Congestion has been striking the global logistics industry over the past months. Its latest victim, rail freight. News from various border crossings and terminals has been flooding in, with reports of containers being stranded for weeks on end. There are several reasons in several regions along the New Silk Road that are causing these congestions. Apart from regional factors, the various oncoming logistics seasons are also contributing to the snail-paced movement.
This article explores the causes and conditions that have caused terminals to choke up, containers to arrive slow and finally, become a cause of much frustration to forwarders globally. But before we scrutinise the state of rail freight today, it is critical to understand the volumes and the growth the rail freight industry has achieved in the last two years.
‘Booming traffic in the pandemic year’
The pandemic proved the resilience of rail freight, especially along the New Silk Road. As airports and ports worldwide reduced their capacity and functioning, rail freight offered the support to global trade that was desperately needed. Record numbers were noted, as compared to 2019 and rail freight became more competitive. In 2020, 12 thousand trains transported about 1,135,000 TEU by rail, which is 56 per cent more than the previous year. These were remarkable numbers caused by an unforeseen global crisis.
During this period, transit countries such as Mongolia and Kazakhstan saw a massive increase in trade and their logistics industry saw a significant boost. Similarly, many new hubs were established in Europe, such as Amsterdam and Liege. More routes emerged, more hubs emerged, and more trains emerged. However, the rosy picture did have some blemishes when forwarders were faced with a lack of equipment, rising rates and diminishing subsidies. On top of these predicaments, the latest ones causing congestion have added to the ever-increasing burdens.
‘Clogged Rail Routes’
Compared to the traffic flow in July this year, August and September have been tumultuous months for the New Silk Road. Traffic congestion is reported from Alashankou, Kazakhstan, a critical cross border terminal for trains coming from China. Last month, it was reported that over 50 trains were queued at the terminal. This has caused the trains that were waiting to depart in August to move to September. Simultaneously, authorities also stopped cross border trucking due to a Covid case, and to prioritise rail freight traffic.
On the other end of the journey, at Małaszewicze, construction caused by capacity increasing projects have slowed freight movement. Forwarders reported up to two weeks of delay at Małaszewicze, resulting in long waiting times for westbound and eastbound traffic. These congestions have caused a shortage of wagons and containers, pressing the ongoing container crisis within the industry. Parallel to this, in August 2021, China‘s third busiest Ningbo port suspended operations at one of its terminals due to a case of Covid-19. This terminal accounts for 25% of container cargo going through the port. Previously, in May, Yantian port was closed because of the virus as well. Of course, this comes as a preventive measure adopted by the Chinese authorities to prevent the spread of the coronavirus pandemic. However, these closures have been detrimental to the flow of goods between East and West, causing delayed shipping and congestion, furthermore increasing the burden on rail freight.
Coupled with the pandemic related lockdowns, some man-made and natural disasters have also heavily influenced global supply chains. The Ever-Green crisis in the Suez Canal shook the entire freight industry, causing a severe setback to forwarders. Natural disasters such as typhoons impacted large hubs like Shanghai, affecting sea, air and rail terminals. These incidents severely fractured the global supply chain, resting the burden of the alternative solution solely upon the rail freight industry.
Apart from the hub congestion, the oncoming golden week, Christmas, and Chinese New Year will keep forwarders on their toes. Reports of insufficient capacity are already coming in, as the number of problems in sea freight has pushed forwarders to seek capacity in rail freight. Clients have been seeking rail freight due to the incoming logistics season, the necessity to move their cargo faster, and finally, to avoid the growing Red-tapism within the sea freight industry. The all-accumulated result of these? $18,000 per container depending on the various routes.
However, the battle may not yet be all lost. Forwarders associations in various countries have approached governmental authorities to step in and prevent further spikes in sea freight rates within the already disrupted supply chain. This would hopefully simultaneously ease the situation in rail freight. Furthermore, the construction at Małaszewicze, once completed, will help with the increasing traffic and thereby create more robust channels. What one finally understands is that the congestion in rail freight is caused not only by a single crisis within the logistics industry but also by the lack of action and support from governmental authorities when it comes to investing in rail infrastructure and empowering small and medium-sized businesses to develop their rail capabilities.