A changing geopolitical climate

The global security outlook is troubling. Conflicts between states and non-state actors continue to plague the world. This has had a pronounced impact on logistics at a variety of levels. An example of this is the on-going conflict between Russia and Ukraine which has resulted in a surge in oil prices and the reduced availability of replacement vehicles and parts.

The immediate aftermath of the Russian invasion of Ukraine led to an immediate surge in the value of crude oil and subsequent crude oil derived products. Research completed by GEP has indicated that the average pre-conflict price of a barrel of crude oil was $76 which rose significantly in March 2022, immediately after the outbreak of the conflict, to $110. An increase in fuel prices was felt throughout the economy and a number of haulage operators found that already tight profit margins were increasingly shrinking. A report by the BBC found that the cost of a litre of diesel reached a record high at 161p. Fuel prices in the UK have returned to more reasonable levels, but the turbulence and unpredictability of this fundamental asset to the haulage sector continues to be an on-going cause for concern.

Economic sanctions imposed on Russia by the UK and the European Union following the outbreak of the conflict have had a profound effect on manufacturers ability to produce HGV's and replacement parts. The Russian Federation is a major global source of both palladium and neon gas which are vital in the production of catalytic converters and semiconductors. The cost and availability of these materials has increased significantly leading to considerable delays in producing new semiconductors for new vehicles and research completed by KPMG has evidenced that this had a long-term negative impact on vehicle production. The same research indicated that palladium prices had increased 26% since the start of the conflict.

In addition, a number of HGV manufacturers, such as Volvo, produce wiring harnesses via sub-contractors in the Ukraine which has resulted in a number of vehicles being produced without some of these parts. Relocation of wiring harness production to alternative sub-contractors across the globe has proven to be both challenging and financially costly. Arrangements are subsequently made for these harnesses to be fit once they are available,but this is likely to incur significant financial implications to a haulage operator whilst their vehicle is off the road.

Back-orders for parts as a result of the Russia-Ukraine conflict have not only been limited to wiring harnesses. Operators of Ford Transit panel vans - frequently used by a number of parcel delivery and courier services - have reported that the availability of replacement rear doors, which are manufactured in the Ukraine, are extremely limited. As such, a number of these vehicles have been determined to beyond economic repair as a result of parts delays.

The Russian Invasion of the Ukraine has had a marked impact on the UK's haulage sector. Haulage operators are subsequently presented with a turbulent fuel pricing market and shortages of both new vehicles and replacement parts. A turbulent global political environment in which further conflicts could break out is only likely to exacerbate these issues further.