Geo-political fights triggered by Russian-Ukranian conflict has a rippled domino effects and pose new challenges on the global supply chain industry. The price as well as the supply and demand of oil and gas are currently more prone to volatility. Logistic and global trade relies heavily on transportation and the price of oil is bound to have a negative impact on price of products that people buy on a daily basis, which on a bigger scale will affect the price of consumptions in local economies.
Several trade routes have completely stopped following the war and others have become risky. The supply of commodities to and from certain regions have simply ceased. Sadex Trading Ltd. is taking active measures to mitigate risks to help its valued clients soften the blow of rising prices and shipping fuel shortages. Sadex Trading ltd. encourage wholesale clients to associate and order commodities in bulk to reduce the price of importing goods frequently and individually. Sharing the cost is well known to reduce the prices and this saving could be passed to customers.
Port congestion, container shortage and surcharges
Ocean shipping costs are rising and this could be attributed to several ports shutting down owing to the war. This has led to congestion in ports as ships are being rerouted. This congestion could lead to delay in cargo flows further worsening the state of global supply chains. With around 10,000 TEU of cargo transported across Russia by rail from Asia to Europe every week, the rail is a significant contributor to imports and exports. However, amidst fear of fresh sanctions and restrictions, a lot of cargo transportation is moved from rail to ocean. This has increased pressure on ocean shipping resulting in a scarcity of containers.
Shortage of crew
Recruiting shipping crew is problematic in the vicinity of conflict areas as many crew members are reluctant to travel across the conflict zones and fear being stuck far away from home, following the multiple delays and cancellation of flights. The shortfall is being felt across the industry, some crew members are abandoning their job in those conflict regions over fear of safety. On an aggregate level, it will cause the price of shipping insurance to go up and some shipping lines will simply stop in a near future. Shipping crew will want an increase in salary and shipping insurance will be higher posing real challenges in delivering good on time.
The effect of embargo in Russia industrial metals and agricultural commodities
Russia is a main supplier of industrial metals and agricultural goods in addition to natural gas and crude oil. The shipping industry relies heavily on metal to repair ships and engines and to make containers. With an embargo imposed on Russian goods, there could be more delays in repairing ships and having containers for shipping commodities. Moreover, many agricultural commodities supplied by Russia such as corn, wheat, flour, sunflower oil and even fertilizers will have a higher demand and pressure because they were traditionally imported from Russia and Ukraine. Finding alternative sources to these commodities in the short and medium term will be costly for the supply chain sector more so, that during the pandemic we have witness that when there is a shortage of commodity, the big countries politicians do intervene to secure supplies for their own countries. As precautionary measure, Sadex Trading offers alternative and safe route to supply clients with essential food commodities and encourage all their valued customers to buy in bulk quantity and stock food to mitigate the frequency and price of shipping.
By Corrine Arekion – March 2022