First, the war between the two countries, which started when Russia started military operations in Ukraine on February 2, shows no sign of ending easily even after a month and a half. It was expected that the war would end soon enough that not many experts thought of a long-term war after the outbreak, but now, no one knows when it will end.
In fact, after COVID-19, the global logistics market and supply chain suffered greatly, and the maritime freight rates rose significantly. Emerging as an alternative, the Trans-Siberian Railway (TSR) has fulfilled its role, and Russia naturally became a hub for global logistics.
The global logistics market suffered from great difficulties due to COVID-19, and TSR seemed to be an alternative to better the situation. However, this alternative was blocked due to war. Especially, as air transport cannot pass through Russian airspace, time losses and physical damages began to mount by taking detours.
The setback to the logistics industry that started in Russia is highly likely to be further aggravated by Russia’s attack on Odessa Port in Ukraine. The Port of Odessa is the largest port on the Black Sea coast. If it is controlled, then the maritime trade through the Black Sea will be blocked, and grain exports to the Black Sea region, which accounts for more than 30% of the world’s grain production, will be halted, leading to a food crisis following the logistics crisis.
The second issue is the logistics impact of the Chinese government’s lockdown of Shanghai city to prevent the spread of COVID-19.
To prevent the spread of COVID-19, the Chinese government started a partial lockdown of Shanghai, which is referred to as China’s economic city, by region on March 28, followed by a complete lockdown. As the spread of COVID-19 did not improve significantly, the city lockdown was extended indefinitely.
Originally, quarantine officials of Shanghai repeatedly declared that they would not lockdown the city because it would have a considerable impact on the entire Chinese economy as well as the global economy. But, in the end, they suddenly decided on the city lockdown. As a result, confused citizens began to buy food and daily necessities. However, this was only the beginning, and 10 days after the city lockdown, Shanghai is having an immense adverse effect on the global logistics and economy as well as the logistics crisis in China along with the news of riots from Shanghai citizens, who have not been able to obtain daily necessities such as food.
In addition, as the logistics impact that started with the lockdown of Shanghai city spread to the logistics crisis that started in the port of Shanghai, the logistics flow in China and the world is developing into a stagnant situation. Since the cargo truck drivers, the main pillars of land logistics, can only enter their destinations only after being tested negative for COVID-19, containers are piling up in Shanghai Port, which started with hundreds of ships waiting for unloading and increased to over thousands. This is causing severe stagnation in the domestic logistics of China and Shanghai. As the port of Shanghai is becoming stagnant, some regular container shipping companies are busy preparing countermeasures, such as canceling until May or skipping one or two voyages.
Surely, the Chinese government announced the easing of some lockdowns, showing a lot of volatility; however, the logistics and economic problems caused by the lockdown of Shanghai are expected to continue for a very long time.
So far, we have examined the war situation between Ukraine and Russia and the logistics impact of the lockdown of Shanghai, China’s largest economic city.
It may be one of several events that occur due to a series of issues; however, the problem is that the impact of logistics on daily life is so far-reaching that it can add to economic difficulties as well as simple inconvenience.
High oil prices due to the war between Ukraine and Russia and a sharp decline in China’s economic growth rate due to the prolonged lockdown in Shanghai are expected to deteriorate not only the Republic of Korea’s logistics but the economic situation. So far, the Korean economy has survived the COVID-19 relatively well. Manufacturing companies have not stopped their operations and have overcome the crisis by maintaining a steady upward trend in import and export logistics. However, as the war in Ukraine and the complete lockdown in Shanghai have overlapped, a warning light is being sensed in the economy, starting with the impact on logistics.
A great crisis has struck once again. If the government and corporations cooperate and overcome this crisis adequately through coherent response, then I firmly believe that it will be an opportunity for Korea to show its potential of why Korea was able to grow into a logistics powerhouse and economic power in a short period of time.
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