The epidemic has slowed down cargo flows

The announcement about the closure of borders with China has caused alarm among businesses – the reduction of export supplies threatens serious losses.

Some telegram channels reported about the closure of borders for commodity trade, but there was no official confirmation of this. Since January 31, Russia has restricted traffic through 16 checkpoints on the border with China. There is no talk of closing freight railroad traffic with China.

“China is of great importance for the trade of all EAEU countries,” says Andrei Petrosyan, head of the integration research center of the Eurasian Development Bank. – Especially for Russia and Kazakhstan, as well as for the countries that border China. For example, Kyrgyzstan’s imports are heavily dependent on China – supplies from there account for almost 40% of the country’s total imports.

China is one of the key destinations for Russian exports. According to calculations by the Analytical Center for Foreign Trade under the Ministry of Industry and Trade (ACFT) based on data from the Federal Customs Service for the first 11 months of 2019, among non-resource non-energy goods exported to China, the main shares come from timber and pulp and paper products (7.8% of total exports), food products (5.6%), machinery and equipment (4.3%).

Despite the decrease in the overall indicator of Russian exports to China (-0.8%), supplies of many non-resource groups of goods increased. Especially supplies of transportation engineering: (+260% vs. the same period last year, in monetary terms – $89 million), machinery and equipment (+44.2%), food (+24%).

According to Andrei Tochin, director of ACVT, the closure of production facilities in China and the suspension of tourist flows will certainly lead to a slowdown of the entire Chinese economy, and as a consequence, a decrease in demand for both raw materials and consumer goods. “The reduction in shipments from Russia to China in the first quarter of 2020 is expected to be at least 10% of last year’s levels,” he reasoned. – The biggest negative effect may come on food exports from Russia.”

Ironically, the stability of the world economy is in the hands of epidemiologists rather than politicians

According to Alevtina Kirillova, head of the export logistics development project at the Russian Export Center (REC), the impact of the coronavirus epidemic on cargo flows is already being felt. Many businesses in China are closed and trade operations are restricted. “We expect a certain decrease in both export-import and transit cargo flows,” she says. – “We assume that the situation will also affect our agroexpresses – container trains for Russian food suppliers.” Now agroexpress trains deliver flour, oils, groceries, confectionery, ice cream, dairy products, poultry and beverages.

There may be other complications with the promotion of Russian goods on the PRC market – already now companies are revising their schedules of events in China. Participation in the largest food exhibition SIAL 2020, which is to be held in Shanghai in May, is in question.

A number of cargoes from Russia go through Kazakhstan, where the International Center for Border Cooperation (ICBC) “Khorgos” has temporarily suspended its work. In addition, Kazakhstan has strengthened sanitary-epidemiological and migration control on the border with China.

So far, according to the results of January, RZD does not record a worsening of the situation – container transportation increased by 12%. On January 29, Deputy Head of Russian Railways Alexei Shilo suggested that in February freight deliveries may decrease, however, not because of the coronavirus, but due to the extension of the New Year vacations in China. They were supposed to end on February 3, but will last until February 10.

Alexey Chernyshev, Commercial Director of AKFA logistics company, confirms that there are no difficulties with cargo delivery: “We sent the cargo on February 1, and there were absolutely no difficulties. I am sure that there will be no further difficulties”. In his opinion, the logistics business will not suffer globally at all. “We are not talking about closing the sea borders at all, container transportation by sea should not be affected. Our representatives in the largest seaports of China report that the epidemic has no effect on the volume of work,” he added.

Now there is a lot of goods piled up in warehouses in China, which means that when the vacations are over, we can expect an increased demand for container bookings. Alexey Chernyshev suggests that if the vacations are extended until February 17, we can expect a real rush.