Henning Schnaars has been visiting Libya for the past 34 years, and yet he no longer feels safe driving around the country alone by car. The risk of kidnapping makes it too dangerous, says Mr. Schnaars, a shipping agent. He is no longer willing to travel inside the country without his Libyan employees.
Mr. Schnaars works for Carl Ungewitter, a logistics company based in the northern German port city of Bremen. The family-owned business, with 60 employees, has focused its business on Libya since the 1980s.
There have been repeated street clashes between warring groups in the country’s cities since 2011, in the wake of the Arab Spring and the death of Libyan dictator Moammar Gadhafi. First it was regime supporters fighting insurgents, and now it is various rebel groups fighting each other.
“Since 2011, I’ve always expected to hear gunshots while I was in Libya,” says Mr. Schnaars, who nevertheless still flies back to the country several times a year. “But you’re better off staying in your hotel,” he adds.
Others are more cautious. U.S. logistics giant UPS, the second-largest company of its kind worldwide, after Deutsche Post, suspended its operations in Libya in June. Mid-sized companies like the Swiss logistics firm Militzer & Münch have recalled their employees from the country. But Carl Ungewitter has chosen to continue its Libyan operations.
“Since 2011, I've always expected to hear gunshots while I was in Libya.”
The world is not short of turmoil, from unrest in Libya and Yemen to the Ebola outbreak in Guinea and Sierra Leone, attacks by the terrorist group calling itself Islamic State (IS) and the lingering crisis between Russia and Ukraine. The effects of such crises are spreading to the economy, especially to shipping businesses that have specialized in one or the other of the trouble spots, like Carl Ungewitter.
The port of Hamburg, Germany’s largest, has also been adversely affected by an international crisis. Russia is the port’s second-largest trading partner, next to China, and ships currently travel between Hamburg and Russia 32 times a week. In addition, Hamburger Hafen und Logistik (HHLA), which operates the port, also manages a terminal on the Black Sea, in the Ukrainian port city of Odessa.
As a result of Western sanctions against Russia and the fighting in Ukraine, HHLA’s after-tax earnings declined by 5.5 percent to €41 million ($52 million) in the first half of this year.
Sanctions and embargos aren’t the only reason for the weakening of international trade flows. Psychology also plays an important role. “The crises are fueling uncertainty,” says Raimund Klinkner, the national chairman of BVL, Germany’s logistics industry association.
Companies worldwide are suspending investments or avoiding certain regions entirely. This also affects the logistics sector, says Mr. Klinkner. “Expectations for future business have declined by 14 percent among German logistics companies,” he says, according to a logistics indicator that the BVL calculates together with the Kiel Institute for the Global Economy.
“There is always less investment in times of crisis,” says Christian Kille, a professor of logistics at the University of Applied Sciences Würzburg. “There is also a psychological effect at play here.”
“The crises are fueling uncertainty.”
Militzer & Münch (M&M) is battling this uncertainty on two fronts. The company, headquartered in St. Gallen, Switzerland, specializes in shipments to Russia and North Africa. Only last year, it was forced to close its office in northern Iraq, and this year it did the same in Libya.
But what worries the company most is the crisis in Ukraine. “Russia is one of the pillars of our business,” explains Sven-Boris Brunner, who runs M&M’s German operations.
The company, which employs about 2,800 staff, generates annual revenues of roughly €450 million. Only about 300 employees work in Germany, while there are more than 1,000 in Russia. Revenues are still stable in Russia at the moment, but the Ukraine crisis is delaying investment in the Russian market and ruining consumer confidence, says Mr. Brunner. “We are seeing significant declines in orders, especially for shipments in the automobile industry or machine-building.”
Where orders are still going strong, the bureaucracy resulting from the sanctions policy is getting in the way. As Mr. Brunner explains, the Russian government has clearly specified customs numbers for groups of products subject to the embargo, but the EU sanctions are much more vague. This has prompted many German exporters to request export permits from the Federal Office for Economic Affairs and Export Control in Eschborn, near Frankfurt.
Despite working overtime, the officials there can hardly keep up with the requests, which increased fivefold between August and September, it said. On-site customs inspections are also slowing down deliveries. Shipments to Russia now take eight to 10 days, instead of the usual five days, says Mr. Brunner.
Where orders are still going strong, the bureaucracy resulting from the sanctions policy is getting in the way.
There are similar problems in West Africa, where officials are desperately trying to stem the spread of the Ebola outbreak. Delays in the region are the result of rigid safety precautions. In the ports of Ivory Coast, each ship and every crew member are subject to a medical inspection, says Rainer Horn, a spokesman for the Hamburg-based shipping company Hapag Lloyd. But the inspectors can only manage to process two container ships a day.
“We aren’t using any of our own ships there, but we do call at these ports with chartered ships,” says Mr. Horn. Hapag Lloyd is now charging its customers an “inspection fee” of $250-350 per container, to cover the additional costs it incurs due to waiting times. Still, today’s crises have not affected the company’s revenues yet, because the current hot spots do not account for substantial shipping volume for Hapag Lloyd, says Mr. Horn. Besides, he adds, its ships can always be diverted when a port in one of the disaster zones is no longer considered safe.
Henning Schnaars doesn’t have that option. Libyan business accounts for almost half of Ungewitter’s revenues. The company had to introduce Kurzarbeit, a German program that allows companies to reduce working hours instead of laying off employees, when the war erupted in 2011. Orders in Libya have plunged since fighting broke out in the streets of Tripoli and Benghazi.
The volume of freight coming into the country has also declined now that infrastructure projects have been put on hold. “Our biggest problem is that we can’t fill our ships to capacity,” says Mr. Schnaars. But there is at least one bright spot for Ungewitter. Its most important customer, the Libyan oil industry, is still producing.
This article first appeared in the business magazine WirtschaftsWoche. To contact the author: email@example.com