Russia-Ukraine conflict starts to affect China-Europe trade
Traders cancel orders, divert shipments to cope with disruptions
Published: Feb 27, 2022 10:04 PM
A China-Europe freight train carrying medical supplies bound for Madrid of Spain departs from the city of Yiwu, east China's Zhejiang Province, June 5, 2020.Photo:Xinhua

A China-Europe freight train carrying medical supplies bound for Madrid of Spain departs from the city of Yiwu, east China's Zhejiang Province, June 5, 2020.Photo:Xinhua

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Chinese traders and logistics service providers have been ramping up efforts to cope with the rapidly evolving situation in Europe, as the Russia-Ukraine conflict raised concerns over potential impact on certain aspects of the China-Europe freight train and shipping routes by sea and air.

While the actual impact remains unclear given the fast changing developments, some Chinese and international traders have canceled or diverted certain trading channels and routes to fend off possible disruptions, the Global Times has learned.

Several traders focused on the European market told the Global Times on Sunday that the rising tensions in Europe have raised growing concerns and affected their businesses.

Some European clients have expressed deep concerns over the possible impact from the escalating tensions and have started cancelling orders delivered by China-Europe freight trains, with small and medium-sized traders bearing the brunt, Tommy Tan, president of Shanghai EPU Supply Chain Management Co, who is a veteran agent of China-EU freight trains, told the Global Times on Sunday.

"Due to the escalation of the conflict between Russia and Ukraine, all our trains passing through Ukraine can only be diverted to other routes.… direct shipments to Ukraine have stopped," Tan said.

Based on the situation, Tan's company is avoiding the borders between Ukraine, Russia and Hungary when designating new trade routes. "The major alternative trade routes to European cities are Małaszewicze in eastern Poland and Russia's Kaliningrad," Tan said. 

The company is also seeking new sea ports with train service networks in Russia or other European countries as part of the contingency plans for European clients.

The disruption has also affected sea transportation, with international shipping companies changing routes amid rising safety concerns from the conflict.

"Earlier this week, we communicated a full stop to bookings destined to or originating from Ukraine... cargo currently en route to Ukraine is being discharged in Port Said and Korfez," Maersk said in its latest statement on Saturday. 

Gary Lau, chairman of the Hong Kong Association of Freight Forwarding and Logistics, confirmed to the Global Times on Sunday that some international shipping companies are adjusting their shipping schedules due to the conflict between Russia and Ukraine, but the actual impact is still not clear.

Lau's company mainly operates on European trading routes, and he admitted that there has been some impact on European clients, whether they are shipping cargo by sea or by air.

"They are more prudent about taking orders these days," Lau said, noting that the longer the tension lasts, the greater the impact on the entire European logistics chain.

"Ships cannot get into ports, and all the flight and port services have already been halted," Qu Bo, chairman of a Chinese chamber of commerce in Odessa in Southern Ukraine, told the Global Times on Sunday.

The impact on logistics includes shipments of goods such as shoes and clothing from China to Ukraine, Qu said.

Despite the disruption, industry analysts noted that the overall impact on China-Europe freight trains from the regional conflict is manageable, mainly because the proportion of these trains going through Ukraine is relatively low, experts said.

"The Ukrainian route is not the main channel of the China-Europe freight train, accounting for about 3-5 percent of the entire China-Europe freight train capacity," a senior industry insider told the Global Times on Sunday.

The total container throughput of Ukrainian ports in 2020 reached 1.03 million 20-foot equivalent units, which was only 0.13 percent of global port container throughput, data from the Shanghai International Shipping Research Center (SISI) showed.

"Judging from the density of containership routes in Ukrainian waters, it is much lower than in the Mediterranean region," Zheng Jingwen, a research fellow at the SISI, told the Global Times on Sunday.

Therefore, disruptions caused by the Russian-Ukrainian conflict have far less impact on container transportation than events such as the previous Suez Canal congestion, experts said.

However, given that the turnover of the container market has encountered bottlenecks and container freight rates are already high and volatile, the market response to emergencies can be very sensitive toward the situation in Europe, Zheng noted.