Rail freight
New Silk Road hit as sanctions cover Russian Railways
As RailFreight.com reports, sanctions now mean European companies cannot work with Russian Railways.
Much like had been predicted, this effectively makes New Silk Road transit through Russia impossible. However, the aforementioned website adds that such actions can often be circumvented, and that some industry professionals say that business is not affected.
There are no such issues affecting Azerbaijan though, which is to continue its rail freight services to and from Moscow.
Road freight
Cross-border operations impacted
The invasion has already seen borders between the EU and Ukraine/Belarus either closed or disrupted due to sanctions and driver safety.
This means new, longer routes. Glenn Koepke, Senior Vice President, Customer Success at supply chain visibility provider FourKites, says a conservative estimate would see delays increasing by 4 to 6 times.
In his latest blog post, Koepke also wrote about some long term implications in the event that Russia is able to take control of Ukraine:
“If a full invasion and Russian takeover of Ukraine occurs, the long-term concern is that the borders to ship between Russia and Europe will drastically change. Today, the primary border for freight traffic is Poland and Belarus. A worst-case geographical border scenario now puts Russia bordering Slovakia, Hungary, Romania, and Moldova. This is meaningful due to the permits Russia institutes every year for non-Russian drivers to deliver freight in and out of the country.”
More haulage companies offer aid to Ukraine
Meanwhile, in more positive news, there have been yet more examples of hauliers from across Europe helping with the relief effort. This piece from the RHA summarises some of the activities going on in the UK, while there have been reports of similar actions in France, Denmark and Bulgaria in the last 24 hours.
Sea freight
Ocean capacity to be squeezed; rates to increase again
The aforementioned problems with rail freight are of course set to have a knock-on effect on shipping.
FourKites’ Glenn Koepke believes that capacity in the shape of both shipping containers and ships will be stretched even further than it already, exacerbate existing delays globally – including at US ports.
Koepke also warns that costs will rise again significantly:
“Already, ocean freight rates are increasing 3 to 4X. Two years ago, container rates for shipments from Shanghai to Rotterdam were less than $2,000. In recent weeks, drury freight indexes showed spot container rates climbing to $13,000 for the same route. Shortly after the invasion, some freight forwarders showed rates at $54,000 for a single container. Prices will continue to be volatile. In turn, shippers will shift some shipments to air with similar price increases and volatility to follow.”
Bookings for Russian ports suspended
Another issue facing the sea freight industry are the sanctions placed against Russia. Containers destined for Russia now face lengthy detours after major shipping lines announced that they would be stopping bookings for major Russian ports.
Yesterday, ONE announced a suspension to booking acceptance to both St. Petersburg and Novorossiysk, the two ports used to ship goods between Russia and Europe. According to Shipping Watch, Maersk has also halted bookings in Russia.
Container terminals are blocking cargo too. On Sunday, ECT in Rotterdam announced that containers destined for Russia would be blocked by customs and cannot be loaded. Renowned shipping expert Lars Jensen adds that this would presumably apply to all terminals in the Netherlands.
Record bunker surcharges expected
Another issue raised by Jensen are the high fuel prices created by the invasion and the subsequent sanctions. The Vespucci Maritime CEO warns that record high bunker surcharges can be expected:
“Global average bunker fuel prices reached 803,5 USD/ton Monday. As I posted last week we should indeed expect fuel to exceed 800 due to the Ukraine war. As the situation still spirals more out of control we have likely not seen the peak yet and shippers should expect record high bunker surcharges in their next rate adjustments.”
White House to take measures against alliances of shipping giants
One key development that’s unrelated to the conflict in Ukraine is the White House’s announcement of a new joint initiative to promote competition in the ocean freight transportation system.
In a statement, the US Government said that the President was “calling on Congress to pass robust reforms to the ocean shipping industry, including reforms that address the current antitrust immunity for ocean shipping alliances.”
Under the new initiative, the United States Department of Justice will provide the Federal Maritime Commission with the support of attorneys and economists from the Antitrust Division for enforcement of violations of the Shipping Act and related laws.
Air freight
Rates set for huge rise as sanctions bite and routes lengthen
According to Flexport, the reduced air corridor space available due to airspace restrictions will likely lead to slower flight times:
“Flexport’s analysis of flights on six key trade routes from Asia to Northern Europe shows that average flight times have increased by 3.4% (range 0.6% to 6.9%) in the five days to February 28 compared to the December 1 through February 22 period,” writes the company’s supply chain economist, Chris Rogers.
Flexport also analysed flight data to see to what extent Antonov, who operate many of the world’s largest cargo planes, has had its capacity impacted. As we reported yesterday, its An-225 Mriya aircraft, the largest in the world, was destroyed during a Russian attack.
Flexport understands that 10 of Antonov’s 15 jets, accounting for 47% of its 1,410 tons of firm-wide payload, last landed in Kyiv. However, only four of those planes have flown in 2022.
The remaining five have a capacity of 150 tons each and landed in Europe or the USA prior to last week’s invasion. However, Flexport warns that Antonov could encounter difficulties with the maintenance of its equipment outside Ukraine should spare parts not be accessible elsewhere.
The company nonetheless concludes that the impact of the war will largely be on routing rather than capacity, as Russian air cargo operators have a very small share of the international air freight market.
Warehousing and last mile
Ukrainian logistics companies urge locals to help
Finally, amid all the talk of global disruption caused by the conflict, one can’t forget about what is arguably the most important supply chain of them all right now – the one providing residents in Ukraine with essential goods.
Silpo, a Ukrainian supermarket chain, has reportedly urged volunteers to help with its logistics activities to ensure that food and other essentials can reach stores.
“You can be the one to bring fresh vegetables, bread, water and meat to the shelves of the stores. If you are near one of the distribution centers and you can help sort, load or send goods and products to supermarkets, please contact us,” the retailer said.
It is understood that volunteers are needed in Browary, Odessa, Lviv, Kharkiv and Zaporizhia.
According to a statement published by the Interfax-Ukraine agency, The Ministry of Infrastructure of Ukraine also made the following statement on the supply of goods into Kyiv:
“It is commonly believed that the Ukrainian capital is surrounded by Russian invaders, and this allegedly leads to the blocking of food, ammunition and humanitarian aid supplies to Kiev. This is not true, because the team of the Ministry of Infrastructure is working 24/7 on centralized food supply points. Here we cooperate with the Ministry of Economy and proactive citizens.”
Photo: Jack No1, CC BY-SA 3.0, via Wikimedia Commons (illustrative image)
