Leader lose position? Ukraine-China trade: status, logistics solutions, forecasts
Iryna Novikova, General Director of the logistics company GEFCO Ukraine since 2019
The pandemic has transformed the world in recent years to change the world trade landscape, global politics, economy and culture, shut down factories and close ports. Entire countries, businesses of various scales and, of course, humanity in general have had negative consequences.
Against the background of the general crisis, trade relations between Ukraine and China have significantly strengthened their positions. Following the results of the first half of 2019, China came out on top among Ukraine’s trading partners with a turnover of $ 5.4 billion. According to the results of the “pandemic” 2020, the figure was $ 15.4 billion: exports of goods from Ukraine to China $ 7.1 billion (+ 98.0%), imports of Chinese goods to Ukraine – $ 8.3 billion (-9.8%).
During this period, Ukraine supplied ores, cereals, ferrous metals, boilers, machinery, and wood. Instead, China – means of land transport (Crimea railways), plastics, polymeric materials, optical and photographic devices, footwear, chemical products, toys, furniture, etc.
In 2021, trade between the countries held its position. In the first 3 months of the year alone, the bilateral trade turnover amounted to $ 4.2 billion.
At the same time, the cost of cargo delivery to Ukraine by sea has increased. If before the pandemic the freight from China in Ukraine was $ 2-4 thousand, now – more than $ 15 thousand. As a result, the volume of container exports through ports decreased by 14%. Thus, the probability of finding another country-importer of a product or alternative multimodal logistics solutions has increased.
This situation, at heart, is related to the crisis of container traffic. One of the main factors in the growth of their value was the shortage of containers. For many years, they have ensured the smooth operation of supply chains. Every year, ports around the world handle more than 800 million containers, which transported about a quarter of the world’s goods in the shortest possible time. Currently, according to Freightos, the average time of delivery of sea cargo increases from 41 days to 70.
What happened? Due to Covid-19 and quarantine, production stopped in China, and then in the United States and other countries. When China emerged from the crisis and began exporting products, the United States quarantined the processing of imported goods. That is why, after adding goods from China, containers accumulate in American ports. At the end of 2020, there were almost no containers left in China, while there were too many in the United States.
Stabilization of the situation was predicted in mid-2021, but another event affected the bottom. In March, the Ever Given container ship ran aground in the Suez Canal. The shortest route for goods from China to Europe was blocked and this caused an increase in freight rates.
A ship across the Suez Canal, inflated ponds, ships queuing in ports, lockdowns – all this has led to the fact that 2021 has become a bifurcation point for container traffic.
AThow much world trade cannot stop and wait ending uncertainty,, logistics companyher startedand look for ways out of the crisis and developedand alternativeand resolvedno in China-Ukraine direction.
Rail transportation may be the best option, as they have guaranteed delivery times, 2 times faster than sea. In addition, the advantage is the preservation of cargo, practical transshipment, regular transportation, regardless of climatic conditions, seasons and days. The disadvantages of such a logistics solution are the higher separation of transportation, limiting the geographical location of mother trains as part of the formation of China, laying the cost of returning containers in the cost of delivery.
Container trains between China and Ukraine will start running on a regular basis in July 2020. A total of 52 were sent to Ukraine from that date. Until September 28, 2021, container trips ran only from China to Ukraine. It was on this day that he first appeared from the Kyiv Lisky railway station in the opposite direction.
Considering air transportation, in the foreground is a very high speed of cargo delivery, a long distance of continuous flight and reaching remote areas. At the same time, this causes a high cost of transportation. Moreover, there is always the possibility of bad weather conditions and restrictions on the weight and dimensions of the cargo.
Break-beam solution have the advantage of the practice of partial loading. If one vessel is filled with goods of different shippers, the transported do not require the presence of containers and due to its absence has a lower cost per unit weight. However, the solution cannot be used for general cargo and has a higher cost of charter service compared to regular container traffic.
Trucking can be cheaper in less than 21 days and cheaper due to high maneuverability, regularity and high speed of delivery, the largest capital costs for the development of cargo turnover at short and medium distances. However, this solution is low, high cost, unloading compared to other modes of transport. An underdeveloped road network in some regions can also be a significant obstacle.
Despite geopolitical relations, which currently have a significant impact on China’s trade with the EU and the US, Ukraine is unlikely to abandon trade with its most important partners, especially China in the near future, as they attract our best government. Therefore, we should not expect changes or a decrease in trade with China. China, in turn, will give preference to countries interested in trade partnerships.
On the part of contact providers, we can expect growth in both export and import volumes in the coming years. Diversification of supply routes between Ukraine and China should reduce the burden on the maritime transportation market, where the change in the crisis is unstable capacity, especially in the pre-New Year period of seasonal growth. Rail transport needs to take on excess volumes to stabilize the logistics market during increased demand. In these conditions it is necessary not only direct container transportation, but also with transshipment in other EU countries. Early planning of their shipments by customers will only help logistics companies to fulfill their obligations on time.