The global freight industry is still getting over the Suez Canal crisis and geopolitical turmoil in Europe and the Middle East, encouraging China to find alternative solutions to trade with the EU instead of shipping through the Red Sea or along the northern route of the 'One Belt One Road'. Looking back on 2024, it was a year of expanding opportunities to connect Eurasian content in new ways, such as a railroad between mainland China and Europe through Asia, with Turkey as a major transit point to European countries and the East.
The average rail freight rates are 59% lower than sea freight rates between China and Europe, according to the Eurasia Rail Alliance (ERA) Index report. That means that the average rail freight rate remained at around USD 3,240 per FEU (forty-foot equivalent unit) for most of 2024, which is already a great occasion to consider the nuances of rail traffic in this direction, as well as to explore the advantages of cost, speed, and infrastructure development. In this article, let's analyze how the architecture of Eurasian freight transportation has changed.
China - Europe railway routes
The protracted conflict in the Red Sea has contributed to a more than 60% decrease in the flow of cargo between China and Europe, which has increased the average 40-foot equivalent unit (FEU) freight rate from Shanghai to Rotterdam by about 78%, reaching a total of $7,961, according to the Drewry World Container Composite Index. Such volatility in sea freight rates could not remain the “new normal”, and Eurasian logistics began to extensively expand rail transportation on additional routes.
The Silk Road Economic Belt maintained its transcontinental coverage, with the Northern Direction mainly dominating the Maritime Silk Road for exporting to Europe. So, from the end of 2023, to prevent global risks in the regions, other parts of the Silk Road Economic Belt have a higher popularity: the China — Central Asia — West Asia corridor.
Illustration of the train route from Xi'an to Prague. The China Railways Express, the first freight train to cross the Corridor, completed the route in 18 days in November 2016.
One of the primary reasons for the Corridor's growing popularity is the desire of importers and exporters to avoid safety risks and get fast delivery. Savings can be up to a whole month's travel time, as it takes about 30-40 days to transport cargo in a given direction by sea, which sounds like a lot compared to less than 10 days by rail.
How did the market respond to this? Given the decrease in trade through the Suez Canal and the related increase in sea freight costs compared to stable rail rates in 2024, let us repeat the conclusion of the Eurasia Rail Alliance (ERA) Index study: average rail freight rates are 59% lower compared to average sea rates for China-Europe routes in 2024.
According to the State Council of the People's Republic of China, freight rail already connects 226 cities in 25 European countries and more than 100 cities in 11 Asian countries, resulting in an increase in EU-China trade to 739 billion euros (15% of total EU trade) by 2023. January-September 2024 was marked by a continued increase in freight traffic between the regions, with 14,689 round trips already in operation, up 13 percent year-on-year. “These trains have transported 1.57 million TEU of goods, 11% more than last year. During the first seven months of the year, more than 50 trains were operated daily.”
Development of logistics centers along the Corridor
Increasing trade requires expanding the network of logistics hubs and centers along the rail freight routes between mainland China and Europe, diversifying infrastructure in the regions. China's western and northwestern regions are experiencing a new round of development and labor attraction, gaining capital as landlocked regions that are part of an extensive rail network for direct international trade with Europe and Central Asia. According to information based on 2024 customs reports, Shaanxi, Zhejiang, and Jiangsu were the leading exporting provinces via China-Europe freight trains, while Shaanxi, Liaoning, and Fujian were the largest importing provinces.
In Asia, cooperation with Kazakhstan played a key role in the creation of a new 'hub-hub' logistics corridor: The launch of the China-Kazakhstan (Xi'an) Trade Logistics cargo terminal was co-established by KTZ Express, a subsidiary of Kazakhstan's national railway company Kazakhstan Temir Zholy (KTZ), and Xi'an Free Trade Port Construction and Operation in early 2024.
In turn, Europe, which has had railroad connections with China for years, has also expanded its network of logistics centers, making cities such as Duisburg, Germany, an important hub for Sino-European cargo transportation.
The Turkish railway network is a key developmental basis for the rail links between the two regions today. The trade between China, Kazakhstan, Central Asia, and Europe gained a new developmental momentum in February 2024 when the first China-Europe freight railroad departed Chongqing for Istanbul, Turkey.
Comparing benefits
Let's compare the China-Central Asia-West Asia corridor with the northern rail route and other shipping options, such as sea and air freight from China to Europe. What beneficial solutions, nuances, and pitfalls should you consider when planning your supply chain?
