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The war in Ukraine and transport. Where to look for solutions?

For many months now, carriers have faced many challenges: Mobility Package, New Deal, Brexit, shortage of drivers, as well as economic effects and restrictions related to COVID-19. Now another one has appeared – the war in Ukraine, and with it the increase in fuel prices, decrease in demand, isolation of Eastern markets. The current situation on the transport market is difficult, but there are solutions that can improve it. There is also optimism in the fact that the industry is very flexible, which gives hope that it will quickly adapt to the new reality.

Rapidly growing fuel prices

The war in Ukraine means another disruption in the supply chain and a sharp jump in prices of energy resources, including fuel. The changes are so dynamic that many carriers – as can be seen from the posts in industry groups in social media – are questioning the profitability of their operations. How to deal with this situation?

Entrepreneurs who operate in the market based on permanent and long-term orders should conduct an audit of their activities and formally secure themselves against unforeseen situations. One solution is to apply a fuel clause. As Maciej Maroszyk of TC Kancelaria says:

 

  • Maciej Maroszyk
  • Operational Director at  TransCash
  • “A fuel clause is a contractual safeguard that protects a transport company against sudden increases in operating costs caused by fuel price increases. When the price of fuel increases – the price list for transport services automatically changes. Appropriate formula allows to update prices even every week.”

The conditions of cooperation within the so-called spot are changing a little slower. Carriers, deciding on single orders, accept rates offered by forwarders. However, it should be remembered that the demand for transport still exceeds the supply of drivers. Even limiting demand as part of the fight against inflation will not change this. So much depends on the solidarity of the carriers themselves in negotiating freights and taking them at the right price.

How to keep liquidity?

In the current situation it is also extremely important to maintain financial liquidity. It has been disturbed for a long time by problems with delayed payments of remunerations for performed freight. There are many reasons for this, such as low payment morality. Now there is also an increase in the cost of living for shippers and forwarders. Until the situation on the market stabilizes, in crisis moments it is good to consider factoring services.

  • Maciej Maroszyk
  • Operational Director at  TransCash
  • Until now, using a revolving credit on a personal account has been a good option. Factoring is an easy way to get fast financing at low interest. Many factoring companies offer an online agreement, which makes the process much easier. No need to visit a bank. You can get the money by filling out an application from anywhere in Europe, such as a paywall.

When deciding on such a service, it is worth choosing a factor specializing in financing the transport sector, if only for procedural reasons. Similarly, if you have invoices that are past due, you can consider a company that does debt collection at the expense of the debtor. For companies that have diversified their activity directions, it should not be a problem to reorient their business towards Western Europe countries. Especially as the whole international supply chain, including the New Silk Road, is adapting to the new situation on an ongoing basis, establishing new transport routes.

It should also be noted that in the absence of price competition, the eyes of shippers are again firmly set on Poland, which is one of the three main road transport powers in Europe. This can be seen by the increasing number of western freights.

Direction west

So far, transports to the East accounted for only 3-5% in international transport. Although this is a small number, behind it there are stories of specific companies, which often based their entire business on transports to Russia, Belarus, Ukraine, Kazakhstan or Uzbekistan. As a result, despite appeals to stop cooperation with contractors from the aggressor country and numerous protests of activists, so far there are about 2000-3000 drivers in Belarus and Russia.

TRANS.EU DATA

However, transport companies, which operated entirely on the eastern market, need more time to adjust to the new reality. The problem is not only finding new contractors, which can be found on the stock exchange in the short term, but also technical adaptation of the fleet to the requirements of the European Union.

Everything is a science

The situation we find ourselves in is shared by all players in the industry – carriers, forwarders and shippers. The events we have been dealing with over the last two years should be a signal for reevaluation of cooperation between them. To change the mutual attitude to the partnership approach. Changing and unpredictable reality should also make us think about using the opportunities arising from the law. Carriers have tools to protect themselves. One of them is to include a force majeure clause in contracts in case of extraordinary obstacles. As Paulina Eliasz-Pietrusewicz puts it:

  • Paulina Eliasz-Pietrusewicz
  • Legal Advisor at TransCash
  • “Force majeure is considered to be an external event, impossible (or almost impossible) to foresee, the consequences of which cannot be prevented. This means that in a situation when it suddenly turns out that we cannot perform a contract, because e.g. 50% of drivers in the company are Ukrainian citizens who returned to their homeland to get their families or to fight for their country, we can invoke force majeure. There is no doubt that war is a case of force majeure, which is grounds for renegotiation of concluded contracts.”

The anxiety is temporary, let’s give ourselves time

According to the research of the Polish Economic Institute, the transport industry very clearly declares its concerns about the future. However, although from today’s perspective there are not many reasons for optimism, in a broader time context we can see a chance for stabilization and improvement of the situation.

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