China-Europe trade starts to feel the impact of Russia-Ukraine conflict

As the Russia-Ukraine conflict raises concern over the potential impact on certain aspects of the China-Europe freight train and shipping routes by sea and air, Chinese traders and Logistics service providers are seen ramping up efforts to cope with the rapidly evolving situation in Europe.

As reported by the global times, with the on-ground impact still hidden given the fast changing developments, some Chinese and international traders have cancelled or diverted certain trading channels and routes to fend off possible disruptions.

Traders focused on the European markets have shown their concerns. Some of the European clients have expressed deep concerns over the possible impact from the escalating tensions and have started cancelling orders delivered by China-Europe freight trains, with small and medium-sized traders bearing the brunt, Tommy Tan, president of Shanghai EPU Supply Chain Management Co, who is a veteran agent of China-EU freight trains.

“Due to the escalation of the conflict between Russia and Ukraine, all our trains passing through Ukraine can only be diverted to other routes.… direct shipments to Ukraine have stopped,” Tan said.

Based on the situation, Tan’s company is avoiding the borders between Ukraine, Russia and Hungary when designating new trade routes. “The major alternative trade routes to European cities are Małaszewicze in eastern Poland and Russia’s Kaliningrad,” Tan said. 

Further, the company is also seeking new sea ports with train service networks in Russia or other European countries as part of the contingency plans for European clients.

Even the sea transportation has been affected by the disruption caused, with international shipping companies changing routes amid rising safety concerns from the conflict.

“Earlier this week, we communicated a full stop to bookings destined to or originating from Ukraine… cargo currently en route to Ukraine is being discharged in Port Said and Korfez,” Maersk said in its latest statement on Saturday

‘Some international shipping companies are adjusting their shipping schedules due to the conflict between Russia and Ukraine, but the actual impact is still not clear.”

Gary Lau, chairman of the Hong Kong Association of Freight Forwarding and Logistics

“They are more prudent about taking orders these days,” Lau said, noting that the longer the tension lasts, the greater the impact on the entire European logistics chain.

“Ships cannot get into ports, and all the flight and port services have already been halted,” Qu Bo, chairman of a Chinese chamber of commerce in Odessa in Southern Ukraine.

The Logistics impact is also felt on shipments of goods such as shoes and clothing from China to Ukraine, Qu said.

While it is undeniable that the impact of the Russia-Ukraine conflict  has been, the industry analysts believe that the overall disruption felt by the China-Europe freight trains from the regional conflict is manageable, mainly because the proportion of these trains going through Ukraine is relatively low, experts said.

The Ukrainian route only accounts for about 3-5 percent of the entire China-Europe freight train capacity

Data from the Shanghai International Shipping Research Center (SISI)  shows that the overall container throughput of Ukrainian ports in 2020 reached 1.03 million 20-foot equivalent units, which was only 0.13 percent of global port container throughput.

“Judging from the density of containership routes in Ukrainian waters, it is much lower than in the Mediterranean region,” Zheng Jingwen, a research fellow at the SISI said.

Thus minimum impact on container transportation has been caused by the Russian-Ukrainian conflict, as compared to the previous events such as Suez Canal congestion.

Source: Global Times

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