The Middle Corridor to Turkey via the Caspian Sea is a safe and profitable alternative when compared to sea and air transportation. Due to the sharp rise and forecasted increase in sea freight growth, rail will be on the same price level as maritime logistics but will still benefit from the consistently high prices of air transportation.
For transportation via the China-Central Asia-West Asia corridor, unlike the northern direction, freight rates may be lower, as countries on this segment of the route are currently experiencing high competition, providing prices of about $5000-$7000 per 20-foot container (TEU) for transportation between China and Turkey and an additional $1000-$2000 to Poland or Germany.
| Place of origin | Place of destination | Shipping type | Container type | Transit time | Freight rates |
| Jiulongpo | Hamburg | Road | 40ft HQ | 24 days | From $9,800 |
| Chongqing | Małaszewicz | Road | 40ft HQ | 24 days | From $10,600 |
| Chengdu | Duisburg | Road | 40ft HQ | 24 days | From $8,450 |
| Jiulongpo | Biała Podlaska | Road | 40ft HQ | 24 days | From $9,750 |
The capacity of the Middle Corridor is still not up to scratch, but it has been showing good growth over the past couple of years, as it claims to be a profitable railroad connection given the rise in sea freight rates.
Railroads in new ways improve regional development instead of servicing large trade flows that suffer from congestion and delays. Diversification of trade routes is becoming a more profitable strategy, especially with the involvement of rail, which has a favorable position compared to air and sea transportation — faster than sea and cheaper than air. Even though prices were previously significantly higher than for sea shipping, why?
The transit time by rail is a key reason why this method of transportation is profitable, as it is necessary for goods with a limited shelf life delivered by small and medium-sized businesses without established warehouse networks to handle supplies for long deliveries. Railways are gaining popularity by offering fast delivery at a price that pays for itself through shorter transit times compared to sea freight.
Also, you can calculate the transit time for your routes from China to Turkey or Germany, which is about a week or two and 18-22 days, respectively, with our tools for digital logistics management.
Why should you consider the faster option?
The abilities to ensure environmental friendliness, quickly meet customer needs, and adapt the entire supply chain are the main advantages of rapid rail delivery. Let's look at the details of the relevance of faster shipping, comparing rail over sea and air transportation:
- Optimize warehouse services and reduce costs: Handling and storage costs are significantly reduced when there is no need to wait more than a month for the previous shipment to be completed by sea. Smaller inventories can be managed more efficiently due to shorter transit time. Reduced volumes of cargo per shipment, but more frequent shipments, result in easier warehouse management and lower costs.
- Reduced risks: A key advantage of rail freight that offsets the high cost of freight is the savings in warehousing and the ability to get goods, especially high-demand ones, to market faster to compensate. Thus, you offset costs and avoid most delays.
- Increase in turnover profit: Goods with a limited shelf life due to technological changes, fashion trends, or components for the operational support of production lines critically need an increased turnover rate to avoid any delays in entering the market. In particular, rail freight transportation helps to maintain the competitiveness of manufacturers of high-demand goods.
- Prompt response to changes in demand: Rail freight transportation ensures that goods are not shortchanged and that stocks are replenished quickly in response to fluctuations in market demand before competitors.
- Improved customer experience: By fulfilling orders quickly and offering a wider range of products, it is more efficient to attract new customers and increase loyalty.
- Reducing seasonal delays: Especially during peak times several times a year, maritime logistics suffers from significant delays at ports on trade routes. Rail service solves this issue by reducing the likelihood of delays due to weather conditions or seasonal rush in the supply chain.
- Environmental friendliness: Compared to the amount of fuel used by air and sea transportation, rail freight produces fewer carbon emissions per unit of cargo transported. Energy efficiency is possible for shipping by sea for high-volume shipments, but freight wagons carry a large amount of cargo using less energy per unit weight. Air freight requires too much fuel to compete in this regard. In addition, modern “green” logistics management practices insist on laying railroad tracks in a way that minimizes the impact on nature, having less impact on ecosystems, unlike the significant water pollution from waste and oil spills in sea and air transportation, forming condensation trails and other clouds that cause the greenhouse effect.
To summarize
The future of rail transportation between China and Europe looks promising, with the development of logistics hubs such as those in Kazakhstan and Turkey improving connectivity and efficiency. Thus, you get more alternatives to sea and air transportation. Trends indicate that rail logistics will continue to grow due to the demand for fast delivery, lower environmental impact, and competitive prices. As infrastructure improves, rail transportation will play a key role in global trade, providing reliable and sustainable transportation options for businesses.
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