War in Ukraine pushes up already high freight costs for Japan

Russia’s invasion of Ukraine has disrupted shipping and air logistics networks, causing freight costs — already high due to the COVID-19 pandemic — to climb even higher.

More European countries have been restricting arrivals of ships at their ports, while due to the war in Ukraine many flights have been canceled, causing freight costs to soar — an increase that could in turn be reflected in the prices of daily products.

At the port of Tokyo, which has one of the largest cargo handling capacities in the world, a series of delays in the arrival of cargo vessels has hindered the prompt loading and unloading of cargo, causing a headache for port workers.

“If the delayed ships arrive all at once, we won’t be able to secure a place to store the cargo, which will make it difficult to hand it over smoothly,” a port employee said.

The logistics industry had already been experiencing a shortage of container vessels due to the pandemic, and container freight rates have been at record levels due to continued infections among port workers and other factors.

But the war against Ukraine has placed further strain on the industry. Ocean Network Express Pte., a joint venture company comprising three major shipping firms including NYK Line, stopped shipping cargo to and from Russia and Ukraine at the end of February.

The company said that delivery has become challenging not only at ports along the Black Sea coast such as Odessa, but also at geographically remote ports such as St. Petersburg.

“There is a concern that many companies will need to redirect their vessels to large ports (in various parts of Europe) that serve as hubs for cargo,” a shipping industry official said.

Although there is not much cargo directly shipped between Russia and Japan, there are concerns that disruption at major European ports could lead to further increases in freight rates.

The same goes for air cargo. Airlines are scrambling to secure cargo space, and competition for international cargo slots is heating up.

Many European countries have closed their airspace to Russian aircraft, and Russia has reciprocated.

The sanctions resulted in numerous cancellations of cargo flights around the world, and they also prompted Japan’s major airlines — All Nippon Airways and Japan Airlines — to refrain from flying over Russia for safety reasons.

Takuma Matsuda, a professor at Takushoku University and an expert on international logistics, predicts that products relying on air cargo will be the first to be affected by the fact that airlines won’t be able to fly over Russia.

An airline industry official said, “Freight rates between Japan and Europe have doubled since before the invasion, and the period of time it takes for cargo to arrive has also been extended by several days.”

There’s a possibility that fresh food, clothing, auto parts and other goods originating in Europe will be held up, causing prices to rise in Japan, they said.