ProcurementIQ is monitoring the ongoing situation in Ukraine and will provide updates and analysis on procurement impacts as information becomes available. See the Recent Developments section of our reports for more information.
The Russian invasion of Ukraine has disrupted air shipping routes and has resulted in higher freight prices. Major air routes have been cut off. The United States, Canada and the European Union have closed their airspace to Russian aircraft while Russia has closed its airspace to airlines from 36 countries in Europe. The closure of these air routes will increase Europe-to-Asia and Asia-to-Europe airfreight rates as these routes often transit through Russian airspace. Long-distance flights between the United States and India also may pass through Russian airspace and may also be affected.
Ocean shipping has also been affected. Four of the world’s largest shipping lines (Maersk, MSC, Hapag-Lloyd and Ocean Network Express), accounting for 47% of global container shipping, have announced that they will suspend shipping both to and from Russia. CMA CGM also has suspended bookings to and from Russia. The invasion has also reduced shipping capacity because some countries (such as the United Kingdom) have banned Russian ships from using their ports while others (such as Belgium and the Netherlands) will inspect Russian cargo ships that stop at their ports. Finally, ocean shipping rates may increase because Western shippers may switch from rail to ocean shipping to avoid having their cargo pass through Russian territory.
Additionally, fuel prices have increased. Although Russia is one of the world’s largest producers of oil and gas , buyers are now avoiding oil and gas imported from Russia. Cargo carriers will raise freight rates in response to increases in fuel prices.
Impacted Markets
International Air Cargo Transportation Services
- Europe-to-Asia and Asia-to-Europe airfreight prices will increase as carriers often fly over Russia on these routes.
- Transpacific and transatlantic routes generally avoid Russian airspace so the effect on these routes will not be as severe.
Deep Sea Cargo Transportation Services
- Container shipping rates to and from Russia will increase sharply because the world’s largest shipping companies have suspended bookings to and from Russia.
- A shipping expert told The New York Times that ocean rates could jump from $10,000 to $30,000 per 40-foot container as a result of the invasion.
- Increased crude oil prices have raised the price of diesel, forcing trucking companies to raise service prices.
Local Freight Trucking Services
- Local freight trucking is also diesel-intensive, so higher crude oil prices will increase trucking rates.
Domestic Air Cargo Transportation Services
- Higher oil prices will mean higher aviation fuel prices; as a result, air cargo carriers will raise airfreight rates.
