Ever since the beginning of the COVID pandemic, the air cargo situation around the world remained unstable, however, as time went by, things started to get back on track, but unfortunately, it wasn’t long before the Russia-Ukraine war started and, at almost the same time, Covid-19 also made a resurgence in China. The impact of the Ukraine war on supply chain companies and related operations turned out to be very alarming. In March, the air-cargo volumes were affected highly due to the ongoing situations, raising a lot of concern for the cargo industry and the overall global supply chain stability.
The volumes of air cargo fell 4.5% in March, and the capacity fell by around 4% due to the Russia-Ukraine war. Supply chain companies had to cope with the constantly rising rates that peaked at 27% compared to the previous year.
Air Cargo expert Niall van de Wouw (currently, Chief airfreight at Xeneta) said that overall cargo markets saw a huge step back this March, especially compared to last year’s situation and this year’s early situation he reminded everyone of how little the Airfreight market had control over the current operations, and how nobody has any idea how things will play out in the future.
He further added that the disruption in Air Cargo has severely impacted the passenger traffic trends, trouble in the geopolitical procedures, and the ocean freight market.
As the world has started to open up again and the pandemic has started to fade, China faces a resurgence in the covid cases as the number rises to over 26,000 cases a day! highest ever since the pandemic first started back in 2019.
Due to the restrictions and lockdowns, China’s most crucial ports are unable to function properly which is proving to be quite troublesome for the global airfreight operations, pushing forward as much as 50% of air freights in a few cases.
As a result of that, the rates of airfreight have skyrocketed ahead of the Lunar New year holiday in China. Most of the shipping has either been postponed or suspended by the companies, making matters even worse.
Regardless of the loss and disruption, dues to the closure of key ports and economic hubs, China has remained firm in its policy of curbing Covid to its core, maintaining a “No Tolerance” or “Zero Covid” policy to combat the pandemic.
In a statement, Chairman of supply chain risk intelligence firm Supply Wisdom Atul Vashistha said that; The ports that are still open and operational, the workflow there is drastically slow due to all the precautions and restrictions.
The Russian invasion of Ukraine has obliged the carriers to take alternative routes which are too long compared to the traditional routes, utilizing more fuel that results in increased service rates as well as cuts down the volume of shipments from the cargo companies.
German Logistics company DB Schenker released a statement that discussed the impact of sanctions on Russia; “Sanctions on Russian carriers and the closure of Russian airspace, as well as the instability in the entire region, is causing major issues for the cargo operations and creating instability in the market”
The Closure of Russian Airspace saw a direct impact on Europe as well as Northeast Asia where a 20% decline was recorded. Between March 21 and 27, Japan-to-Europe spot rates soared almost 50% higher compared to the prices before the war.
The current situation is quite unsettling for the cargo, logistics, and supply chain experts. The reemergence of Covid-19 cases in China is really worrisome for the cargo operations, the ports which are the economic hub of China are almost non-functional or operating at a very slow pace, hence affecting a wide range of countries spanning regions such as Asia, North America, Europe, and Australia.
On the other hand, The Russian Invasion of Ukraine has raised a lot of concerns for the present as well as future Air cargo operations. As the two countries continue to stay on their toes and show no signs of backing out, the world would have to bear the consequences in terms of hefty freight rates, longer delivery time, and insecure pathways.