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Update MarchPublished on 16 March 2022
In this our March update we would like to give you an overview of what we have seen over the last few weeks, starting with an update on Covid-19.
We had started to see some return to normality as several countries announced plans to reduce safety measures and to reopen or relax border. Many countries had indicated that they could not economically afford or are not willing to stay closed, these steps signaled that there was a shift in pandemic thinking which was positive for our industry.
However, Covid-19 continues to be a challenge, cases had increased in the first months of the year, and it was reported that the number of global cases hit a new peak in late January with more than 4 million cases registered in a single day. In recent weeks Hong Kong & China have experienced a dramatic increase in cases which has resulted in the reinstation of stricter measures and lockdowns will cause global concern and will put additional pressure on an already challenged freight industry. Source: Splash247, China gripped by new Covid wave, Shenzhen enters citywide lockdown
Of course, it goes without saying that the one topic on everyone’s minds and in our hearts is the Russia / Ukraine conflict. We have a large relocation and moving logistics company in Russia so we see firsthand the daily impact on our own staff and the clients we serve and the impact the conflict will have on an already challenged global mobility supply chain.
Here are some key topics to update you on this month:
1. Russia / Ukraine conflict
Our Moscow office continues to be fully operational, and we have 50+ staff available to provide support to our clients. From our Netherlands office we also offer financial, operational and supply chain support to our Moscow office. To provide you with some insight, over the last weeks the number of move initiations and departure services we have received has increased dramatically, and we are making every effort to meet the needs of our clients. We are also managing more & more properties in Moscow for international staff who are leaving the country. We have also seen multiple requests from corporate clients as they start to consider moving Russian staff to European countries, especially from the tech & retail sector. Our continency plan in Russia is in full force and our expats will remain in country for as long as possible.
There is extensive media coverage on the conflict, but we would like to share the following:
- More and more foreign business (Automobile/Clothing retailers/ Food industry/IT sector) are exiting Russia and are either completely ceasing or suspending their activities for an unspecified period.
- From the banking sector, VISA and Mastercard have fully suspended their services and international transactions are subject to additional sanctions which restricts the normal business functions. In addition, the government has put limitations on foreign currency operations and the exchange rates are volatile.
- The foreign business houses with plans to exit are also at this time under counter sanctions from the Russian government, the assets of these companies will go under external management (factually confiscation).
- The Russian Government issued an order on the 10th march which prohibits exportation of previously imported goods outside the Eurasian Customs union zone (Russia+ Belarus+ Armenia+ Kazakhstan+ Kyrgyzstan). The list includes 200+ items, examples are technological, telecommunications, medical equipment, vehicles, agricultural machinery, electrical equipment, railway cars and locomotives, containers, turbines, metal and stone processing machines, monitors, projectors, consoles, and panels. Currently this order does not specifically mention individuals but there is no certainty that they can also be included.
- Transport and rates in general continue to increase and there are challenges with capacity and options, for example the sea route via St. Petersburg is no longer an option.
The situation in Russia & Ukraine is dynamic and we will continue to keep you informed as we receive updates.
2. Industry challenges
Global freight: The freight and congestion challenges have not changed over the last weeks, whilst there were some reports of the easing of congestion in Asia, this will now be impacted by the reintroduction of Covid-19 measures and lockdowns and the situation continues to escalate in North America. The number of ships waiting off the coast of California fell to its lowest since November 2021, but this has been attributed to the fact that vessels had been re-routed to other ports which has meant that rather than reduced congestion the problem has just been re-distributed. So, whilst congestion eases in some locations it is escalating in other areas and the backlog is still 160% up year on year which means as we go into the peak season, we will see the queues increase again.
This article from the American Shipper describes the situation as Supply chain “whack-a-mole”. Source: Freightwaves, Supply chain whack-a-mole: West Coast eases, East Coast worsens.
In Northern Europe the hub ports are already experiencing congestion and it is anticipated that the Russia / Ukraine conflict will increase the pressure. As countries start to refuse entry to Russian vessel’s this will mean re-routing to other ports. Source: Business Insider, Russia’s war on Ukraine could triple ocean shipping rates to $30,000 per container, expert says.
Fuel & General Increases: The transport industry is amongst the worst affected by energy increases due to the conflict; we were already seeing volatility in fuel prices due to the pandemic, but this will be disrupted further by the Russia / Ukraine conflict. The increased costs at the fuel pumps will impact road transportation network, and we will see shipping and airlines imposing fuel surcharges for air and sea shipments. Most European countries are dependent on Russian energy and even those countries who have a low dependency will experience an impact due to global supply and demand. It is anticipated that freight rates could double or even triple as we approach our peak season. Source: FIDI Focus, Ukraine conflict to hit wooden packaging and pallet supply.
3. Relocation Services
The global freight challenges are also impacting the relocations industry; delays to shipment arrival dates means temporary housing is extended or rental furniture is required for a longer period which puts pressure on the supply chain. There also continues to be a shortage of long-term properties which results in increased costs, so it is more important than ever to manage our client’s expectations in relation to housing budgets and expenses.
In the Netherlands it has been forecasted that rental prices will rise by 12.5-15% in 2022. The housing market is limited in the Netherlands, and whilst new properties do come onto the market there is a disparity between supply and demand, and it is no longer possible to negotiate which can be problematic for individuals with pre-pandemic budgets. Most clients are willing to consider extending temporary living to 30 days and as it is taking longer to secure permanent properties employers are providing at least 30-day temporary accommodation upon arrival.
What do we do?
In all Voerman locations our customer service staff will as always work closely with the families moving as well as our corporate contacts to proactively keep everyone updated. We continue to review our processes to improve efficiencies while maintaining the quality of service and we also look for ways to reduce costs by offering consolidation of shipments, exploring all modes of transportation and in some cases extending SIT periods prior to shipment. We continue to count on flexibility from both sides to meet preferred packing and delivery schedules and to executing cost saving measures, and we are committed to serve and to meet expectations.
What can you do?
For new initiations, please continue to reach out to us as soon as possible so we can properly understand the needs of the transferee and the transit time requirements. This will allow us to set realistic expectations at the beginning of the relocation journey. If you have any questions, please reach out to your account manager or customer services contact.
Global Network & Connection – To Keep You Informed
We will continue to keep you updated regularly and please reach out on any questions. We are here to serve you!
Wiebe van Bockel – CCO Voerman Group