A report The impact on trade and development of the war in Ukraine by the United Nations Conference on Trade and Development (UNCTAD) warns 1.5 million containers of Asia-Europe rail cargo could be re-routed to the ocean freight market and drive freight rates even higher.
The war between Ukraine and Russia has disrupted land and air cargo shipments between Asia and Europe. Restrictions on Russian air space, service suspensions and security concerns are complicating trade routes going through both countries which are part of the Eurasian Land Bridge.
In the last two years of the pandemic, shippers increasingly turned to rail, air and trucking services from China to Europe due to congestion and the lack of schedule reliability in ocean freight even as costs skyrocketed.
“In 2021, 1.5 million ocean containers of cargo were shipped by rail west from China to Europe.
If the volumes currently going by container rail were added to the Asia-Europe ocean freight demand, this would mean a 5% to 8% increase in an already congested trade route,” UNCTAD’s report stated.
Given the current lack of capacity on the Asia-Europe trade, the upward pressure on ocean freight rates will continue. UNCTAD said higher fuel costs, re-routing efforts, capacity constraints in maritime logistics, and the impact of the war in Ukraine will lead to even higher freight rates.
Increases in freight rates can have significant impacts on the economy. UNCTAD simulated that the container freight rate increase during the pandemic increased global consumer prices by 1.5%.
Source: Seatrade Maritime News, UNCTAD