Entering May, China Europe freight trains have started to raise prices significantly, and the prices of each train company's European line have increased by 10% to 20%.

"The cargo volume of the China Europe freight train on the European route has been gradually increasing recently, especially after the May Day holiday. The spot market freight rates have been rising, and some routes have quoted more than $9000. Last week (May 13-19), most platforms were adjusting booking prices, with a relatively large increase." Tang Tingting, Assistant General Manager of Sichuan New Silk Road Multimodal Transport Co., Ltd., told First Financial.

The prices of China Europe freight trains have skyrocketed

Tang Tingting stated that some of the China Europe freight trains have raised their European routes by more than $1000, with an average increase of $400-500, an increase of approximately 10% to 20% compared to last month. In addition, the Russian route has also seen a 10% increase, mainly due to the recent significant increase in container rental prices, with rental costs rising by $400-600, driving up overall freight rates.

Among them, Zhengzhou and Suzhou saw the largest increase, with prices rising by over $1000. The price range for express trains in Xi'an is between $400 and $500. After announcing a price increase, Chongqing once again notified that it will continue to adjust booking prices in the short term, with an expected increase of over 8%.

The above weekly report also shows that with few remaining seats in early June, various platforms are tightening their supply after mid to late June, and some platforms are using bidding to allocate the remaining seats. According to industry insiders, the spot market freight rates for Hamburg and Duisburg in southern China have exceeded $9000.

What factors led to the general surge of China Europe freight trains after May Day?

"The increase in freight rates for China Europe freight trains is mainly caused by the rise in sea freight prices, which are also mainly affected by the Red Sea crisis. The Red Sea incident has increased the cost of sea freight detours, and the crisis intensified in March and April this year, resulting in a significant increase in sea freight prices." Hao Panfeng, Deputy Secretary General of the China Container Industry Association, told First Financial.

Moreover, Hao Panfeng stated that due to the detour of the Red Sea crisis, the container turnover rate has decreased, and a large number of containers are on the way, which has also led to an increase in container prices, resulting in a significant increase in the overall sea freight prices.

Since April, sea freight prices have been continuously rising. According to previous reports from First Financial, the US freight rate has risen twice in May, each time by around $1000, and the price increase is expected to continue, soaring to over $5000 in late May. This also means that the increase in this wave of freight rates will be multiplied.

According to information provided by data firm Freightos, container freight rates departing from Asia have increased by approximately $1000/FEU (40 foot containers) since the end of April, causing prices for routes to the West Coast and Nordic regions of the United States to rise to around $4000/FEU, routes to the Mediterranean to rise to around $5000/FEU, and routes to the East Coast of the United States to rise to $5400/FEU.

Hao Panfeng said that most of the goods transported by the China Europe freight train to Europe overlap with sea freight. In the face of rising sea freight prices and shortage of containers, many goods will come to the China Europe freight train to find space. In fact, there are already some signs of an increase in the China Europe freight trains in March and April.

Tang Tingting said, "Now there are some sea freight goods taking the China Europe freight train, and we have received some inquiries. The main reason is that the shipping time is not good, and goods with strong seasonal characteristics will consider taking the train. The main factor affecting enterprise decision-making is the issue of shipping time. Currently, most ships detour the Red Sea, and it often takes more than 60 days for China to ship to Europe by sea."

European demand rebounds?

According to data released by China Railway Group on May 15th, a total of 6184 China Europe freight trains were operated in the first four months of this year, sending 675000 TEUs of goods, an increase of 10% and 11% year-on-year, respectively. As of the end of April, the China Europe freight train has operated over 89000 trains, reaching 223 cities in 25 European countries.

Some of the city's train companies have seen significant increases in transportation volume. From January to April 2024, there were 445 inbound and outbound shipments of China Europe freight trains (Changsha), a year-on-year increase of 58.4%. The China Europe freight train (Nanjing) has operated a total of 175 trains, a year-on-year increase of 36.7%, and the Qingdao region has operated 262 China Europe freight trains. Among them, there were 105 China Europe freight trains departing from Europe, a year-on-year increase of 26%.

The significant increase in the volume of China Europe freight trains has also led to congestion at border ports and a decrease in operational efficiency.

The weekly report of the China Europe freight train "Silk Road Expansion" shows that last week, the border ports between China and Kazakhstan continued to face congestion problems, especially the Alashankou Dostek port. The clearance time for goods has significantly extended, at least 7 days, with an average of 10-15 days. Khorgos Atenkiri's lack of car boards has not been improved, and the changing time is generally 6-12 days. From the overall operation of the train, most trains heading towards Europe have a time limit of over 20 days.

Is the rise in volume and price of China Europe freight trains a rebound in trade with Europe?

Tang Tingting told First Financial News, "After May Day, the freight rates of China Europe freight trains have increased slightly. What we feel is that the demand for European routes has indeed rebounded, but it does not match the magnitude of price increases. The reason is that the growth in demand is not as significant as the increase in prices."

Hao Panfeng also stated that there is currently no significant increase in the total trade volume between China and Europe.

According to customs statistics, the total import and export value of China's goods trade in the first four months of 2024 was 13.81 trillion yuan, a year-on-year increase of 5.7%. However, the total trade value between China and the European Union was 1.75 trillion yuan, a decrease of 1.8%, accounting for 12.7%. Among them, exports to the European Union amounted to 1.14 trillion yuan, a decrease of 1.5%; Imports from the European Union amounted to 612 billion yuan, a decrease of 2.3%.

Regarding the sudden increase in demand and price increases, Tang Tingting also analyzed that due to the issue of transportation time between China and Europe, sea freight often exceeds 60 days. Therefore, everyone's analysis now is that the consignee in Europe is preparing goods in advance, which leads to the arrival of the peak season ahead of schedule. But everyone believes that if the Red Sea crisis ends, the problem of shipping companies exceeding demand will become apparent, and freight rates will also fall quickly.

Is the current increase in freight rates for China Europe freight trains a short-term or long-term trend? Hao Panfeng said that from now on, it still depends on how long the Red Sea crisis will last.

In fact, after 2022, the trade volume of China Europe freight trains on the China Europe route has significantly decreased. In 2023, sea freight prices have sharply declined, and China Europe freight trains have been affected. Some sources of goods have shifted to sea freight, and various platform companies are lowering booking prices, resulting in operational pressure on freight train companies.