Bump IN The Silk Road Cover

A “Bump” In The Silk Road

China has expended a lot of financial and political capital in the ambitious development of its belt and road project to connect its manufacturing hubs to Western European markets. The project employs all modes of transportation, sea, road, and rail. However, the Russian invasion of Ukraine has severed connections between Asia and Europe.

Over the past two years rail transportation was playing an increasing role because maritime supply chains were facing long delays due to backed up traffic outside of ports and COVID testing regulations enacted by some countries.

New Silk Road

High lighted in red are New Silk Road routes passing through Russia and Ukraine.

The cargo volume carried by rail is relatively smaller than ocean shipping, but it does have the advantage of being faster than sea transport yet cheaper than air transport. This combination of speed and pricing places rail transport in an ideal position for large or heavy items that require expedited delivery.

Both Maersk and Ceva Logistics, a subsidiary of CMA CGM, are two examples of container lines that have been offering rail transport services as an alternative to ocean shipping. However, these services appear to be set to stop since Russia is facing tough sanctions because of its military actions in Ukraine.

Maersk has announced it has temporarily suspended intercontinental rail bookings “without exception” for both east and west bound routes between Asia and Europe. Maersk hasn’t provided an anticipated date for resumption of services.

Although traffic is an estimated amount of just over 1m teu per year, some industry sectors have grown to rely on expedited rail in their supply chains. It’s understood that German automakers are concerned that production could be affected if a substitute cannot be found. Additionally, some areas were already facing shortages of intermediate stocks before the war in Ukraine due to the global pandemic.

According to a spokesman for the German Association of the Automotive Industry, “The disruptions to train and ship connections caused by the war as well as restrictions in air traffic are already having a significant impact on the sully and logistics chains.”

Furthermore, it’s expected that part supply chains will be tightened because service providers have discontinued service on the Silk Road, which will impact material supply in Europe and China.

As the Silk Road faces a rail transport stoppage and air freight faces longer transit times or closes routes, BGL is continuing to offer customers the best available options to maintain an effective supply chain.

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