Supply Chain Woes Hit China–Europe Rail Lines Due to Russia–Ukraine War

The logo of Swiss logistics group Kuehne + Nagel International AG is seen at its headquarters in Schindellegi, Switzerland, on Oct. 17, 2018. (Arnd Wiegmann/Reuters)

Russia’s invasion of Ukraine is upsetting the transportation of goods on railway lines linking China and Europe, forcing businesses to look for alternate routes.

Logistics firms and exporters are avoiding land routes passing through Russia and Ukraine due to security risks as well as payment issues stemming from Western sanctions, according to a report by Bloomberg.

Businesses are also afraid that European customers might boycott goods transported on Russian railways.

Over a million containers—supposed to be moved between China and western Europe through Russia—are now being considered for shipping via sea. One of Europe’s largest freight forwarders, Kuehne + Nagel International AG, has begun rejecting rail cargo to Europe from China.

The risk of sanctions surrounding Russia and Belarus has prompted the majority of Scan Global Logistics’ customers to turn to ocean or air freight, the company said to supply chain media outlet The Loadstar. Customers are also worried about shipments getting stuck in these countries.

In China, some nervous traders have stopped orders as they assess the risk of sanctions on payment settlements and insurance. Bookings on the weekly China–Europe train from Shanghai saw a 40 percent decline as of March 17, according to The Loadstar.

Nils Muller, rail manager at the Hamburg, Germany, office location of Danish company DSV Air & Sea Inc., is exploring alternative rail routes, The Loadstar reported. Some of his clients have already switched to direct sea freight or sea-air freight.

“We have been using the middle corridor for the past two years already,” he said during a recent webinar.

“But in the end, sea freight rates are much less and the transit time to the main European ports is much faster,“ Muller said. ”The middle corridor could be a good option, but they need to invest in new infrastructure and try to avoid the reloading process because they have more than seven or eight reloading processes before arrival in Europe.”

While transporting goods from China to Europe through sea freight takes a month, it only takes about two weeks through rail. However, shipping via the ocean is still the cheapest option. As cargo volume shifts to sea from rail, congestion could develop in the Asia–Europe sea trade logistics network.

Sea transportation networks have been under strain since the COVID-19 pandemic began. The latest outbreak in China and the subsequent government restrictions have affected port activities in the country, adding pressure to an already fragile transportation system.

“Getting vessel capacity and getting shipping on time to destination has already been a challenge in the past six months,” Glenn Koepke, a general manager at FourKites Inc.—a Chicago-based information provider for the logistics industry—told Bloomberg. “This is just one more thing that’s being added to an already fragile network.

Railways moved roughly 1.46 million containers carrying goods worth about $75 billion between China and Europe in 2021. This accounted for about 4 percent of the total trade between the two regions.