Russia’s unprovoked aggression in Ukraine is a humanitarian catastrophe. The loss of life and scale of displacement have not been seen in Europe since World War II. Well over a million people have left their homes, countless more have been killed or wounded and Russia’s military is focused on leaving nothing left for Ukrainians to return home to.
When this aggression ends, the funds and supply chains necessary to rebuild the country are going to significantly impact the traditional flow of goods and draw orders and require equipment that will be diverted from other projects for Ukraine’s country-wide reconstruction.
For today, however, logistics companies must balance their horror at what is transpiring while simultaneously evaluating rapidly changing conditions surrounding sanctions, equipment, fuel and capacity.
The list of carriers who have announced they are not serving Russia includes many, if not all, of the carriers who call German and European ports, including Maersk, MSC, CMA-CGM, Hapag-Lloyd and One Network Express (ONE). Hamburg and Bremerhaven serve as staging and transit points of cargo going into and out of Russia.
By terminating Russian service, this traps loaded imports and exports and empty containers and puts them out of circulation. Right now, all import containers in Russia cannot be emptied and returned to Germany for loading by Germany, the Netherlands and Belgium.
Because the transit time from Asia to Europe right now is between 35-42 days, there are five to six vessels already en route, laden with containers for Russia and Belarus that will arrive and be unable to be moved there, simultaneously clogging the terminals and removing valuable containers from circulation.
We continue to work diligently with our carrier partners and customers to align demand forecasts with equipment requests as far into the future as is feasible, but we know that this will add another layer of complexity.
The price of oil continues to move upwards. The first upward spike was driven by Russia’s attack. The second wave appears tied to the news that the US and EU are contemplating ceasing purchases of Russian oil and LNG which would further starve the country’s economy. Those increases in oil translate immediately into increased fuel surcharges by air, sea and land. The Loadstar reports the cost of Rotterdam-sourced low-sulphur fuel oil on February 24th was up $30/ton and increased by a total of 40% from December.
The average price of VLSFO at the top 20 ports has shot up by almost $130 per ton since Russian forces entered Ukraine. Marine bunkers are “galloping,” said brokerage Fearnleys.
In addition to the cost of fuel—which directly impacts all modes of transport—the supply of drivers and fuel for their trucks is being constrained. Most of Europe’s drivers come from countries like Poland, Lithuania, Romania…and Ukraine. Ukrainians represent 6-8% of the driver population. Many of those men and women—by some estimates, half—have returned home to fight for their country and help get refugees out.
For air freight, the war is impacting capacity, and with this decreased capacity, rates are shooting skyward. Sanctions have all but grounded AirBridge Cargo’s fleet of freighters. Charter aircraft from the Ukrainian-operator of Antonov’s, Volga Dnepr, are carrying weapons and humanitarian aid. Freighter operators like National, Western Global and Atlas are doing the same, reducing the number of aircraft operating on commercial lanes at a time when passenger flights have not returned to full strength.
Lufthansa Cargo announced a 10% reduction in capacity between Asia and Europe and carriers are also incurring additional fuel costs because they have been prohibited from Russian airspace. Truckers have a limitation placed on fuel. We hear that in Poland, they are only allowed a maximum of a half-tank, or 500 liters per stop, but these vehicles will hold 1000 liters. Finally, rail slots normally allocated to freight trains are being sidelined in lieu of the never-ending stream of refugee trains filled with people leaving the country.
TOC Logistics and ProTrans are sensitive to the situation. Many of our customers have suppliers in the heart of Europe, and between rapidly-changing sanctions and the influx of refugees, it is a tumultuous time to remain focused on the commercial demands of business.
From the United States, we continue to work hand-in-hand with all our partners, sympathetic to the onslaught of challenges while remaining focused on ensuring continuity of service and the continued movement of cargo.
If you are looking to help in Ukraine, there are many NGOs and charities who are trying to help. A great list of places to donate money or relief goods can be found here. We pray feverishly that this unprovoked attack and the valiant defense of Ukraine by her citizens and the world ends as soon as possible. Until that time, we continue to remain focused both on the realities of business and trying to find ways to help out in a time crisis.