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#UkraineWar to have limited impact on shipping

Ukraine said Russian warships shelled a Moldovan-flagged tanker and a Panamanian-flagged cargo ship near Odessa port

The immediate impact of Russia's invasion of Ukraine on the world economy and container shipping is fairly small, but that could change quickly, Drewry said in its latest report on Container Insight.

"In the previous edition of Drewry's Container Forecaster, we rather hopefully said that the rising geopolitical risk to trade and the world economy might be overplayed. Sadly, the opposite has proved true as Russia President Vladimir Putin launched a military attack on neighbouring Ukraine in the early hours of 24 February."

Ukraine said Russian warships shelled a Moldovan-flagged chemical tanker and a Panamanian-flagged cargo ship due to load grain near Odessa port in the Black Sea on Friday, Reuters reported.

While no one knows how this story will play out in the long run, there were some immediately obvious consequences: oil prices jumped to a seven-year high of $100 per barrel hours after the invasion, stock markets around the world slumped with Russian stocks falling particularly sharply and the rouble crashed to a record low. Commodity and energy prices surged,the report added.

"The fallout for international container shipping will likely take longer to materialise and the immediate operational threat is relatively low outside of the locality. Retaliatory cyber-attacks that might affect shipping and fast-rising fuel costs are probably the main concerns right now."

The note said shipping will avoid the Black Sea for the foreseeable future (the Ukraine port of Odessa was closed shortly after the invasion, and carriers notified customers that the country would not be called at for the time being). "In any case, there were only three inter-continental services (on the major trades that Drewry tracks) calling at ports in the region so disruption to international liner networks will not be catastrophic."

Drewry would expect to see much stiffer economic downgrades if the situation were to escalate and western allies of Ukraine step in, something which Putin ominously said would lead to "consequences greater than any you have faced in history."

Drewry view
"These are dark times for everyone that will only add more disruption and uncertainty to the world economy and trade. The risks look to be heavily weighted to the downside."

Drewry Container Index moves up
Drewry's composite World Container Index (WCI) increased 1.1 percent to $9,477.46 per 40ft container. The WCI remains 81 percent higher than a year ago.

Average composite index of the WCI, assessed by Drewry for year-to-date, is $9,458 per 40ft container, which is $6,416 higher than the five-year average of $3,041 per 40ft container.






Freight rates on Shanghai–Los Angeles increased 3 percent to $11,030/FEU. Rates are likely to remain stable in the coming week.

Tough days ahead: Jensen

"The situation is clear, and tragic, in relation to Ukraine," wrote Lars Jensen in his latest LinkedIn post. "The situation for freight to, from and through Russia is much more uncertain as new sanctions keep coming and it is difficult for any freight provider to have any certainty for the coming days and weeks."

"If a total trade embargo is enacted (likely), then that will not only kill the large amounts of cargo moving in and out of Russia by sea; it will also lay out an awful lot of small truckers in Europe who service that and other CIS country trades," says Bjorn Vang Jensen, VP Advisory Services - Global Supply Chain, Sea-Intelligence "A lot of collateral damage to real people outside of the two warring parties indeed. Let's remember that."

Traffic declines across LA/LB but global port worries continue
Container ships backed up across the ports of Los Angeles/Long Beach were 66 as on February 25, 2022 (down from an all-time high of 105 during January), according to data from Captain J. Kipling Louttit, Executive Director, Marine Exchange of Southern California.

The congestion, however, has increased on the east coast and ports across the world. And the geopolitical worries are adding to supply chain pressures.



Jyothi Shankaran

Jyothi Shankaran

Associate Editor, STAT Media Group. He has worked with IndiaSpend, Bloomberg TV, Business Standard and Indian Express Group. Jyothi can be reached at jyothi@statmediagroup.com


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