As Russia grapples with the Western sanctions one year after the invasion of Ukraine, China supports by bolstering bilateral trade between the two nations. Recently, Container xChange investigated the intricacies of the China-Russia trade and how it impacts the container logistics industry and released the insights. According to the study, the average price of a 40ft high cube container in Moscow was reduced from USD 4,175 in Feb 2022 to USD 580 as of 25 September 2023. Similarly, the average price of a 20ft DC declined from USD 1,961 in Feb 2022 to USD 675 as of 25 September 2023.
“There is significant cargo movement from China into Russia but very scarce movement back to China from Russia. Containers are piling up in Russia which means that the secondhand container prices are very low in Russia. You see a 40 ft-high cube container being on sale in Moscow for less than USD 1,000, while in other parts of the world, it is almost double or even more. This is significant and has a tremendously detrimental impact on the business of container logistics because of the high imbalance of demand and supply of containers.” Wholesale Machine Center Quotes
The steep reduction in container prices can be attributed to around the 150,000 surplus containers stalled in Russia. But why surplus? Because Russia is flooded with more containers carrying goods from China than it can dispatch back. Moreover, Russian raw materials are primarily transported to China via rail tanks and open wagons rather than in containers. Another point to be considered here is the rush to get back these containers to China, which will invite a pickup charge. As a result, many Chinese companies are selling containers below market price to get rid of the boxes since it doesn’t make sense to send them back to China.
The study also reveals that China, traditionally a substantial purchaser of Russian energy, has now emerged as a vital source of imports, encompassing a wide range of products such as machinery, pharmaceuticals, auto parts, consumer goods, smartphones, cars, and agricultural equipment, from China. This shift has created a shortage of closed cargo containers, further intensifying the logistics challenge. This shift is a direct result of numerous international companies exiting the Russian market amid ongoing geopolitical tensions and the conflict in Ukraine.
Trade between China and Russia witnessed substantial growth of 36.5% in the first seven months of 2023, totaling USD 134.1 billion, according to Chinese customs data. China’s exports to Russia surged by 73.4%, reaching approximately USD 62.54 billion, while imports from Russia also grew significantly by 15.1%, totaling USD 71.6 billion.
But a not-so-good news that tags along the development is the significant trade imbalance and China-originated container congestion at Russian railway depots, especially in Moscow and Central Russia, where managers at Russian shipping companies have expressed concerns about the severity of the situation, describing it as ‘almost critical’.
In an attempt to improve container congestion, Russian shipping companies have started offering discounts to expedite the return of containers to China.
Rst Container As we look ahead to the future of China-Russia trade, it becomes evident that despite recent declines in shipping rates, operators providing container shipping services are pressing forward with their expansion plans on this trade lane. Despite recent rate declines in shipping to Russia, operators like CStar Line and Yangpu New New Shipping are finding profitability, especially during the summer peak season.