Beijing (Agencies): In the face of the prolonged Red Sea crisis entering its third month, shipping lines remain cautious about resuming services, leading to soaring freight rates and a shortage of shipping slots for large companies and international traders. Mediterranean cargo rates from Asia to Europe have more than doubled since November, prompting industry insiders to explore alternatives, with the China-Europe freight train service gaining prominence for its efficiency.
In response to the crisis, Maersk, a major shipping company, announced a halt to vessels bound for the Red Sea or Gulf of Aden, diverting them around the Cape of Good Hope due to heightened tensions and security risks in the region. This strategic shift is impacting shipping times, creating supply chain uncertainties, and contributing to a significant rise in logistics costs, according to Zhong Zhechao, founder of One Shipping.
The detour around the Cape of Good Hope adds an estimated 7,000 to 10,000 kilometers and seven to 10 days to the shipping journey, intensifying the challenges faced by the industry. Data from the Shanghai Shipping Exchange indicates a sharp increase in market freight rates for exports from Shanghai Port to European basic ports, reaching $2,871 per standard container on Friday—a 210.38% rise from December 8, 2023.
European businesses are grappling with the repercussions, affecting global trade and prompting exporters to consider alternatives. The unpredictability of sea freight rates has led many to explore the China-Europe freight train option, known for its faster delivery and reliability. Despite higher costs associated with rail shipping, the shorter transit time of about 12 days, compared to approximately 40 days by sea, is increasingly appealing.
However, challenges remain, with traders facing price differentials and constraints in rail shipping capacity. Gao Yangjiang, General Manager of Ningbo Rapid International Freight Agency Co, noted that while more traders are turning to China-Europe freight trains, it remains challenging to significantly increase the share of rail transportation compared to sea routes.
The Red Sea crisis has implications for Chinese companies in Italy, potentially causing a 10-day delay in product delivery. Yet, the impact is limited for now, given the one-year fixed-price contracts signed by Chinese companies with shipping firms, according to an insider from the Italy China Chamber of Commerce.
As industry insiders anticipate continued high sea freight rates in the short term, with a peak expected in mid-January, the China-Europe freight train service emerges as a viable alternative, offering a more reliable and expedient solution amid the challenges posed by the Red Sea tensions.