There is less and less freight from China on the move through Russia. Both in imports and in transit there is reportedly a significant decline in traffic. Sanctions on the transit of dual-use goods could be part of the explanation, but the Russian economy itself is not helping either.
China – Europe rail freight through Russia has been on the decline for months, writes the South China Morning Post (SCMP). A wave of freight seizures in Russia has caused logistics companies to lose confidence in the route, industry insiders told the Chinese publication. One market source is quoted as saying: “We have not dared to ship [goods via the railway] since November”, which is when the repercussions of Russian sanctions on dual-use goods transit started to take shape.
The sanctions have impacted thousands of China – Europe containers. Even though Russia introduced the sanctions in October, Chinese freight companies only found out weeks later – too late to prevent freight seizures.
Russia remains an attractive route
Subsequently, various reports claimed that transit through Russia had plummeted in recent months, which would be in line with the sentiment expressed by SCMP’s source. RailFreight.com, however, has not been able to verify those claims with data from Russian Railways.
A Chinese market source explained that Russia remains the best route for non-sanctioned goods, and estimates that dual-use goods made up around 25 per cent of the pre-sanction shipments through Russia. If all of those goods are no longer transiting Russia, that would mean a significant decline in transit traffic.
The economy does not help
The Russian rail freight sector, for its part, is also observing a decline in freight for transport. However, their findings reflect a different economic development altogether. According to Russian publication Kommersant, the high interest and a decrease in purchasing power are suppressing the demand for imported goods.
“There is no freight”, a market source tells Kommersant. A strange situation, considering that the dollar is now relatively cheap and the Chinese holiday season is over. March is usually the month of growing volumes, but there is still an ongoing decline.
Due to Russia’s high interest rate, goods that are usually financed with loans (for instance, clothing and automobiles) are now in low demand. Imports of clothing have shrunk by 30 per cent, and Russian warehouses of Chinese cars are full, because none of it is being sold.
Fear of high interest
Simultaneously, an expectation that Western sanctions against Russia will be weakened have put consumers in “waiting mode” (reports indicate that the White House is considering options to provide Russia with sanctions relief). Why buy now, if things may be cheaper in the near future?
All of these factors are having a bad impact on the Russian rail freight sector. The market has a difficult time estimating when the trend will reverse, but they made clear that they fear another interest rate hike.