New Silk Road: train traffic has not stopped but crisis will have repercussions across global logistics industry
The economic sanctions against Russia and Belarus have not stopped the train traffic on the New Silk Road. However, the war will cause further disruptions in sea transport and a decrease in rail freight prices, believes Miłosz Witkowski, director for rail transport at the Polish Forwarding Company (PFC).
What is the impact of the war in Ukraine and the Western sanctions on Russia on the functioning of the New Silk Road?
We can see that a large part of the customers moved their goods to sea transport. However, we do not close these services. We offer rail transport from China all the time. We are currently waiting for the proposal of new insurance conditions against the war situation offered by the Chinese. We need to check all the terms of this policy. Moreover, it turned out that only one platform from Xi’an offers such insurance so far. The rest of the operators will not (yet) offer such insurance. There is also information that Chinese rail operators can guarantee the return of full containers to China if the borders are closed due to war and sanctions. However, we believe that such a situation will not happen and the transport will continue all the time. Currently, the Chinese companies are trying to calm the situation but they can see that their volume has decreased since many shipping companies have stopped accepting new orders.
In my opinion, this will have an impact on the railway and maritime rates. The railway ones will fall to attract customers again. The maritime ones will grow because they will take over the loads in turn and the ship owners will probably want to use it somehow. Furthermore, this creates more and more congestion in European ports, which is not improved by the fact that most shipments to and from Russia have been suspended. Currently, there are around 200,000 TEU being moved to and from Europe and the destination country was Russia. These containers will have to be kept somewhere, be stored. This will have a knock-on effect and affect the operational capabilities of the ports. This will result in reducing the quality of the sea service. Let’s not forget about fuel prices, which have a big impact on sea rates. Unfortunately, we are facing a very difficult period, which may have greater repercussions than the problems during the COVID.
What services do you provide on the New Silk Road?
On the New Silk Road, we carry out both full-container (FCL) and groupage (LCL) transports. In the latter case, we use our own console. We collect loads from practically all of China and consolidate them in Xi’an, from where the transport goes to Pruszków once a week and covers up to four containers, depending on the number of goods. We also carry out FCL transports from anywhere in China. We work with many proven agents, so we are not limited to only one terminal. We can offer shipping with any rail connection functioning on the New Silk Road.
As for FCL, the main border crossing we use is Małaszewicze but some of the transports are sent to Siemianówka, where there is no problem of congestion and the transport goes faster. However, due to the lack of phytosanitary inspection at Siemianówka, loads that are related to food cannot be transported. However, even after deducting this type of transport, there is still a lot of freight that we can direct to this border crossing. This even applies to our groupage shipments. The transit from Xi’an to Siemianówka takes 12 days, so it is currently the fastest connection. Currently, any alternative to Małaszewicze is beneficial for everyone, as it allows reducing the traffic jam at the border, which is beneficial for customers.
What is the issue of congestion at the terminals in China today?
Currently, it is smaller than before the Chinese New Year, as some trains have been suspended. We are getting signals that there are fewer loads, so the border crossings on the New Silk Road have uncorked. The travel time has been enhanced. At the moment, the main problem is the cancellation of trains by the Chinese Railways. At some terminals, a train may wait a week or two for departure. However, the delays for a few days are happening most often but there is no longer a situation where a train waits for a month. Recently, the difference in rail and sea freight rates has become more noticeable. Even last year, the prices of sea and rail transport were comparable, although China continued to pay extra for trains.
Which warehouse in Poland do you use for groupage shipments?
From DTA’s facility in Pruszków, with which we cooperate well. We have practically only our loads in the console. Our Chinese partner sends something too but rarely. I believe it is a great success for PFC that we were able to launch our own console. We also have plans to add one more terminal in China to the groupage service to expand the service portfolio and be more flexible. We also plan to buy or build our own warehouse but it is a matter of the distant future. We are also considering the launch of block trains in the future.
We are currently developing the railway department within the PFC structures, which will organise rail container transport services but also the transport of conventional freight such as wood or steel. We will also implement cargo and intermodal connections in Europe. Currently, we have been already implementing the second project for moving a large volume of steel. Initially, we had an order for export from Poland via the Port of Gdynia. However, we are now carrying out an import order, which includes 40 wagons.
What actions should Poland take for the development of cross-border rail transport?
We definitely need smart investments. The locations for new terminals or railway investments must be considered and consulted with the private sector. The necessary investment is the modernisation of the Małaszewicze Reloading Region, although this project is a bit late in relation to business needs. There is also a need to clear the transport route from Małaszewicze to Germany, or to respond to such needs as the sanitary station at the border crossing in Siemianówka.
Poland cannot allow itself to be avoided by transcontinental transport. Although it now seems that with such a dynamic development of the New Silk Road railway as we have been seeing for several years, these flows of cargo will not escape us. However, from the customers’ perspective, the operation of several border crossings, through which trains can be directed, is a good situation, as it allows choosing the route so that it is suited to the final location. We can adapt better to the customer’s needs.