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Important Shipping Update

Russia’s invasion of Ukraine

Russia’s invasion of Ukraine on February 26, 2022 is bringing about further supply chain disruptions and shaking up the global commodities market. Further delays, higher transportation costs and longer transit times across transport modes are to be expected for shipments around Europe and the world. The further effects of this incident are still not foreseeable. According to Reuters, global sanctions will have a noticeable impact on trade.

Shipping to and from Russia has been banned, leading to a stagnation in the flow of goods. Due to the closure of Russian airspace, air freight traffic is hindered. In addition, rail traffic between Asia and Europe via Ukraine on the “Silk Road” has been obstructed, making transport through both countries unsafe. Ukraine is completely disconnected from any ocean ports and can only be reached via road / rail for now. Meanwhile, routes to Belarus also are disconnected by European truck or train providers.

Sea freight
Major shipping lines announced at the beginning of the conflict that they would omit Russian ports in Eastern and Western Europe to support the European and US sanctions. Within weeks, cargo has begun to pile up in European ports due to the early booking stops but also the consequent controls in the ports.

Ports only allow cargo in their custody if there is a possibility to ship. Cargo with European origin must therefore be returned to its owner if the service is cancelled or the cargo is on the embargo list. Cargo arriving at European ports is either to be returned or stored on shippers’ costs.

Currently, there are two different scenarios for cargo to still reach Russia. Either it falls under exception regulations – like food or humanitarian goods – and can still be booked and shipped if a shipping line decides to call a Russian port. Cargo from European origins will have an export permission by the local customs authorities for such goods.

All other transport requests will be rejected. An export request is meanwhile obligatory and will give shippers the necessary security if cargo is banned or not. On the other hand, some countries and routes are not bound to these sanctions and so there are alternative trade routes opening up.

However, shippers should carefully evaluate compliance regulation for all their plants & offices. It is important to highlight that Leschaco cannot and will not be able to assist customers with such transports.

Air freight
The Russia-Ukraine conflict has a negative impact on air cargo capacity and the closure of airspace disrupts direct connections to many markets linked to Russia, according to the International Air Transport Association (IATA). IATA director general Willie Walsh said the association expects cargo markets to be affected by the Russia-Ukraine conflict due to sanctions-related shifts in production and economic activity, rising oil prices and geopolitical uncertainty.

“Capacity is expected to come under greater pressure and rates are expected to rise.” he said in a statement.

Many airlines increase their fuel surcharges by mid-March as not seen for a long time: Increases between 0.15 and 0.30 Euro take place. Further, some airlines announce to increase their security surcharge or to introduce a war risk surcharge to compensate for additional administrative costs. A dynamic market and price situation is expected during the next weeks.

Rail freight
Silk Road companies are doing their utmost to guarantee customers the safety of the main China-Europe corridor via Belarus and Poland. In general Rail Operators do not foresee any disruptions in the near future on the Russian corridors. Rail transports on the EURASIAN routes have not experienced any significant disruption or delays.

Road transport
The Russian attack on Ukraine led to a huge increase in oil and gas prices on the world market. This has led to historically high volatility in energy prices, which have risen significantly in recent weeks and could escalate further.

This also affects overland transport by truck to a significant extent. In order to be able to continue to carry out their transports, many road transport companies see themselves forced to react to the increase at short notice. In addition, as a result of the dramatic crisis situation in the Ukraine, there is a loss of Eastern European driving personnel and thus an even greater impairment of the loading space situation.

Further developments and effects remain to be seen but will be communicated as the situation continues to unfold.

COVID-19 Updates – Greater China Area

Shippers should be warned of upcoming landside logistics disruption in China from the latest round of Covid-related lockdowns, despite key gateway ports said to be operating normally.

For example, Maersk claimed it was “business as usual” at Shenzhen and Shanghai, but noted the major lockdown in Shenzhen, home to the Yantian container terminal, would see warehouses and container freight stations closed for at least a week.

While there was no direct hit on ocean terminals and carrier operations, there was potential impact on ocean freight due to trucking restrictions if picking up from outside Shenzhen or a locked-down area. Most carrier staff, like those of CMA, ONE, HMM, Matson, have started working from home, which may cause delays in communication, emails and operations.

There are trucking restrictions for vehicles traveling in and out of Shenzhen, which means no cargo from outside the restricted area can enter. Furthermore, according to Alphaliner, even with ports open, the lack of terminal handling staff and expected trucking delays could force carriers to skip numerous Pearl River Delta calls, or keep vessels waiting.

It added: “The greater Shenzhen region is also China’s hi-tech hub, a centre of manufacturing for electronic devices such as smartphones, computers or TVs. Shenzhen is home to industry majors such as Huawei, Oppo, TCL and Foxconn, manufacturing components for Apple, Samsung, Amazon, Intel, Nvidia and many more.”

Cross-border trucking with Hong Kong is also affected, with capacity limited and long waiting times. Many goods for cross-border are now transported by ocean due to limited truck capacity. Warehouses in Hong Kong have reduced capacity for cargo handling, causing delays for handling and loading.

In Shanghai, said to be “on the brink” of lockdown and already imposed restrictions on passenger flights, so far there is no direct impact on ocean terminal operations. However, trucking restrictions in Shanghai have caused some shipments to be moved out of Ningbo. CFS warehouses require drivers to have Covid test reports valid for 48 hours.

According to Bloomberg, ship queues outside of Shanghai and Ningbo have now risen from 243 last week to 262 this week, further adding congestion issues to the region.

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