News / Ukraine invasion will impact China-Europe rail freight and push up rates

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War in Ukraine and sanctions on Russia could have far-reaching consequences for China-Europe rail freight.

Ukrainian Railways has said that, despite reverting to emergency operations, it would continue operations for both passengers and cargo.

The country is a secondary gateway into Europe for China-Europe rail freight, however, with the bulk of traffic passing through Russia and Belarus.

Indeed, Chinese forwarders moved quickly today to reassure customers their cargo was safe.

One Qingdao-based forwarder said: “The conflict between Ukraine and Russia is currently the most unstable factor in Europe… a larger-scale hot war seems to be on the verge of breaking out.

“According to our confirmation with all parties, including Russian Railways, their operation is normal. In addition, we believe neither Europe nor Russia wants an impact on their own trade.”

Likewise, Chengdu-based New Silk Road Intermodal said there was “no danger whatsoever for rail shipments via Russia through Belarus”, given that the main route is “on average, 1,600km from where the conflicts are taking place”.

It added: “In fact, current transit times are the fastest recorded in recent months. Every week, an average of 275 trains are traveling on this route.”

Nevertheless, with the west preparing “massive” sanctions against Russia, speculation is mounting over their impact on trade and cargo.

For example, according to Russia Briefing, sanctions placed by Brussels “could have the effect of slowing or stopping bilateral trade flows between China and Europe, as Moscow could organise a go-slow or a complete halt in transiting freight. Fifty percent of all EU-bound rail freight traffic enters via Russia and Belarus. That traffic rose 30% in 2021.”

Furthermore, it speculated, given the warm relationship between Russia and China, the two countries could “orchestrate a China-EU trade slowdown that would create supply chain pain in Brussels”.

However, Andre Wheeler, CEO of Asia Pacific Connex and an expert on China’s Belt & Road Initiative (BRI), told The Loadstar: “China would be very concerned, as it will have a significant impact on EU-China trade. China needs the EU to improve its chances of withstanding the economic headwinds it faces, with the potential that this conflict will disrupt its reliance on the EU, potentially a game-changer, in terms of current internal dissent within the CCP [Chinese Communist Party].

“Ukraine was one of the earliest signatories to the BRI, and this has significant economic and geo-political fallout for China. In my view, China will not be particularly happy with Putin right now.”

Meanwhile, with the recent storms in Europe significantly impacting rail freight traffic, one forwarder said today’s invasion of Ukraine would “definitely” lead to a spike in freight rates.