Ocean freight travelling near Russian ports has dropped considerably since global sanctions were imposed on the country in late February, and more disruptions to sailing schedules are expected to slow global supply lines in the months ahead, according to a report from logistics software vendor project44.
The company tracked a 54% decline in vessel traffic within 50 nautical miles of Russian ports between February 01 and March 04, stemming from suspended bookings to Russia as the country’s invasion of Ukraine intensifies. Since March 01, ocean carriers MSC and Maersk have suspended all cargo bookings to and from Russia, including all access areas near the Baltic Sea, the Black Sea, and the Russian Far East. French shipping giant CMA CGM, German shipping lines Hapag-Lloyd and Hamburg Sud, as well as some other major carriers, have since suspended bookings in the region as well.
Sanctions mean that maritime companies and ports have to tread carefully when dealing with Russian shipping companies, analysts say.
“Companies looking to protect themselves from financial and regulatory risk exposure will have to look not only at the vessel flag, but also at its ownership structure and recent owner changes,” predictive intelligence company to the global maritime industry Windward said.
“As major carriers suspend services to Russia, we are going to see additional disruptions to global sailing schedules in the months ahead, leading to additional global delays,” Adam Compain, Senior Vice President of data insights for project44, said in a statement.
There has been a steep decline in ocean freight arriving at Russian ports as well; daily peak TEU (twenty-foot equivalent unit) vessel volume fell more than 40% between February 01 and March 03, according to the report, which is based on data from the company’s Supply Chain Crisis Tracker.
Professionals from across the logistics industry agree the situation will cause immediate and long-term effects on supply chains, most notably by reducing capacity and driving up energy prices.
“The supply chain as we know it has been strained for the past two or three years. Now, capacity moving in and out of Eastern Europe is being cut off,” said Bill Thayer, Co-founder and CEO of logistics-as-a-service platform Fillogic. “The supply chain issue has all been about capacity and a lack thereof–and now, more and more capacity is being taken out of the network.”
Moreover, the number of Russian-owned vessels seeking jobs on Monday was triple that on February 28, according to a separate data from Windward. The rise indicates how foreign businesses are increasingly unwilling to deal with Russian-owned companies, the maritime data provider said.
Oil prices continue to surge, fueling fears of more inflation and an even higher cost to ship goods. The Logistics Manager’s Index has tracked a sustained increase in transportation prices over the past year-and-a-half, and researchers there said last week they expect continued upward pressure on pricing in light of problems stemming from the crisis in Eastern Europe.
“Beyond the truly tragic loss in human life, a number of costs are extending out of this conflict–many of which will have a direct effect on global supply chains,” LMI researchers said in their February report, released March 01. “The most apparent change has been the shock to fuel prices … As sanctions rack up on Russia, prices may continue to increase, potentially driving transportation and inventory costs higher.”