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Covid ripples through land, sea and air, and China-Europe rail cashes in

CHINA-EUROPE rail rates have doubled in the last few months as shippers have been forced out of the air and sea lanes by space shortages caused by the Covid crisis, reports IHS Media

19 January 2021 - 19:00
CHINA-EUROPE rail rates have doubled in the last few months as shippers have been forced out of the air and sea lanes by space shortages caused by the Covid crisis, reports IHS Media.

Westbound rail space was severely constrained in the fourth quarter, despite a record 12,400 trains deployed in 2020 by the state-owned China Railway Express.



'The peak season added fuel to the market, bringing customers from various industries, such as retail, to look to rail,' said Yves Larquemin, Dachser managing director of air and sea logistics for North Asia.



Said DHL Global Forwarding China chief Thomas Kowitzk: 'The system began to shake and from September. Even increased train capacity was no longer able to cope with the demand. The availability of containers became an issue and rates started to increase due to the shortage.'



Rates in January for carrier-owned containers on China-Europe from terminal to terminal passed US$10,000 per FEU, with the soaring demand for limited capacity quickly elevating rates from the $4,000 to $5,000 per FEU levels seen in October, according to an executive at a Europe-based forwarder who asked not to be identified.



Tony Cole, the head of ocean freight at Davies Turner, a British forwarder offering services on the China-Europe rail network, said 'rates per FEU without guaranteed space and equipment, still in short supply, are over twice what they were back in October.'



Strong demand from European importers is pushing short-term rates on all modes out of China to levels never seen before, with the demand condensed into the last four months of 2020 and continuing through January, overwhelming capacity across air, land, and sea.



China-Europe rail has been more expensive than ocean but cheaper than air. Rates are now more in line with sea freight, but even though rail prices have doubled in the last few months, the rate per kilogramme remains well below air freight. A Davies Turner calculation on its website shows that China-Europe rail will cost shippers $0.66 per kilogramme.


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