Exacerbating the contradiction in the international air logistics supply chain from the production side
Both Russia and Ukraine are major suppliers of global commodity trade. Russia occupies an important position in the energy market such as crude oil and natural gas. Ukraine is an important exporter of grains and non-ferrous metals in the world. The Russian-Ukrainian war will have an impact on the supply of energy, metals, and other products in Russia and Ukraine, thereby affecting the manufacturing industry chains of semiconductors, automobiles, and aviation, and exacerbating the tension and contradiction in the aviation logistics supply chain. For example, U.S. semiconductor manufacturers almost entirely import neon gas, the compound hexafluorocyclobutene and palladium used to make chips from Russia and Ukraine. The Russian-Ukrainian war may further increase the cost of the chip industry chain, aggravate the shortage of chips, and cause the already unbearable Overburdened global supply chains are suffering from new shocks.
Raising oil prices from the transport side increases the cost of airlines
From a historical perspective, whether it was the Gulf War or the Iraq and Syria wars and the beginning of the war, oil prices all showed an upward trend (Figure 2). The main reason is that the outbreaks of these wars are all oil production areas, and the wars have a certain impact on the production and transportation of crude oil, resulting in interruption of oil supply and reduction in transportation volume, thus causing price increases.
The Russian-Ukrainian war will also lead to a rise in oil prices for the following reasons: First, it will affect production and supply. Russia is one of the world's major crude oil producers, accounting for about 11% and 35% of global oil production and exports. In 2021, Russia's crude oil supply will account for 29% of Europe's total crude oil imports. The war will have an impact on the oil supply side and increase the supply pressure. The second is to affect circulation transactions. The exclusion of some Russian banks from the SWIFT payment system by the United States and the European Union will undoubtedly cut off some energy supply channels, which will exacerbate the energy shortage situation, weaken the energy supply capacity, and further trigger the rise in crude oil prices.
As the largest component of airline operating costs, jet fuel is already at a high level under the influence of the epidemic. The war will further push up oil prices and increase the pressure on the operating costs of airlines, which will lead to higher air freight prices under the chain reaction.
Partial demand spillovers from land and sea boost demand for air freight
On the one hand, the war caused some physical passages of sea and land transportation to be blocked. After the conflict between Russia and Ukraine, transportation companies chose to suspend flights or divert routes one after another. For example, Maersk, MSC, CMA CGM, etc. announced the suspension of Ukrainian operations. Flexport said it would no longer accept bookings for the Trans-Siberian railway between China and Europe. On the other hand, it leads to a shortage of capacity and labor. Russian companies own 7.4% of the global cruise fleet and 3.5% of the LNG carrier fleet (Figure 4). Russian and Ukrainian seafarers account for 14.5% of the global shipping labor force. If the logistics channels are not smooth, the supply of transportation capacity and labor flow between the two countries will be blocked, which will have an impact on the global shipping and land transportation markets, aggravating traffic congestion and transportation disruption. Global trade tensions hit by the pandemic have been compounded. It may lead to the overflow of some high-value goods from sea and land transportation, increasing the demand for the international air logistics market.
Impact on global trade patterns
Increase the risk of global economic inflation. Russia and Ukraine are the main product producers upstream of the industrial chain. The conflict between Russia and Ukraine and the new round of sanctions against Russia by Europe and the United States will push up the prices of raw materials and agricultural products, which will have an impact on the manufacturing industry in the midstream of the industrial chain of relevant Eurasian countries. If the conflict continues, events such as regional inflation and financial market fluctuations will be intertwined, which will bury cross-market risk contagion and resonance effects, increase the price of imported commodities, adversely affect global trade, and further aggravate global inflation risks, thereby restricting international air freight logistics. Demand is growing steadily.
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