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Supply Chains are Interconnected as seen from the Decoupling of Ocean Freight in Russia

Supply Chains are Interconnected as seen from the Decoupling of Ocean Freight in Russia

Reinforcing the stance that Supply Chains are interconnected webs, the expulsion of Russia from the world cargo market is proving to be expensive to western freight concerns after Moscow’s invasion of Ukraine in February, reports IHS Media.

Maersk, in its first-quarter results released this week, put the price of “disengaging from all activities in Russia” at US$718 million, with almost half of that linked to unwinding its 30 per cent investment in Russian port operator Global Ports International (GPI).

Maersk said it was writing down all assets, which in addition to the GPI stake, involved writing off stranded containers, bad debt, employee-related costs, and exiting two warehouses and a cold storage facility.

Part of Maersk’s withdrawal from Russia is the winding down of its weekly AE19 sea-rail service launched in August 2019 that connected Northern Asia countries with North Europe via the trans-Siberia express line.

All major carriers, except Cosco, suspended all bookings to and from Russia and Belarus. Estimates put the number of western containers affected at 10,000 TEU, valued at $63 million.

Mediterranean Shipping Co (MSC) has “not completely stopped” offering rail solutions between China and European destinations as it is still accepting bookings for food, medicine and humanitarian aid.

DHL and DSV played down the impact of withdrawing from business operations in Russia, Belarus, and Ukraine during interim earnings calls with analysts last week.

Germany’s DHL said reduced business in Russia led to a $30 million asset impairment in the first quarter, with DHL Global Forwarding’s suffering costs of $6 million.

Said Denmark’s DSV chief executive Jens Bjorn Andersen: “We are in the process of terminating our business in Russia in the not-too-distant future.”

Kuehne + Nagel CEO Detlef Trefzger said 30 percent of the air cargo trade between Asia and North Europe was affected by diverted flights.

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