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Container transportation 2023: results and prospects

18.01.2024

Recently, maritime container transportation has faced significant challenges for all participants in the supply chain. This issue is not limited to the war in Ukraine and our logistics industry; it can be said that the entire global container transportation industry has been experiencing turbulence. Starting with the suspension of port operations in China due to the “zero-COVID” policy, followed by the “roller coaster” of container shipping rates, the blockage of the Suez Canal by the Ever Given container ship, and other events.

What’s happening in the world

When we look at Ukraine’s transport and logistics industry, it is essential to consider it within the context of global trends. In April this year, according to Sea-Intelligence, punctuality in the container shipping sector increased by 26% compared to the previous year.

According to the management of Global Ocean Link, last year the industry “hit rock bottom” in terms of service, with only one in three ships arriving on schedule. However, by February 2023, global schedule reliability had increased by 7.7%, reaching 60.2%, the highest level in many years.

But just as we began to enjoy the improved service from container lines, the situation in the Middle East worsened. The trade route from China to Europe via the Suez Canal is used for transporting approximately one-third of the world’s containerized cargo. Using alternative routes through the Red Sea increases costs and transit times — the route around the Cape of Good Hope requires additional fuel expenses, increases delivery times by 35–40 days, and can cause a shortage of space on ships due to empty containers stuck in transit, which are needed for Chinese exports. Notably, container lines are already reducing the number of port calls. All of this combined will lead to higher costs.

Container transportation in Ukraine

Due to the armed aggression of the Russian Federation, maritime container transportation has been completely blocked from the beginning of the war until now. It has likely suffered the most losses since the sea transport of other goods was resumed literally a few months later thanks to the Danube ports, followed by the operation of the so-called “grain corridor.” Now the humanitarian corridor is gaining momentum. However, container shipments from the Big Water ports are still in question, although there is some light at the end of the tunnel.

The ports of Ismail and Reni took on a heavy load at the beginning of the full-scale war, when the ports of Greater Odesa were blocked. By the fall of 2022, container barge services from the Danube ports were already launched. Despite the relatively stable functioning of the Danube ports for almost a year and a half, the enemy began regular drone attacks starting in the fall of 2023, trying to destroy the port infrastructure. This led to the suspension of the Orlivka – Isaccea ferry crossing several times. Therefore, strengthening air defense has become relevant in this direction as well.

Industry in numbers and trends

According to Global Ocean Link, the following important trends and indicators in the industry should be noted:

After the grain corridor ceased operations, there was an increased demand for transporting grain crops in containers.
There is also a growing share of small-scale production exports, highlighting the effectiveness of government export support programs.
In September-October this year, the schedules for maritime container transportation were stabilized. There was a sharp increase in demand for grain shipments from Ukraine, as prices favored this. This specifically pertains to container exports. This is significantly influenced by Ukraine’s impact on global prices for sunflower oil, sunflower seeds, rapeseed oil, rapeseed, rapeseed meal, wheat, and peas.
Freight rates from Europe to the USA have sometimes fallen as trade needs to be closed. This has influenced financial trends in this market segment.

Ukrainian logistics have significantly felt the impact of port blockades and attacks, compounded by the blockade of truck borders by neighboring countries. In this context, rail transport has proven to be a much more stable mode of transport, with better planning capabilities. The example of the contrailer train from “Ukrzaliznytsia,” which transported Ukrainian trucks to Poland, is very telling. Therefore, reliance on rail transport will remain strong, especially for container shipments.

When discussing the structure of cargo, the key items are grain and oilseed crops and other products exported by Ukrainian agriculture. There is also significant demand for the transportation of fertilizers, for which containers are widely used. Metal products, ores, and foodstuffs are also among the popular export goods. Of course, this list is not exhaustive.

The blockade of the border in Poland, as previously mentioned, has affected infrastructural processes in Ukraine. A large portion of imported containers has been blocked. The problem of empty container imbalance in Ukraine has become more acute since exports could not be transported out. One solution was organizing direct container trains from Poland, which brought in loaded containers and took empty ones back. Additionally, it’s important to mention the delivery of cargo with transshipment, which involves changing wheelsets. This refers to the well-known narrow-gauge railway systems of EU countries. Ukrainian carriers are well adapted to this, as they regularly operate in this format, and the processes are well established.

To transition from these examples to the general trend, it is indispensable to analyze Ukraine’s interaction with other countries in this sector and consider the numerous indicators of import and export shares.

For imports, the shares are as follows:

60% Poland
20% Romanian ports
20% Reni (Danube region)

For exports, the shares are as follows:

45% Romania
45% Poland
10% Reni (Danube region)

Thus, from all the above, it can be concluded that the demand for container transportation by rail will remain. Therefore, Ukrainian transport and forwarding companies and other market players must not only continuously adapt their operations to the changing conditions of wartime but also keep their finger on the pulse of global trends.

Forecasts for 2024

In addition to the trends mentioned above, it is essential to consider expert opinions. For example, Nerius Poskus, Vice President of Global Ocean Freight at Flexport, believes that the Panama Canal crisis could impact American importers in terms of transit time and cost.

Container lines are under tremendous pressure, leading to the cancellation of more sailings. Despite low freight rates, concerns about import delivery delays are significant and justified. There is also a threat to shipping in the Bab-el-Mandeb Strait.

Global experts pay considerable attention to the International Longshoremen’s Association (ILA) case and a potential strike in US ports on October 1, 2024. Although that date is still far off, if the reasons for the strike are not addressed, it could lead to a global supply chain disruption. In the Ukrainian context, the resumption of container and ferry connections with the ports of Greater Odesa is possible. The launch of feeder services makes sense, potentially involving ships that can carry up to 1000 TEU. We hope that Ukrainian logistics will continue to develop and strengthen Ukraine’s economy despite the harsh realities of war, facilitating the export of our goods and raw materials to international markets.

How to operate for exporters

To ensure smooth and efficient export operations, it is crucial to diversify logistics solutions. As the saying goes, “don’t put all your eggs in one basket.” Different transportation solutions and the use of multiple warehouses are necessary. This approach is related to the risks of war, which must be understood and minimized to avoid significant losses.

In this context, the concept of the BANI world (Brittle, Anxious, Nonlinear, Incomprehensible world) becomes very relevant. It refers to the concept of a new anxious reality where everything can break unexpectedly. The stronger the illusion of stability, the more significant the potential future disaster. This doesn’t mean one should only wait for disasters. Such a stance would paralyze any actions and development. Instead, determining your actual level of influence on each situation is a good solution.

If we cannot fully control the circumstances, we must understand the degree of our objective influence on them. This can involve reducing risks, diversifying, calculating alternatives, and developing clear criteria for selecting partner enterprises for strategically important collaborations. All of this is extremely relevant for all companies in Ukraine, particularly in the transport and logistics sector, as each serious decision affects their adaptability to unstable market conditions.