Demand for rail transport surges amid Red Sea crisis

A surge in demand for rail transport through Russia from Asia to Europe has been reported by logistics companies and rail operators, in the wake of the disruption caused to ocean routes caused by recent Houthi attacks in the Red Sea.

Most major container shipping lines have redirected their Asia to Europe sailings away from the Suez Canal due to the ongoing attacks on commercial vessels, leading to global trade flow disruption.

Rerouting of ships around Africa's Cape of Good Hope has not only resulted in an additional 10-15 days of journey time but has also brought about numerous surcharges and increased costs for shippers, trade news outlets have reported.

Logistics companies are revisiting routes through Russia in response to the volatile situation in the Red Sea.

The Financial Times newspaper cited Germany's DHL saying demand to move goods on the Russian rail route leaped by approximately 40 percent since container ships started choosing the longer route in December, with RailGate Europe reporting a 25 to 35 percent increase in requests and the Netherlands-based Rail Bridge Cargo noting a 31 percent rise in cargo rail traffic through Russia compared to this time last year.

"The requests have picked up since the beginning of the situation in the Red Sea by around 40 percent," DHL said on the demand for rail. "The overwhelming amount is going through Russia."

The company emphasized that it was not handling any traffic to or from Russia due to western export restrictions related to Russia's conflict in Ukraine.

"We're doing severe export controls, in line with applicable sanctions," it said.

According to DHL, a significant portion of goods traveling from Asia to Europe by rail use the "west corridor" through Kazakhstan into Russia and Belarus, while some traffic follows the "north corridor", crossing directly from China into Russia east of Mongolia.

Rail transport is proving appealing to shippers due to its cost-effectiveness compared to air freight and faster delivery times than ocean transportation, reported US media outlet CNBC.

Julija Sciglaite, RailGate Europe's chief business development officer, told CNBC last month that the company, which transports furniture, toys, clothes and automotive parts from China through Russia to European countries, uses the route as the journey takes between 14 and 25 days depending on its origin and destination, a transit time that is "significantly better" than ocean times.

When the Russia-Ukraine conflict first started, some customers expressed concern about shipping goods via rail through Russia, Sciglaite said.

"Bookings decreased significantly via Russia, but within the last year, this route is recovering due to good transit time and prices," she said.

Sciglaite added that since the beginning of attacks on vessels in the Red Sea by the Houthis toward the end of 2023, demand for rail transport has "skyrocketed".

Source:China Daily