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$54,000 Ocean Freight Rates: ‘Prices Will Continue to Be Volatile’

Supply chain disruptions and the early signs of price hikes are beginning to emerge following Russia’s invasion of Ukraine and subsequent sanctions as logistics companies scramble to re-route customer cargo and prepare for worst-case scenarios.

A.P. Moller-Maersk said Saturday morning it was working to apply sanctions that were announced and assisting those who are customers of sanctioned banks.

Maersk, along with several other ocean liners, said Thursday it would no longer call at Ukraine ports. Maersk is instead routing cargo destined for Ukraine to Port Said in Egypt and Port Korfez in Turkey.

“As ports in Europe have endured pressure for quite some time already, we are very mindful of how we handle the global supply chain to manage congestion in key ports,” Maersk said Saturday.

The company continues to offer air and rail service to and from Russia, excluding any routes running through Ukraine.

Glenn Koepke, senior vice president of customer success for supply chain tracking firm FourKites, wrote in an update Friday that some freight forwarders indicated ocean rates had risen to $54,000 per container not long after Russia’s attack.

“Prices will continue to be volatile. In turn, shippers will shift some shipments to air with similar price increases and volatility to follow,” Koepke noted. “As shipments slow and costs rise, U.S. consumers will continue to notice empty shelves and high prices.”

Movement by truck could also eventually be constrained with sanctions and changes at borders that could mean new processes for approvals and also furthering the need for new routes, with Koepke saying that could bear out in more miles driven alongside increased fuel costs and wait times. Delays, he estimated conservatively, could increase four to six times.

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“If a full invasion and Russian takeover of Ukraine occurs, the long-term concern is that the borders to ship between Russia and Europe will drastically change,” Koepke said.

Rail service for moving cargo from Asia to Europe continues in Russia but France-based logistics firm Geodis warned of possible delays or an immediate halt on movement.

Geodis immediately stopped all business in Crimea/Sevastopol, Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR) and is also bypassing Ukraine and nearby areas.

Ryan Petersen, founder and CEO of digital freight forwarder Flexport, said Friday in social media posts the company halted bookings for its trans-Siberian rail service in a move effective immediately.

“All containers en route will be delivered. As of now, the railroad is functioning normally, but customers will be notified immediately if that changes,” Petersen said. “We thank our many customers who used this service over the years as [a] cheaper alternative to air freight and a faster alternative to ocean freight. Those customers will be presented with both of those options going forward.”

Petersen also confirmed Flexport is not accepting bookings out of Russia.

Drewry Shipping Consultants on Friday tempered concerns over the Ukraine invasion’s impact on container shipping saying in a report it would take time to fully understand and, at least in the near term, is small on a global scale.

Instead, the note suggested “retaliatory cyberattacks that might affect shipping and fast-rising fuel costs are probably the main concerns right now.”

Seattle logistics firm Expeditors International, with a market cap of $17.6 billion, remains down after a cyberattack hit its systems a week ago.

The causes of the attack are unknown. The logistics service provider to The Kooples and Herschel Supply Co. has shared little on what systems have been affected or when operations could fully resume outside of publicly reassuring customers it is operating off backup procedures and what it said Saturday were “many different solutions to continue to support our customers and stakeholders.”

Flexport’s Petersen lamented to his Twitter followers Saturday the lack of attention on Expeditors, given the length of time it’s taking the company to resume full operations: “The cyberattack that has rendered the largest international logistics company in the U.S. totally non-operational since last Sunday seems under reported.”

Petersen went on to reiterate Drewry’s point and echoed concerns over supply chain cybersecurity repeated across several reports released by federal agencies last week, saying, “One of the biggest risks in the world right now is cyber war.”