Insufficient capacity, long-term or temporary clients?

In July, 1,352 trains were operated and 131,000 TEUs of goods were delivered, an increase of 8% and 15% respectively year-on-year, according to China Railways. Since May 2020, the China-Europe freight train has operated more than 1,000 trains in a single month for 15 consecutive months, and since May this year, it has operated more than 1,300 trains in a single month for three consecutive months.

However, compared with last month, the number of China-Europe freight trains has declined. Congestion and insufficient capacity have once again become the focus of the industry.


Insufficient capacity

“It’s not about putting clients beyond the pale and rejecting them. Please understand us: Facing the special period of export, loyal clients deserve to be rewarded. We can only assure clients with long-term cooperation and tiding over difficult times, and assure generous and ethical clients…” Dan Qi, General Manager of Yuxinou Logistics, the platform company in Chongqing, shared months ago in the circle of friends, revealed the dilemma of the China-Europe freight train. Under the difficulties of insufficient freight space an transport capacity, how does the Eurasia Freight Train select clients?

Over the past ten years, with the support of the state and local governments, under the participation and joint contribution of domestic and international parties, Eurasia Freight Train has achieved rapid development. In the large-scale outbreak of COVID-19 epidemic in 2020, the Eurasia Freight Train has effectively stabilized the normal operation of the global supply chain and helped to resume production and economic.

Facing the high demand in the Asia-Europe freight market, the freight rate of Eurasia Freight Train has been continuously increasing since last year. For the development of the industry, one of the main benefits of the rate increase is, such increase gradually reduces the dependence on government supportive subsidies. From this point of view, the marketization process of Eurasia Freight Train has indeed taken a giant step forward.

The epidemics in Europe and the United States continued to relapse this year, and the impact of the blockade on global transport capacity continued. The stranding of the “Ever Given” in Suez Canal has become a “black swan” in the logistics industry this year. Since marine transportation was obstructed, seaborne goods are pouring into the railway again, and the westbound transportation of Eurasia Freight Train becomes hot again which creates difficulty to find a freight space. The freight capacity of Eurasia Freight Train is insufficient to satisfy all market demands, so the price has reached a record high.

Even in the situation where everyone spends a higher freight rate, many clients still cannot find a space to complete the cargo transportation. In the final analysis, Eurasia Freight Train has insufficient capacity comparing with market demand.

Then, here comes the problem. ——Which clients should be selected by major train platform companies?


Long-term clients or new friends?

Is it the client who has been using Eurasia Freight Train for a long period? Or is it a new client who is transferred to the Eurasia Freight Train because of the blockade of marine transportation?

From the perspective of market-based competition, the answer is quite simple: the higher bidder wins. Whoever is willing to pay more, the freight space belongs to him.

On one side, they are loyal clients who have been using Eurasia Freight Train during the off-peak and peak seasons after years of nurturing and merging; on the other side, there are marine clients who temporarily moved to the railway due to the obstruction of marine transportation during this period. In such case, normally the “temporary clients” from marine transportation will pay higher price and seize the opportunity, who is occupying the freight space. Since the second half of last year, marine clients have experienced the sky-high freight rates step by step. Current freight rates of Eurasia Freight Train are almost no difficulty for them to accept.


Will they stay loyal with the railway transportation?

Can marine clients be transformed into long-term railway clients? Or will they eventually return to marine transportation when shipping capacity improves and the market becomes normal? Which one will be more likely happened?

Besides, no one wants to be a disloyal client in the mouth of a business partner. In this market, those with small size and limited funds don’t have so many choices in general. They just select the line and method which can maximize their benefits. No reason other than survival.

Therefore, in the current situation with limited capacity, it is worthy of discussion: how to provide good service to the long-term clients of Eurasia Freight Train, and how to balance the service demands between long-term clients and temporary marine clients.


Reporter: Qiaonan Zhang / Gong-Wei Lou