Asia-Europe intermodal services gaining momentum amidst coronavirus pandemic

With the coronavirus outbreak, and countries in Europe having imposed varying degrees of bans on the entry of non-citizens, air transport network in the region has come to a near-halt. According to Eurocontrol, the body managing air traffic around Europe, total number of flights in the region has decreased from 85.7% to 86.9% between April 1, 2020 and April 8, 2020, with the busiest aircraft operator being DHL Express on this date.

Furthermore, according to the latest data from Freight Investor Services (FIS), urgent requests of medical equipment and pharmaceuticals from China to Europe has pushed air freight rates to record-high levels. The price per kilogram rose almost 36% week-over-week starting March 30, 2020 to about €5.70 per kg, as a result of increasing air cargo rates from Shanghai to Europe, reports FIS.

If it seems that, after a rather unsuccessful 2019, air freight volumes might not recover in 2020, and sea freight rates volatility might also be one of the potential scenarios for the freight forwarding market.

On the bright side, however, intermodal transport seems to be gaining momentum, particularly as far as China-Europe routes are concerned. In March, trains around the route mostly started operating again, after disruptions caused not only by the Chinese New Year but most crucially by the coronavirus pandemic. Further to that, volumes saw a spike: the number of containers and open wagons on the China-Europe train increased by 36% and 30% year-on-year respectively, with shipments close to a 99% full container rate.

The transportation of coronavirus-related medical supplies has contributed to this rise in volumes, since pharmaceutical products were given priority over other products. It has been estimated that by the end of March, China-Europe trains shipped a total of around 494 tonnes medical aids mainly to Italy, Germany, Spain, Czech Republic, Poland, Hungary, the Netherlands and other European countries.

LSPs in various markets have decided to ride the wave of this opportunity. This is the case, for example, of Maersk, managing a Westbound rail freight service from Asia to Europe taking between 28 and 32 days for completion, almost half of the time when compared to traditional sea routes. Having noticed a steady increase in volume since the beginning of January 2020 and as requested by its customers, the company recently announced its decision to strengthen this service and deploy it on the opposite route too, from Europe to Asia. In line with this, Maersk’s first eastbound freight train service was dispatched from St Petersburg on March 28, 2020.

In late February, Nurminen Logistics also instituted an eleven-day service from Hefei, China to Helsinki, Finland. DHL Global Forwarding further reported an increased the frequency of its trains, with high levels of utilisation and demand in both directions. 

In the UK, Davies Turner announced that in mid-March it reactivated its weekly direct Express China service to the UK, with cargo railed to Duisburg in southern Germany, transported to Purfleet by ferry, and delivered by truck to the Dartford distribution centre for customs clearance and delivery, with a record arrival time of 17 days.

According to Tony Cole, head of supply chain at Davies Turner, sending cargo by rail costs €0.22 per kg against the €5.70 per kg that costs sending it by air freight.

This tendency of choosing rail freight is likely to be mainly led by lower rates when compared to air freight, and faster delivery times when compared to sea freight, as well as an environment when a massive proportion of the world’s aircraft aren’t flying, therefore making belly freight unavailable

It might be that the New Silk Road can expect a more centralised approach from China in the future, on the back of this growth in Asia-Europe rail freight traffic and a slow recovery of the air and sea freight markets.

Source: Transport Intelligence, April 14, 2020

Author: Caterina Ciccone