freight rates to rise accordingly."

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In fact, due to insufficient air and sea transport capacity, last year's railway transport volume between China and Europe increased significantly by 56% to 1.14 million teu, and 12,400 flights were carried out. According to media reports, in January and February this year, container throughput increased by 96% year-on-year to 209,000 teu.

Reichel added: "The capacity is very tight, prompting many customers to also look for other options, such as road freight from China to Europe." "We have also received information from the platform operator that some trains have been cancelled, which will exacerbate the capacity contraction. ."

Rob Foster, business development manager for Norman Global Logistics in Central and North China, said that the Suez crisis "has not helped" in terms of rail freight space and increasing congestion.

He pointed out that due to the congestion of the Los Angeles port, the shortage of containers is still continuing, and due to the delay and chain reaction in Suez, which is expected to last for several weeks, there will be a severe shortage of empty containers returning to China to replenish inventory.

"In early May, China will have another national holiday, which may slow down the supply chain."

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Foster said that the current delays in the railway network are very small, and the main bottleneck is the 3 to 6 days delay of flights departing from some departure places in China. For example, he explained that China’s railway terminals are not as advanced as container ports in terms of customs inspections.

"Because the goods cross different borders, the railway transportation company must carry out a large number of commodity code checks. Due to the different wording of the codes, some goods are not allowed to cross the border; as long as one container is detained at the border, the entire train journey is delayed."

▍Air cargo charter flight prices hit a new high, and shippers have narrowed options

In addition to supply chain shocks, air freight rates were stable in the last two weeks of March, with only single-digit fluctuations.

But as expected, the freight company reported that due to the Suez Canal crisis, their charter flight rates have soared.

A freight forwarder specializing in Asia-Europe business said: “Charter flight prices will soar in the next two weeks, and capacity seems to be insufficient. In fact, some shippers have contacted us through air to find alternative solutions.”

Peter Stallion, head of the aviation and container division of Freight Investor Services, a freight investor service company that studies long-term demand, said that the potential model shift triggered by Suez is also driving future price changes.

"The biggest change is an attempt to switch from sea to air. This is due to cargo delays caused by congestion caused by the Suez Canal crisis. Simple and clear freight schedules in the past will become crucial and begin to be transported by air charter."

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Bruce Chan, vice president of global logistics at Stifel, explained that at the same time, retail inventories are close to historical lows, and the US stimulus measures are likely to increase retail demand on the East Pacific route.

He added: “The gradual reopening and vaccination of the United States may promote activities in the pharmaceutical and even fresh food sectors. However, in the common air cargo categories, we believe that high-tech and e-commerce-related freight is in a leading position.”

Mr. Stallion said that the hope of vaccination has also contributed to future price declines. He said that transatlantic prices in the third and fourth quarters began to "collapse" because of the expected higher passenger volume and therefore higher capacity. He explained that passenger traffic will become the "core indicator" of air cargo.

However, the lack of capacity will continue to exacerbate volatility until passenger travel is fully restored.

Chan said: "We expect that the lack of structural capacity caused by the lack of wide-body cargo aircraft in the market will magnify the fluctuations in the global spot price of air cargo. This applies to both expected seasonal fluctuations and a seemingly endless series. Supply chain shock."

"In terms of freight, the speed of conversion and increased freighter delivery speeds help expand global capacity, but we believe that the current cross-regional and cross-modal global freight capacity is almost universally lacking, which further reduces the selectivity of shippers."