Advisory: Russia - Ukraine - Impact on Supply Chain Management

Border restrictions, regulatory changes, diverted air and ocean traffic, cyber security concerns, market response and related impact on currency and insurance, as well as the impact on fuel and gas will affect global supply chains. 

Fuel prices and shipping rates are seeing increases as a result. Space and equipment shortages are also likely to become more severe as alternative routings and modes of transport are being sought for cargo. As land options through the region become more uncertain, an increase in the demand of air cargo is a likely short-term alternative.

With Ukraine and Russia making up 29% of European exports of wheat, 19% of corn and 80% of sunflower oil, food prices across Europe and the UK may also take a hit and likely rise as a result.

Cyber security is also an increasing concern to the supply chain industry, along with many other sectors.

Ocean Freight

Following the suspension of shipping in the Sea of Azov from 1am GMT on February 24th, foreign container vessels and tankers have been piling up on the approach to the Kerch Strait shipping lane, which is currently blocked by Russian ships. The Kerch Strait is a key trade artery linking Ukraine to the rest of the world, and its closure has seen a small number of vessels unable to leave the region.

Vessels already en-route towards Ukraine will instead now discharge cargo in the Eastern Mediterranean or ports in the Black Sea to avoid further ocean delays, however this will cause disruption in the form of congestion, space issues and equipment challenges on these routes. The cargo will be moved from these ports via road and rail, which will cause further issues to the already strained transport modes.

Air Freight

The Civil Aviation Authority has put an immediate ban on all non-military aircraft entering Ukrainian airspace (24th February). The map (source: www.flightradar24.com) illustrates the rerouting that flights are having to comply with to avoid the region. 

With air cargo unable to travel to or through the country, routes passing near to or around Ukrainian airspace will  experience potential delays and cancellations - this could further force rises in the cost of air freight with increased fuel usage on routes avoiding the area.

Road and Rail

Significant delays and disruption is expected for road and rail freight passing through neighbouring countries. Increased border controls are being enforced with further sanctions expected. 

Our thoughts are with the communities affected. 

We will of course keep you updated as to any further industry impact.