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Top Reasons Why Georgia Has A Hot Freight Market

Top Reasons Why Georgia Has A Hot Freight Market

As we enter the second year of Russia’s war in Ukraine, we are seeing more of its consequences reverberating across the globe. And while the war has brought tragedy to many, it has also created opportunities for others. In an article from The New York Times, we see the story of Georgia’s freight market boosting its economy by emerging as a key logistics hub for Russia.

Part of the reason Russia’s economy is still stable is due to the route through Georgia’s Caucasus mountains, where truckers carry goods from Turkey, Armenia, and Azerbaijan. This route is driving Georgia’s freight market growth. Georgia – Russia border is now overloaded with waiting trucks.

What’s Happening with Georgia’s Freight Market?

  • Cargo transit between Turkey and Russia tripled in volume in the first half of 2022.
  • The long chain of idling trucks was twice as long in December as it was a year prior.
  • Russia plans to expand the number of processing lanes, and Georgia is building a 5.5-mile tunnel for smoother operations.
  • Much of the freight is European parts and raw materials for factories.

What does the Georgian government say about the Freight Market?

The Georgian government says that it strictly enforces Western sanctions and that many shipments have been denied. However, opponents of the ruling party in Parliament say that goods and money are flowing through largely unhindered.

While some are profiting from this war, others suffer a food crisis.

The conflict between Ukraine and Russia, which combined accounted for a quarter of global wheat exports in 2019, has dealt another blow to the food supply for vulnerable communities, per CNN Business. Communities already dealing with the combined issues of the pandemic, high fuel costs, and extreme weather now have the added struggles from the conflict, reducing the flow of grains.

The food crisis impacts communities in East Africa and the Horn of Africa.

  • According to the UN’s Food and Agriculture Organization, the Food Price Index rose 14% last year compared to 2021.
  • The data says that the number of people dealing with acute food insecurity rose to 345 million from 135 million in 2019 globally.
  • The governments of Malawi and Zambia are dealing with the higher costs of importing food – rising by 145% and 120%, respectively.
  • Estimates say that more than 90% of wheat consumed in Somalia comes from Russia and Ukraine.

Things may get worse before they get better.

On the positive side, Ukraine has restarted food exports via the Black Sea and shipped 12 million metric tons of grain and other foodstuffs through early December. The falling price of energy has brought down the cost of fertilizer. Overall, food prices have been steadily declining.

However, food prices have stabilized at high levels. And while fertilizer costs are down, it is still at historical highs. Farmers are using less, which could result in smaller harvests. Russia has also been slowing down inspections of grain ships at Black Sea ports, leading to backups and costly delays.

Photo Credit: Sergey Ponomarev for The New York Times

Freight Demand Continues To Plummet

Freight Demand Continues To Plummet

Written by Adriana Pulley

FreightWaves’ US Outbound Tender Volume Index (OTVI) shows container imports, rail intermodal shipments, and truckload demand have all fallen from their stratospheric heights during the pandemic. According to FreightWaves expert analyst Zach Strickland, these numbers may better indicate how inflation will be tamed in the coming months than the Consumer Price Index (CPI).

A Clearer Picture: Pre-Pandemic (November 2019) to Present

  • Container import bookings are ~6% higher than in November 2019 after averaging 80% higher throughout 2021.
  • Loaded intermodal container volumes on the rails (ORAILL) are 7% lower than in November 2019.
  • Outbound Tender Volume Index is just 9% higher than this time in 2019 after averaging 50% above pre-pandemic levels from July 2020 to March 2022.
    (As measured by FreightWaves’ Inbound Ocean TEUs Index)

Macroeconomic data doesn’t tell an accurate story…

…because the dollar figures they use are contaminated by emotion as well as supply and demand imbalances. For example, the scarcity effect is an economic psychological phenomenon that occurs when people believe something has a higher value simply because there is less of it. At the same time, they place a lower value on abundant objects. The scarcity effect has been one of the main catalysts of inflation these past two years.

Things look to worsen for transportation providers…

…as we enter December and January, which are typically the slowest months of the year for domestic freight movements. While truckload and import demand have not yet found their way back to pre-pandemic levels, it won’t be long before they do.

Overall, the trends remain unpredictable. The data we see on the macroeconomic level will take time to reflect what is actually taking place.