The conflict between Russia and Ukraine has worsened the supply chain crisis that is already difficult to alleviate.
Glenn Koepke, an expert at FourKites, a supply chain consultancy, recently said that the war may cause another blow to the global supply chain, leading to skyrocketing prices for sea and air freight. The freight rate per FEU on the route from China to the United States may rise to double or triple the current level, that is, from US$10,000 to US$30,000 per 40-foot container.
Koepke pointed out that since the epidemic, shipping prices have continued to hit new highs. The conflict between Russia and Ukraine will also have an impact on the supply chain. At present, the conflict has caused many ships to change their routes. Basically all Ukrainian ports are now closed. Ship rerouting has exacerbated port congestion problems in other European ports. Data show that as of February 28, there were more than 200 ships waiting to cross the Kerch Strait, the waterway and the only waterway connecting the Black Sea and the Sea of Azov.
The Russia-Ukraine crisis has seriously affected the transportation of goods across the Black Sea, an important shipping lane for crude oil and bulk food. Since the war between Russia and Ukraine started on February 24, several ships have been attacked by artillery fire or detained. European and American countries have begun to impose sanctions on Russian trade, including the United Kingdom banning all Russian ships from entering British ports. The shipping industry and ports in Belgium, the Netherlands, and Germany will also intercept and inspect cargo ships heading to Russia.
The world’s top two container shipping companies, Maersk Line (Maersk) and Mediterranean Shipping Company (MSC), as well as France’s CMA CGM, Germany’s Hapag-Lloyd and Japan’s Ocean Network Shipping Company (ONE) also Order services for Russian goods have been suspended. According to data from Alphaliner, an international shipping industry analysis organization, the total shipping capacity of these five companies accounts for nearly 60% of the global market. Market participants predict that their suspension of services to Russia will cause supply chain difficulties to intensify and shipping rates to rise sharply.
At present, container shipping companies have begun to increase freight rates. Starting from March 15th and April 1st, container shipping companies will increase the “container comprehensive rate surcharge” (GRI) and “fuel surcharge” (BAF) respectively. International container shipping giants have even begun to Add “port demurrage”. Industry insiders pointed out that after this round of increases, freight rates may rise by 50%.
Glenn Koepke said that it is not yet the peak season for the container shipping market, but as companies begin to increase summer shipments, it will have a significant impact on the supply chain. Some shipping companies provide other alternative routes. For example, Hapag-Lloyd will launch the Sino-German Express service from April, connecting Shenzhen Dachan Bay Terminal to Hamburg, with a transit time of 27 days.
Maersk Line has also begun to promote intermodal transport services, which can transport goods from Busan, South Korea via the Trans-Siberian Railway to Kaliningrad, a seaport city on the Baltic Sea in Russia, and then to other places in the Baltic Sea region. By comparison, crossing the Suez Canal requires a 60-day ocean voyage, but services through Russian territories may face new restrictions and the risk of sanctions.
Since about 41% of the world’s exports come from Asia, and Ukraine is one of the ancient trade routes between China and Europe, the war has disrupted trade routes, with European countries being the most affected. The longer the tensions between Russia and Ukraine last, the greater the impact will be on logistics throughout Europe. Maersk Line warned customers that this was a global impact and was not limited to trade with Russia, with supply chains still severely disrupted.
However, the market also has different voices. Andy Lane, director of shipping consulting firm CTI Consultancy, has a more optimistic attitude. He believes that amid the global shortage of shipping capacity, the withdrawal of ships from routes entering Russia or the Black Sea represents an increase in shipping capacity in other markets and trade routes. Although it has a negative impact on Russia and Ukraine, it may have a positive effect on other regions.
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