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The East is foraging
Logistics experts are recording a sharp increase in demand for road transport from China to Russia in the third quarter. The growth is estimated to be between 10 and 15%, which is several times higher than the same indicator of the previous year. At the same time, traffic from Kazakhstan, indirectly related to Chinese imports through Kazakhstan, is growing rapidly. Market participants explain this trend by contextual factors, including a shortage of railway capacity and platforms, deferred demand due to difficulties with settlements with China, an increase in road transport due to an increase in the collection of recyclable materials and proximity to nearby areas. New Year's season. JSC Russian Railways is also observing an increase in demand for transportation from China.
According to the ATI.SU freight exchange, the number of applications for road transport from other countries to Russia in the third quarter increased by 68% compared to the same period last year and by 51% compared to the second quarter. In particular, the number of applications for transportation from China, which had been growing throughout the year, by the third quarter of 2023 had sharply increased by about 3.5 times, or by 56% compared to the previous quarter. ATI.SU also notes an explosive growth in demand for transportation from Kazakhstan, which unexpectedly began in mid-summer. In the third quarter, the number of applications for transportation from Kazakhstan to the Russian Federation increased several times year-on-year.
"The growth in the Chinese direction is mainly due to problems with other modes of transport related to rail transport," said Svyatoslav Wilde, founder and director of ATI.SU. "Russian Railways' priorities are coal and strategic cargo, so other suppliers' goods should be transferred to road transport," he said. "Until recently, transportation from China to the European part of the Russian Federation was considered unprofitable," according to Kazakhstan. The growth in demand for transportation is also largely due to Russian-Chinese trade: "Carriers and forwarders see that a lot of cargo comes from China, and some goes in transit through Kazakhstan." In addition to logistical reasons, says Mr. Wilde, the problem of paying for Chinese deliveries sharply worsened in the summer due to new sanctions against the Russian Federation, and many companies now work through Kazakhstan, he explains. made it clear that this is about physical re-export, and not just "paper" export.
Logistics market participants are also paying attention to the rapidly growing demand for road transport in China. The number of applications for road deliveries from China has doubled since June, said Evgeny Dyatlov, head of international transport procurement at the Russian company FM Logistic. “The growth in demand is due to an increase in the supply of road construction equipment due to the reduction in the capacity of the railway infrastructure and the growth of disposal costs,” he explains. Dmitry Khrushchalev, deputy director of corporate development at Business Line Group, estimates that in the third quarter, the number of road transport communicating with China will increase by 40% compared to the average annual figure. “Since the traditional delivery route from China via Vladivostok is facing problems with overloaded railway infrastructure and delays at Far Eastern ports, some importers are turning to alternative delivery routes by road transport through Kazakhstan and Mongolia,” he notes.
According to him, the delivery period from China to Russia is 3-4 months, as this is affected by the congestion of railways and the lack of areas for container shipping. "Everyone is switching to road transport. Especially emergency delivery." Commercial Director of ILC Mikhail Timofeev believes that the increase in deliveries from China is due to problems with payment for goods by Russian importers in the first and second quarters. He noted: "The delay in mutual settlements was reflected in the decrease in shipments and the formation of deferred demand, which was compensated for in the third quarter." According to top managers, the increased demand for goods led to an increase in prices, which led to a transition to more expensive types of delivery, including road transport.
Ivan Zakharchenko, head of international road transport at Noytech Supply Chain Solutions, estimates that road freight volumes in China will increase by 10-15% compared to the same period last year. “We have noticed a tendency for customers to redirect their requests from rail or sea transport to direct road transport in China,” says Igor Rebelsky, founder of VIG Trans.
Yulia Shlenskaya, president of the customs and logistics broker KBT, noted that the trend of outflow of cargo from rail to road transport in China is unquestionable. "The terms of direct deliveries by rail and intermodal transport are becoming longer and more unpredictable," she says. "The waiting time for rail delivery in the Far East can be two to three weeks, and in some regions - more than 30 days." There has been no suitable platform in the required quantity for a long time. He added that the gondola fleet, although partially covering the deficit, does not completely solve the problem.
“As the new year approaches, the challenges of meeting deadlines and delivery times will become more important,” she says. KBT has also transferred many clients to direct auto services and acquired new clients for this type of delivery. Nikita Kazarinov, CEO of Shuttle Logistics, believes that the outflow of cargo from intermodal and rail transport to road transport is due to the increase in the time and cost of transportation by sea and rail. It is estimated that compared to the first quarter, rail tariffs have increased by about 1.5 times and are almost the same as road tariffs.
However, Russian Railways is not recording an outflow of imported cargo from China. "Record volumes of containers with imported cargo are arriving from the Far East, and demand for transportation remains very high," the company assures. Russian Railways added that it is using all possibilities to ensure the timely removal of all volumes of cargo, including allocating additional container trains and ensuring the unloading of containers from gondola cars.
Ashuraliyev predicts that demand for road transport will increase even more in the fourth quarter. “We expect stable and high growth in demand for road transport to continue in the fourth quarter of 2024 and the first quarter of 2025, unless rail capacity is significantly improved,” said Evgeny Dyatlov. Mikhail Timofeev expects that with the onset of winter, logistics will reorient toward sea and rail transport. Difficult weather conditions may have an impact, contractual obligations will expire at the end of the year, and in the conditions of high demand before the New Year, the remaining “permits” (permits for entry of vehicles from other countries) will cease to be valid. “Enough, enough,” he predicts.