If maritime transport returns to normal, will Eurasian rail transport bid farewell to prosperity?
Ocean trade usually accounts for more than 90% of Global trade. Due to the limitation of maritime transport capacity and lack of containers, a lot of cargoes originally used to be transported by sea poured into the railway, which gave the Eurasian rail transport a new round of explosive experience. Many people believe that the propersity of the Eurasian rail transport is a bubble boom and the epidemic will eventually dissipate and maritime transport will also return to normal. By then, the China-EU freight train will go back to square one all of a sudden.
Despite the fact that new strains of the virus begin to emerge in many parts of the world and the global accessibility of vaccines to human beings is still very unbalanced, we still don’t know when the epidemic will eventually dissipate.
The shipping freight rate per FEU from Asia to northern Europe rockets to 14000-15000 US dollars, some short term rates even to 20000 US Dollars as some sources reported, making the shipper daunting, which indicates the shipping market is indeed too extreme at present. And coupled with the port congestion and delay, the overall service quality has declined seriously and complaints are heard in many industries.
In the long run, the shipping freight rate is bound to decline from the historical high record of US $15000 or even higher, but what chance will there be of dropping to US $2800-3200 in 2019? Shipping companies have got rid of the days of being as cheap as cabbage price and long-term losses in the past decade by controlling the transport capacity, then will they make themselves fall into the abyss in the future again? Before the outbreak of epidemic, the maritime transport capacity has been surplus for a long time. If the epidemic comes to an end, shipping companies will still implement active shipping capacity management and control strategies to maintain today’s supply-side market. Freight rates may fall, but are unlikely to return to their pre-epidemic low levels.
Nowadays, many goods are being transferred from sea to railway and the transport capacity of the Eurasian freight train is also in a tense state. Meanwhile, rail freight rates are also rising. Some people are concerned about whether the transport plan of freight trains can be increased in order to improve the transport capacity? After lowing the shipping rate, will the rail rate also be decreased along with it?
Despite the relief in the maritime market in the future and large quantities of cargoes returning to shipping, the China-EU rail operation plan is bound to rise steadily in the long run and is unlikely to decline. However, from the perspectives of operation and cost control, the ideal state of the transport market will still be that the supply is slightly less than the demand, which is also in line with the goal of maintaining the stable development of freight rates and attracting high value-added goods.
Through the prediction of industry insiders, in the future, Eurasian rail freight rates will fall back to about US $7000 / 40 foot container, and shipping freight will go back to the level of US $5000/FEU; Railway transport freight is about 30% more expensive than sea , but that should be acceptable to the market.
At present, there is a shortage of freight space. How far on earth is it? According to the instruction of one leading rail freight forwarders, their whole month’s booking work has to be completed in the first ten days of the month. It is nowadays difficult to book the space because there are no enough in the market. It’s just easier to book the shipping space for those who have the eastbound cargoes. After all, for the chinese rail platform companies, if their clients have the demand of west- and eastbound at the same time, the operating cost will be lower. Therefore, for the freight forwarders, it will be also an advantage for them to actively develop sufficient eastward cargoes.
There is no denying that it will be a perfect opportunity for the Eurasian rail transport to take advantage of the current supplier market to actively explore market-oriented operation, choose high value-added products and high net worth clients, and learn how to achieve the aim of subsidy recession. Many international clients have realized the comparative advantages of rail transport solutions and the supply chain benefits brought by it. Reducing inventory and arriving at the destination faster can help them speed up the rate of turnover, reduce product costs and improve profits.
However, there is still one problem that cannot be avoided. Due to the overstocking and congestion of the rail transport, it is also undermining its fundamental survival and competitive advantages. At the beginning of the development, the time limit of more than 10 days or half a month has been extended to more than one month even two, which is contrary to the goal of the rail sector.
So it’s time for the industry to reflect.
Reporter: Qiaonan Zhang / Min Lou