russia’s war against Ukraine hampers global logistics

russia’s war against Ukraine hampers global logistics

At the beginning of 2022, global logistics saw a gradual decline in container rates and small improvements in the congestion at major ports and inland terminals. Yet russia’s war against Ukraine might have just reversed the direction of change.

🚢 #Ocean Freight
All Ukrainian ports were closed shortly after the start of the invasion. As of March 7, major carriers (e.g. Ocean Network Express, Hapag-Lloyd, MSC, Maersk, and CMA CGM) suspended new bookings to and from russia and Ukraine.

The war’s immediate impact on global container shipping capacity is rather limited, given the small volumes and limited intercontinental routes in the Black Sea region. However, in the meantime worsening port congestions in Europe, soaring ocean freight insurance and skyrocketing fuel cost may lead to global container rates increase.

The current impact on dry bulk and breakbulk shipping is limited. Yet, if the export of commodities, is not possible from russia and Ukraine during the peak season of summer 2022, dry bulk and breakbulk rates will be highly volatile, depending on how grain trades are played out among Europe, North America, and other regions.

🚊 #Rail Freight
2021 saw a 30% YOY increase in cargo shipped by train between China and Europe. Around 2% of China-Europe rail freight transited via Ukraine. As of March 7, routes via Ukraine stopped. The southern routes via Turkey as an alternative will not be able to scale up quickly.

✈ #Air Freight
Current events add another layer of complexity onto the already stretched air cargo market. Air cargo capacity is down 10%, with rates jumping 2.5-3 times higher due to higher demand and reduction in passenger plane belly cargo capacity. With the closure of russian and Ukrainian airspace (leading to detours) and airspace sanctions placed on russian-owned planes, air cargo capacity will sharply decline while rates surge. Air cargo rates are expected to stay elevated amid uncertainties and surging fuel costs.

🚍 #Road Freight
In 2020, russia accounted for a large part of EU road import (10.7%) and export (7.8%) volumes. On 11 April, 2022, the European Union has adopted new sanctions against russia and Belarus, banning road haulers from transporting goods to the EU and denying russian-flagged vessels access to ports.

📌 russia’s war against Ukraine is expected to affect global logistics heavily. The outcomes include surging freight rates, uncertainties and further risks. 

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