At a logistics expo in London this week, Russia’s invasion of Ukraine dominated discussions, rather than interest in the latest package-tracking devices or how to kick-start the sector after the coronavirus pandemic.
A week of fighting has forced many companies to suspend operation out of Ukraine as well as Russia, as world governments began imposing tough financial sanctions.
Now there are fears the conflict could cause more disruption to the sector and hinder recovery from the pandemic, which battered world supply chains.
Dan Smith-Cox, a business development director at Zencargo, told AFP: “We’ve seen a few manufacturers pull into eastern Europe from Ukraine and Russia as opposed to China.”
“A lot of production is moving to Turkey,” he said at the Retail Supply Chain & Logistics Expo at London’s giant ExCeL conference venue.
Another attendee, who declined to give their name but works in the metal cutting sector, said they bought raw materials from Poland, Russia, Germany and Ukraine.
Many of their suppliers were directly impacted, he said, fearing even tougher times ahead.
“The invasion is going to be much more difficult than the lockdowns,” he added.
Ratings agency Moody’s called Russia’s invasion of Ukraine “the greatest risk” facing supply chains since the pandemic and the conflict is already having an effect.
On Tuesday, the world’s three largest shipowners, MSC, Maersk and CMA CGM, among others, announced they were halting their services to Russian ports, from Saint Petersburg on the Baltic to Vladivostok in the Pacific.
Not only do companies have to find new routes in haste, but shipping prices immediately increase due to longer journeys, causing more pain at a time of sky-high inflation.
Stopping transport to Russian ports is affecting air and rail shipments crossing the country, “making rates more expensive because of oil prices going up as a result of the war”, said a spokesperson for Freightos, an online international shipping marketplace.
Oil prices have rocketed since the invasion as Brent North Sea crude rose to $120 per barrel and gas prices have also hit record highs.
Supply chain fears have gripped markets while industrial metals have also surged, with aluminum hitting a new all time-high on Friday.
Product-specific crises
Freightos also pointed to increased insurance premiums for carriers potentially crossing the conflict zone.
Dave Howorth, executive director at Scala, a supply chain consultancy, said the supply chain crisis would be “product-specific” rather than general as in the pandemic.
On top of energy and commodities prices, semiconductors already subject of a global shortage are also set to see prices go up.
Ukraine is responsible for more than 90 percent of semiconductor-grade neon shipped to the United States.
Mike Hawes, head of UK industry body the Society of Motor Manufacturers and Traders, said Russia and Ukraine produced key raw materials such as aluminum and neon used in semiconductor manufacturing, and are part of the European automotive supply.
Howorth warned that agricultural commodities are also being hit.
Ukraine and Russia accounted for 23 percent of global wheat trade in 2021-2022.
Both countries hold the two top spots for sunflower oil production, producing 60 percent of global stock.
“The food supply chain, specifically wheat and grains, will be impacted,” he said.
In haulage, too, the conflict risks aggravating a widespread shortage of truck drivers in Europe, particularly in Poland.
The country’s biggest trucker association estimates that 30 percent of Ukrainian drivers work in Polish transport companies.
Since the invasion it is estimated that almost 80,000 Ukrainians have returned to fight Russia, leaving industries short of labor.