At 4 a.m. local time Feb. 24, a nation’s nightmare came true when Russian tanks and troops crossed Ukraine's eastern border and charged towards Kiev. The war in Ukraine, widely seen as the most serious land invasion in Europe since World War II, has already claimed thousands of lives and devastated a nation of 40 million while promising to degrade an already frazzled global supply chain.
Though the U.S. domestic trucking industry remains mostly insulated from the flow of goods internationally, Ukraine and Russia represent major global players in metals, energy and food supplies that will likely worsen inflation and cause pain points for American fleets.
Here's a rundown of what the fleets can expect in the wake of perhaps the single most disruptive economic event since the dawn of the pandemic.
As Ukranian ports and airspace remained mostly closed, wheat futures jumped to their highest levels since 2008 before settling back down 4% to $8.98 a bushel. Giant food companies like Kellogg's, Coca-Cola, and Pepsi have already warned of double-digit inflation taking food prices higher. Aluminum – another big export from Ukraine – jumped 5.7% on the London Metals Exchange before settling down to a 1.5% increase.
In terms of the macro financial picture, all this inflationary signaling has lead to a market consensus that central banks may have to keep rates lower for longer, as the European Central Bank estimated the war could shave .4% of GDP off the entire Eurozone.
What does any of this have to do with domestic trucking in the U.S.? CCJ has already explored how fleets can best manage inflation in finances and maintenance agreements, but the war in Ukraine brings with it some specific conditions fleets should be aware of.
Firstly, expect inflation pain points to continue to weaken real wages for workers. Despite fleets significantly increasing pay for drivers, those paychecks likely won’t go as far at the grocery store or within sectors that really drive Consumer Price Inflation, like used cars and housing. Conveniently, CCJ has also written about how best to offset the rising costs of driver compensation.
