TAKEAWAYS [ IN FOCUS ] Shaping the Future of the Global Supply Chain
Russia-Ukraine Supply Chain Strain
CONSUMERS CATCH COLD Growing consumer demand in the United States is impacting the storage and distribution of frozen foods and other products that depend on cold environments, finds the Thomas Index Report. The report examines the shift to buying groceries online during the pandemic, as consumers embraced online ordering and fully filled pantries and freezers. The increased demand for frozen foods means distributors need more refrigerated trucks to handle the available goods and more space in cold storage warehouses to store them. As a result of this demand, freight rates are going up. In March 2022, it cost $4.97 per mile to ship goods by refrigerated truck, a striking jump from $2.93 in early 2020. If demand continues to climb, it could exceed available capacity and drive prices up more starkly. In response, a growing number of third-party logistics providers plan to expand their cold storage capacity in the coming months, building new facilities and acquiring more cold storage warehouses. The growth in cold storage aligns with overall growth in the storage and warehousing sector. The average availability of U.S. warehouse space dropped from 8.5% in the first quarter of 2016 to a mere 5.6% in the first quarter of 2021, says real estate firm CBRE Group. Meanwhile, U.S. warehousing and storage companies have added 420,000 new jobs to accommodate the increased work they are bringing in, reports the Bureau of Labor Statistics.
The commodities markets are the industry category that is experiencing the greatest strain as a result of Russia’s invasion of Ukraine, according to a Dun & Bradstreet briefing report released in March 2022. The report, which assesses the global business impact of the crisis, focuses on the businesses and countries that work with Russian and Ukrainian suppliers. Data compiled by the business intelligence provider shows that 25 countries heavily depend on Russia and Ukraine for a variety of commodities. In particular, at least 374,000 businesses worldwide rely on Russian suppliers—90% based in the United States—and at least 241,000 businesses rely on Ukrainian suppliers—93% based in the United States. The most prominent commodities affected by the conflict include wheat and meslin, coal, and petroleum gases and other hydrocarbons. Of particular concern, the crisis threatens “to widely exacerbate Europe’s energy crisis,” according to the report, which notes that European gas storage levels are at a critically low 33% of capacity. Another concern is Germany placing a hold on the Nord Stream 2 gas pipeline as part of European Union sanctions on Russia. The impact of the Russia-Ukraine crisis on the supply chain includes not only the disruption of trade routes but also increased freight costs and inaccessibility of critical raw materials. The sanctions on Russian companies issued by the United States, the UK, and the EU impact thousands of entities and “further cripple an already weakened global supply chain,” the report says.
Number of countries that have a high dependency on Russian and Ukrainian exports of select commodities
25
Wheat and meslin
24
Coal
16
Petroleum gases and other gaseous hydrocarbons
12
Barley
10
Crude Petroleum
8
Maize (corn)
Source: UN Comtrade, Dun & Bradstreet
20 Inbound Logistics • April 2022
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