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The ‘huge impact’ that will cause disruption to every business until 2026

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As the war in Ukraine remains chaotic, many key industries are feeling the brunt with unintended consequences

The world is facing severe supply disruptions. However, some countries are being impacted more severely than others.

Delivery speed is a key metric in supply chains and this has never been more essential when it comes to the crisis between Russia and Ukraine.

Ukrainian forces are needing military aid as quickly as possible to combat Russian aggression – so with major disruptions, sanctions and a war, how is Ukraine getting supplies?

What differentiates military supply chains in comparison to commercial supply chains?

Peter Jones from Prological consulting joined a panel with ticker’s Brittany Coles and Holly Stearnes.

The supply chain expert says in military supply chain, it is absolutely critical that things happen the way that they are intended to happen.

Medical supply donations for Ukraine are prepared for shipment in a Vanderbilt University Medical Center warehouse off of Dayton Avenue Friday, March 11, 2022 in Nashville, Tennessee.

“It’s a very big part of alternative forces strategies to disrupt the supply chain of their particular enemy, because that means then people aren’t being fed food and water can’t get through, let alone armament and other military types of support infrastructure. So there’s actually quite a significant difference at that first base level that people’s lives are at stake,” Peter says.

He continues to say the second level is in commercial supply chains, and at war time, nations tend to “open up the chequebook and whatever is required. So from a financial perspective, that support is given as much as possible with domestic commercial supply chains, that commercial imperative always has to be considered.”

How are goods transported to Ukraine and Russia amid war?

There’s sanctions on Russia, global companies boycotting. So what does the supply chain landscape look for shipping and also air freight?

Air freight to Ukraine

Peter breaks this down to two elements.

At a local level

Peter begins with Crimea, which is basically Russia’s major gateway, into their nation, and then out of Ukraine. These local areas will be enormously disrupted.

At a global level

Peter says Russia only occupies around about one and a half percent of global movement or product in and out of Russia.

“So that global level, Russia doesn’t have a big impact in terms of the volume going through the networks, and the Ukraine is only half a percent. So at that local level, it’s enormous, because nothing can move in and out, due to ports disrupted,” he says.

“But at an international level, that factor by itself is not going to have a huge impact. The follow on to that though, where the big impact will come into global shipping is firstly, the energy crisis as this is creating.”

Energy and employment crisis brewing at ports

Ships are one of the biggest consumers of crude oil in on the globe. With Russia being the second largest exporter of oil in the world, Peter says commercial pressure on businesses will impact global trade.

On the other side, there’s employment.

According to the global shipping chamber, around 15% of global seafarers within merchant navies come from Russia, a bit over 10% and the Ukraine a little under 5%. So that’s 15% of a global employment group coming from the two countries that are in conflict.

“Global shipping lines are going to get conflicted about their ability to continue to employ the Russian employees. And the Ukrainian government more and more is bringing as many of their men back into the Ukraine to look after the nation. So those two elements with is going to have a huge impact if this conflict goes on for any length of time.”

What about China?

Peter says global shipping is still a long way from recovered from the events of 2020.

When demand around the world just fell off a cliff, the shipping lines took the opportunity to retire their old equipment, because it was coming with new taxes and fees being applied because of emissions regulations.

Lockdown fears hitting global supply chains

“So they said rather than us applying those taxes and fees, here’s an opportunity, we’ll get rid of the ships demand came back very, very quickly and unexpectedly, but the ships had been retired. So that was one of the issues that led to a lack of demand,” Peter says. “Then we put up the overlay on top of that port shutting down, empty containers being in all the wrong places. All of those issues are still very present today from COVID.”

Now with the Ukraine situation having emerged and the wash back through to China, and the things happening there, these issues are just going to amplify even further.

The question is how long is this disruption going to go for?

So with global shipping, the general thoughts were until a month ago, maybe towards the middle of 2024, q3 2024.

Peter says the industry has really been thrown a curveball due to war and further lockdowns in China.

“If the Ukraine Russia scenario lasts for many months, then that timetable is going to get pushed right out 2025/2026.”

