The Russian invasion is a setback for the Ukrainian people, a challenge to European democracies, and a strong headwind for economic recovery everywhere, especially after COVID-19. A potentially protracted conflict could lie ahead. Oil and gas prices will continue to rise as the Russia-Ukraine crisis escalates, but the impact on energy supplies will not be the only one. In this article, I will focus on two elements - trade routes, and supply chains related to machinery trade.

Trade Routes

The 27 European Union nations, Canada, and The United States have closed their airspace to Russian aircrafts. Russia, in turn, has closed its airspace to 36 nations. This has consequences for transportation costs. The cargo division of the German airline Lufthansa estimates that this will reduce its air cargo capacity by about 10%. FedEx has added a war surcharge.

The war also has implications for land transport and cut land routes between Europe and Asia. This will especially affect Chinese companies that use rail transport to move goods to Europe. For example, despite the pandemic, the volume of goods transported by rail from China to Europe has increased from 14 million tones in 2019 to 24 million tones in 2020. The invasion of Ukraine is expected to affect further growth.

The invasion of Ukraine has disrupted China's new "Silk Road" to Europe, the world's longest freight rail route, on which the country has spent US$900 billion. It will also massively increase freight rates for ocean carriers, which provide an alternative to land and/or rail transport.

Supply Chain

Russia’s invasion of Ukraine and resultant economic sanctions has contributed to negative impacts on supply chains and are likely to impact a wide array of industries, ranging from food products to heavy machinery.

The invasion increases pressure on the global logistics and transportation network, as discussed above. Therefore, the supply chain seems to be directly affected, as its steps may be delayed or even become impossible in some cases.

In summary, we are facing unprecedented challenges in the machinery trade, mainly because this market requires multiple steps, such as logistics and transportation. This leads to price increases and possible delays in shipping. If observed from a good point of view, as a society we still have different ways to take the last step. In other words: We are battered but not broken.

At Glomacht, we work hard to provide our customers with excellent customer care and reduce the negative impact of this conflict because your experience with us is important.