Ukraine War’s impact on supply chains expands

Air freight capacity from Asia has shrunk by 22% in a week, rail freight services have been suspended and sea freight bunker surcharges are expected to spike, with crude oil more than double the price at the beginning of the year.

Flight distance, times, fuel burnt and cost will rise as airlines reroute flights between Asia and Europe to avoid Russian air space. Average flight times on six key trade routes from Asia to Northern Europe increased by 3.4% within days of Russia’s invasion.

Freight costs are likely to increase further, as are fuel costs and many carriers are introducing War Risk Surcharges to compensate for the costs of adjusting operations.

Some carriers may cancel their Asia-Europe services as they face longer and costlier routes and those carriers that do continue to fly, will pass on higher fuel costs, while the weight of the additional fuel could limit the amount of cargo carried.

Container ship fuel bunker prices have increased by a third since Russia’s move on Ukraine, with bunker surcharges rising around 15% and expected to spike further with crude oil hitting new highs of more than double the price at the beginning of the year.

There are reports of delays and detention of cargo by overseas customs authorities seeking Russian and prohibited cargo and French customs officers have already seized two vessels suspected of breaching sanctions.

Port dwell times have increased 43% across Europe since Russia’s invasion of Ukraine and container ships are skipping ports to try and maintain their schedules or, at best, limit delays, which are averaging 17 days and unchanged since last November.

China to Europe rail freight operations are apparently continuing, though major service providers have added Moscow ally Belarus to their booking suspensions, which effectively blocks rail shipments on much of the Asia-North Europe network, because containers must be transferred to different gauge trains on entering Europe, with the busiest crossing at the Małaszewicze-Brest reloading area on the Poland-Belarus border.

Increasing in popularity with shippers, particularly for high-value products that would benefit from a faster transit, rail freight from China has grown massively since the advent of the COVID pandemic, with volumes surging 29% last year, to 1.46m teu.

The displacement of such massive volumes will have a profound impact on other modes from Asia, taking much needed capacity and putting even more pressure on pricing.

Supply chains are facing new challenges and with conditions changing continuously, we are working closely with our international partners, to proactively identify potential issues and take any action necessary to protect our customers.

We have long-established relationships with air and surface carriers, which means we have access to a wide range of service options and can provide our customers with solutions, whatever the situation.