PETER JONES

The implication to that comes back to countries being able to get what they need in order to run the nation from government perspective.

Peter is based in Australia and says he has heard of quite a lot of talk about onshoring more manufacturing and becoming more self sufficient as a nation.

“So what these issues will lead to is just that conversation being amped up again, at government level and in boardrooms as they try and work out what their risk profile looks like in terms of how long we believe this Russia and Ukraine scenario is gonna last,” Peter says.

He believed we could well see a pivoting back towards much more national security from a manufacturing and a maintaining sovereignty perspective.

Business

Management shake up at under fire Qantas

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There’s been a management shake up at Australia’s flag carrier airline Qantas, which has come under fire for cancellations and delays

Jetstar CEO and longtime Qantas executive Gareth Evans has resigned.

He was touted as a potential replacement for controversial Qantas CEO Alan Joyce.

Gareth Evans has been with Qantas for 23 years.

He has been chief of Jetstar since 2017, but has worked across the group and has now “decided this is the right moment to move on”.

This comes as the aviation grapples with the higher fuel prices and staffing issues at airports that are affecting much of the industry globally.

Strong demand

Qantas has also updated the market, saying it’s on track to record second half earnings of just over 500 million dollars.

Underlying profit is set to return in FY23, while debt levels are now well below pre-pandemic levels.

Qantas says this is due to continued strong domestic and international travel demand.

Qantas has come under fire for long delays and cancellations
Qantas has come under fire for long delays and cancellations

After peaking at more than $6.4bn at the height of the pandemic, net debt is expected to fall to around $4bn by June 30, an improvement of around $1.5bn in the past six months.

The airline has come under sustained pressure, with many passengers complaining about long queues, cancellations and delays.

Qantas is calling for patience ahead of the winter school break rush as it hires more staff to manage increased demand at airports.

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Business

Nike to fully exit Russia

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U.S. sportswear maker Nike is making a full exit from Russia, three months after suspending its operations there, the company said in an emailed statement Thursday

The sportswear giant had said back in March that it would suspend operations at all the stores it owns or operates there.

On Thursday (June 23) the firm said it would leave the country altogether.

In a statement, Nike said it would scale down over the coming months.

The move is largely symbolic for the company, which gets less than 1% of its revenue from Russia and Ukraine combined.

It says any stores that are still open there are run by independent partners.

In May, Russian media reported that Nike had not renewed agreements with Inventive Retail Group, its largest franchisee there.

Now the full exit lputs Nike in line with other major western brands such as McDonald’s and Google.

Foreign companies seeking to leave face the prospect of new laws being passed that will allow Moscow to seize assets and impose criminal penalties.

That has prompted some businesses to accelerate their departure plans.

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Business

U.S. orders vape company Juul to cease sales

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Juul has been an industry leader in the vaping sphere since its establishment in 2015, controlling 75 per cent of America’s market by its third year of operations.

This is just the latest crackdown on the Tabacco industry by the Biden administration, all part of a sweeping effort to regulate the sector after years of delay.

The White House has also announced a rule to establish a maximum level of nicotine in tobacco products in an attempt to make them less addictive.

After a nearly two-year-long review, the FDA said Juul submitted insufficient and conflicting data to show that its e-cigarettes met public health standards.

The regulator also said the findings raised “significant questions,” including whether potentially harmful chemicals could leach out of Juul pods.

The decision potentially deals a fatal blow to the once high-flying San Francisco company.

Juul did not immediately respond to a Reuters request for comment.

The FDA had to judge whether Juul’s products, which have been sold for years without being officially authorized by the agency, were effective in getting smokers to quit and, if so, whether the benefits to smokers outweighed the potential health risks to new e-cigarette users, including teenagers.

“They prey on children.”

Democratic Senator Dick Durbin hailed the decision by the FDA on Thursday, but said “they’re in for a legal battle for sure.”

Earlier this week, the Biden administration said it also plans to propose a rule establishing a maximum nicotine level in cigarettes and other tobacco products to make them less addictive.

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