"Container rental and freight rates remain high and will not fall back quickly"; Russian Railways Logistics ships pork products to Xi'an and Chengdu

Russian Railways Logistics JSC has for the first time transported pork products of Miratorg, Russia's leading meat supplier, to Xi'an and Chengdu, China by rail. The cargo departed from Moscow's Berelasto station and will be delivered to Xi'an and Chengdu regularly in the future.

Russian Railways Logistics uses its own independent refrigerated containers to transport frozen pork belly and other products. These refrigerated containers are grouped with general containers for transportation in public trains. In addition, Russian Railways Logistics is responsible for road transportation of the first and last leg. Alexander Sivertsev, Director of Container Transportation of Russian Railways Logistics, said: "The opening of rail transportation of domestic pork products directly to China has opened a new stage in the development of public train LCL transportation services. This allows us to use all the advantages of railways to deliver products to central China. For our customers, transportation time is shortened and transportation areas are expanded. Accelerating delivery to central China's economic centers (Xi'an, Chongqing and Chengdu) will help bring Russian producers closer to Chinese consumers."

"Increasing transportation demand, difficult container turnover, and rising costs"

Fedor Tokarev, multimodal transport manager of Russia's Noytech supply chain company, said that the growth rate of freight volume from China to Russia slowed down in July in all modes of transportation. Compared with March-April 2024, freight rates to St. Petersburg in May-June rose by an average of 35%-40%, intermodal transport costs through Far Eastern ports rose by 30%-35%, and direct rail train freight rates rose by 50%-55%.

The imbalance in the use of containers between Europe and Russia plays a role in this. Due to the risks of passing through the Red Sea and the Suez Canal, which led to changes in the routes of ocean-going ships, and the capacity difficulties faced by Russia in ensuring the export of containerized goods to China, a large number of 40-foot empty containers have accumulated in Russian yards and have not returned to China in a timely manner.

The imbalance in the use of containers between Europe and Russia plays a role in this. Due to the risks of passing through the Red Sea and the Suez Canal, which led to changes in the routes of ocean-going ships, and the capacity difficulties faced by Russia in ensuring the export of containerized goods to China, a large number of 40-foot empty containers have accumulated in Russian yards and have not returned to China in a timely manner.

In addition, due to problems with Russia's payment to Chinese suppliers, a large number of deferred orders have accumulated.

Fedor Tokarev said that due to increased demand and a shortage of Chinese containers, container leasing costs have risen sharply, almost tripling in May-June. By July and August, leasing costs began to gradually decline. At the same time, due to the significant increase in westbound traffic through Russia by European companies, there was a shortage of wagons for direct rail transport in Russia.

In the past two or three months, many container trains did not leave the departure station on schedule, some ports were congested, and transit time increased. Some goods began to shift from direct rail services to sea and rail transport through the Far East, triggering a new round of freight rate increases. Fedor Tokarev concluded: In addition to the seasonal increase in freight volume, the market and customers are worried about future freight increases and longer delivery times, which has accelerated the pace of stocking up for the Christmas sales season. This is one of the main reasons for the recent increase in transportation demand and freight rates.

In the next few months, container turnover will gradually stabilize, and leasing prices and freight rates will stop growing. But the price correction will not be fast, and shipowners and railway operators still have time to make considerable profits.