The (supply) chain effect of cancelling more than 100k containers

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What’s inside?

    In the past 48 hours, the world’s top three container shipping companies MSC, Maersk and CMA CGM reported that, due to the current crisis in Ukraine, they stopped all activities related to delivering containers from and to Russia.
    According to Windward data, container vessels owned or operated by MSC, Maersk and CGA CGM have made 1,244 port calls in Russian ports in the past 12 months. This represents 28% of all container vessel port calls in Russian ports over the course of that time period. Using data from Windward’s Ocean Freight Visibility platform and the World Bank, we estimate that MSC, Maersk and CMA CGM would have been responsible for moving 101,237 containers in and out of Russia in March 2022.

    WNWD 2
    Image 1: Port calls by MSC, CMA and Maersk in Russian ports during this past year

    What does this mean for the container shipping ecosystem?

    Container movements out of Russia

    With the three largest container shipping companies in the world staying out of Russia, other liners, most likely such that are not owned or operated by European, UK or US companies, would be chosen to move many of these containers. This could be challenging as, for the better part of the past 18 months, extra space was not exactly abundant on the global fleet of container vessels. Yet, even if there was enough room for each and every one of these containers, many of these containers would still not get to their destination, because it would be very improbable to find a liner that: 1. didn’t stop operating in Russia and; 2. would agree to carry a container owned by another liner, with whom it most likely doesn’t have any business relationship.

    This could result in additional storage and/or demurrage fees. How high will these fees be? That remains to be seen and will largely depend on the efficacy of the reaction of all stakeholders involved – ports, liners, forwarders and others.

    Container movements into Russia

    These giant liners will need to discharge all of these containers in other ports throughout Europe, for them to be transshipped and carried on to their destinations in Russia by feeder vessels and/or other liners. In some cases, it might be required to add multiple transshipment stops. The outcome is likely to increase congestion at the ports that will be chosen for these transshipments. Moreover, the risks of delay for these shipments will certainly be heightened, as transshipments add more opportunities for things not to go as planned.

    Although the announcements from the liners focus on the impact on their vessel operations, it will be interesting to see whether containers that they own will also be restricted from entering the country, even if loaded on carrier vessels. One reason MSC, Maersk, and CGM CGA might want to also restrict their containers from reaching the territory is to avoid having containers stuck in a port in Russia. If restricted, all containers owned by these liners that are currently at sea and are loaded with goods destined for Russia would have to be devanned at the transshipment port. This process is costly – devanning itself incurs a fine, and in addition, it is a lengthy process that can cause delays which, in turn, leads to more expenses.

    It should be noted that, at the time of writing, all ports in the UK and the Port of Hamburg, Germany, have stopped handling containers coming from or going to Russia. Multiple EU countries are reportedly discussing the possibility of doing the same. Windward estimates that, under normal circumstances, 362,796 containers would have made their way in and out of Russia in March 2022. If, indeed, the majority, or even all, of Europe’s ports close their doors to containers with Russia as origin or destination, it could result in hundreds of thousands of containers stuck in various places along the supply chain.

    While the foreseeable future seems to be uncertain in many ways, it is safe to assume that the supply chain in general, and the ocean freight market in particular, is not returning to a pre-pandemic normal any time soon. However, using a predictive and preemptive approach, it is possible to prepare and plan enough to not be caught off-guard when the next wave of disruption arrives.

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