China-Europe freight services in high demand

China-Europe freight train services will continue to play a key role this year, facilitating foreign trade amid China's ongoing industrial upgrade and a growing inclination among companies to seek greater efficiency while circumventing geopolitical uncertainties, said analysts and exporters.

The current reluctance of global shipping companies to transit through the Suez Canal has affected China-Europe trade and exerted pressure on operational costs of businesses on both sides. The orders for China-Europe freight trains — an important supplementary mode of transportation of goods between the two major trading partners — have surged in recent weeks, they said.

When container ships avoid the Suez Canal and instead navigate around the southwestern tip of Africa — the Cape of Good Hope — it increases sailing costs, extends shipping duration and creates corresponding delays in delivery schedules.

All freight train cars on the Yiwu-Madrid service route are fully booked for January with many exporters securing their slots in December. Previously, customers would book their containers two weeks prior to departure, said Chen Kaifeng, director of YXE Trading Service Group's business development department. The group, based in Yiwu, Zhejiang province, provides freight services for the China-Europe rail route that links Yiwu with Madrid, Spain.

Chen said the freight rates have also spiked by 10 to 20 percent in January, compared with the previous month, in line with the increase in demand.

"January, following the peak shipping season in October, is also regarded as a minor peak season," he said, adding that Chinese suppliers have been working hard to arrange shipments before the Spring Festival holiday in February.

There has been a change in the composition of China's exports in recent years, with the focus shifting to high-value items such as smartphones, vehicles, auto parts, computers and high-end electronic components. This has resulted in a surging demand for swifter transportation methods over maritime shipping service, said Zhou Zhicheng, a researcher at the Beijing-based China Federation of Logistics and Purchasing.

Driven by deepening economic and trade cooperation between China and partner countries, the number of China-Europe freight trains operated in 2023 reached 17,000, up 6 percent year-on-year, while 1.9 million 20-foot equivalent units of containers were shipped, soaring 18 percent year-on-year, according to the latest data from the China State Railway Group, the country's railway operator.

Starting mid-December, there has been a notable surge in global maritime shipping prices due to security concerns in the Red Sea region. As a result, a growing volume of maritime cargo is being diverted to the China-Europe freight service. Certain products, such as computers and footwear, are now being redirected to the rail route, said Li Ke, an official at Chengdu Customs' Qingbaijiang branch.

As both Chinese and overseas automotive and household appliance manufacturers show a growing interest in shipping their products via freight trains, Li said the cargo slots for China-Europe freight trains departing from Chengdu, the capital of Sichuan province, in January are fully booked.

In 2023, the number of China-Europe freight trains originating from Chengdu exceeded 2,400, with transported goods weighing 1.19 million metric tons in total and the total value of goods reaching 46.39 billion yuan ($6.46 billion), both record highs, data from Chengdu Customs showed.

"Since our washing machines have gained popularity in markets participating in the Belt and Road Initiative, the export value of this product transported through the China-Europe freight train route witnessed a year-on-year growth of 85 percent in 2023. We anticipate further growth of over 2 percent on a yearly basis this year," said Lin Chuangen, head of supply chain management at Nanjing LG Panda Appliances Co, a China-South Korea joint venture based in Nanjing, Jiangsu province.

Jiangsu, another key export hub, saw the number of China-Europe freight trains originating from cities in the province increase to 2,123 with a cargo value of 30.32 billion yuan last year, up 7.6 percent and 8.3 percent year-on-year, respectively, according to Nanjing Customs.