“Russia erased from map”
Logistics industry forges new alliances
4/2/2022 11:37 am
Global logistics is still a long way from recovering from the Corona crisis when the Ukraine war is forcing an entire industry to reorganize. Aviation and shipping are breaking new ground so that shipping companies don’t have to store containers temporarily and customers don’t have to wait weeks for goods.
The war in Ukraine has disrupted supply chains around the world. Aviation and shipping are now reconnecting the nerves of world trade so that they can still supply their customers with goods after the sanctions against Russia. “Russia was wiped off the map and is practically non-existent due to the sanctions,” says an insider at a major shipping company, describing the new world. Global logistics has by no means recovered from the consequences of the Corona crisis. Large liner shipping companies, meanwhile, make a lot of money from the fact that freight prices are skyrocketing due to the tight capacities and use their full coffers to forge new alliances.
Even more important than Russia for sea logistics is China, where the pandemic is currently flaring up again and with the gradual lockdown in the port metropolis of Shanghai, problems that were thought to have been overcome are returning. “We are closely monitoring events in China with another wave of Covid-19 spreading to several major cities and businesses,” said Gene Seroka, executive director of the Port of Los Angeles recently. Los Angeles and the adjacent port of Long Beach on the west coast of the USA are a bottleneck for container shipping traffic. At peak times, more than 100 ships were waiting there to be cleared.
In the meantime, the situation has eased somewhat, as Seroka reported at an event organized by the Hamburg shipping company Hapag-Lloyd. The bottlenecks on the US west coast and in China are the main reasons why liner shipping companies around the world have not been able to keep to their schedules for a long time and transport capacities are tight. Containers back up in the ports and customers often have to wait weeks for their goods.
Profits are bubbling up at HHLA
The turbulence began with the outbreak of the corona pandemic two years ago in China, when ports closed. Containers were piling up at the terminals and trucks couldn’t clear them out of the ports. Goods threatened to spoil because there were not enough sockets at the terminals. “At that time, two large ships were left in the roadstead in order to use the sockets on board for the refrigerated containers,” says Rainer Horn, spokesman for Maersk’s Hamburg-Süd subsidiary. The shipping companies learned from the experience and quickly stopped the goods after the sanctions against Russia.
Horn reports that even bookings where transport had already been confirmed were cancelled. Meat or fruit from South America, for example. “Customers can specify a new, alternate destination for the load at no cost.” Nevertheless, the ports on the North Sea are full because shipping companies have to temporarily store containers that they are not allowed to transport to Russia.
The container terminals benefit from this. At the Hamburg port and logistics group, profits have been bubbling up for some time because, due to the ship delays of several weeks caused by Corona, containers have been in the port for longer, for which HHLA collects demurrage. In the meantime, tens of thousands of empty containers are lying around in Russian ports, which ships would otherwise take with them on the return journey once their cargo has been unloaded. The containers are urgently needed because of bottlenecks elsewhere. The Danish shipping company Maersk alone accounts for 50,000. They are now trying to get the steel boxes out of Russia by train. But depending on the length, 80 to 100 containers fit on a train, on a ship it can easily be 10,000 or more. Meanwhile, there are no Ukrainian truck drivers in the West because they are fighting in the war against Russia.
Shipping companies want to offer everything from a single source
The tills of the major container lines such as MSC from Switzerland, the Danish Maersk Group, CMA CGM from France, the Chinese Cosco and Hapag-Lloyd based in Hamburg are ringing because transport space is scarce and freight rates are skyrocketing. The shipping companies use this financial power to siphon business from shippers. “Forwarders live from the fact that they buy large quantities of loading capacity on certain routes and sell them on to their customers in small parts and at higher prices,” says a representative of a liner shipping company, describing the business. “We don’t need them at the moment because the demand is so great.” The so-called arbitrage business is as good as dead. “We do it ourselves because there is a margin involved,” says the insider. “We deliver to your doorstep.”
The shipping companies invest in airlines, container terminals and truck fleets in order to offer their customers everything from a single source: transport from the factory gate to the customer’s warehouse or to the customer’s home. World market leader MSC, for example, has set its eyes on the Italian state airline ITA together with Lufthansa and wants to build up an air freight and passenger business. Maersk and CMA have ordered cargo aircraft. The Danes already have a foothold in the air freight business with Maersk Air Freight. Now the group from Copenhagen wants to take over the logistics company Senator International, a large air freight forwarding company from Hamburg with around 2000 employees worldwide.
The world’s largest online retailer Amazon also wants to get into the freight business and is digging up business for the freight forwarders. The media recently reported that the US group wants to book capacities in container ships and cargo planes. The logistics group Kuehne und Nagel already has all types of air and sea freight to overland transport on offer. The Swiss transport company sees the effects of the crises on the logistics chains less dramatically than others. “In air freight, a lot had to be reorganized in recent weeks because Russian airspace is closed to western airlines. The planes now take longer to get to or from Asia,” says spokesman Dominique Nadelhofer. Overall, however, the industry ensures that the goods reach their destination.