Ukraine invasion weighs on global container shipping
Pile-ups at ports and higher freight rates likely as conflict adds to pressure on ocean traffic
As Russia’s invasion of Ukraine snarls regional logistics and rattles the global commodity market, ripples are spilling over into container shipping, resulting in more delays, less capacity and higher costs, according to experts.
The conflict in Ukraine, a country at the nexus of Europe and Asia, was weighing on ocean traffic between the two continents in particular, they said.
Though the world’s major shipping routes do not pass near Ukrainian ports on the Black Sea and the Sea of Azov, which have been under attack or closed, some commercial vessels have been hit by missiles and congestion is building in the region as ships divert from their original paths.
Escalating sanctions on Russia have also added pressure on the global shipping network, which is already stretched with pandemic-related disruptions.
Top ocean carriers, including Maersk and CMA CGM, have suspended new bookings to and from Russia.
“These developments could increase volumes at other regional ports and are already resulting in pile-ups at origin ports in Europe and elsewhere, possibly causing congestion and increasing rates on these lanes,” Judah Levine, head of research at Freightos, said in a note last week.
Christian Roeloffs, co-founder and chief executive of Container xChange, an online platform for leasing and trading shipping containers, said central and northern Europe was already congested and further disruptions to cargo flow “will only worsen the state of container pile-ups”.
Customs authorities in Europe are inspecting all goods to or from Russia transiting their ports to identify sanctioned cargo, exacerbating delays, according to a customer advisory from Maersk last week.
The biggest impact on shipping could come from the redirection of rail and air transport on the Asia-Europe route, industry insiders said.
The China-Europe Railway Express, which is a key logistical cog in President Xi Jinping’s Belt and Road Initiative and a critical pipeline for Chinese exports to Europe, is facing increasing uncertainty as sanctions are imposed on Russia and Belarus – two countries that most routes run through.
Around 10,000 twenty-foot equivalent units of cargo travel across Russia by rail from Asia to Europe each week, according to Levine.
“If sanctions or fears of disruption shift significant numbers of containers from rail to ocean, this new demand will also put upward pressure on Asia-Europe rates as more shippers compete for already-scarce capacity,” he said.
Lars Jensen, chief executive of container shipping consultancy Vespucci Maritime, said shippers using the rail line were typically focused on speed and more willing to pay higher freight rates.
“If this cargo was to be redirected onto the ocean services, it might price out some of the lower-value cargo on those vessels,” Jensen said in a LinkedIn post last week.
Air freight capacity across Russia and Europe had also been reduced, as the European Union, the United States and other countries banned Russian carriers from their airspace – and Moscow responded in kind, experts said.