Impact of the Ukraine Conflict on Maritime Shipping
May 23, 2022
The war in Ukraine has caused a serious supply chain disruption which is likely to exacerbate the crew crisis, port congestion, and supply chain disruption caused by the prolonged pandemic. International freight forwarding has been hard hit, with the burden of sanctions, the disruption of trade with Ukraine and Russia, and the loss of vessels and life in high-risk areas in the Black Sea. Carriers face multiple challenges such as cyber risk, availability and cost of fuel, and crews stranded in Ukraine waters.
Implications for Global Trade
According to the International Monetary Fund, the ongoing conflict is likely to keep shipping costs high and climbing for longer. Trade with Ukraine and Russia will be affected, adding pressure to already strained supply chains. The reduction in trade and sanctions are likely to cause the redrawing of trade routes and supply chains. Yet, this is a long-term scenario that will come with a cost.
The biggest impact of the conflict in Ukraine, however, has been on trade with Russia and ships sailing in the Black Sea. Due to Russia’s naval blockade, major ports in Ukraine are closed, with hundreds of ships either at anchor or trapped in ports. Thousands of Ukrainian and Russian seafarers are also trapped and facing uncertain future.
In February, Russian ships have been detained and banned from calling at EU and UK ports due to suspicion of sanctions breaches. In addition to Russian yachts having been seized in Europe, many ports have announced they will no longer serve Russian-flagged or owned ships. Insurers, classification societies, maintenance companies, and engine manufacturers are no longer serving Russian vessels.
The war in Ukraine already has an impact on sea freight in Europe and not just the conflict zone. Insurers and shipping companies are faced with compliance challenges due to EU and US sanctions, and many are opting out of trading with Russia.
Carriers Turning to Alternative Fuels
A prolonged conflict in Europe is also expected to have significant political and economic implications, transforming the trade in oil and other key commodities. The proposed EU ban on oil could result in oil price increases and shortages, forcing carriers to use alternative fuels. Experts point to the fact that there are already carriers that are considering substandard or non-compliant fuels. This is likely to result in more equipment breakdown claims in the long term.
Going Forward
Coinciding with Covid-19 outbreaks in major cities in China, the conflict in Ukraine is exacerbating existing demand and supply pressures, resulting in longer transit times, higher shipping fees, and further port congestions. A large part of the shipping industry will be affected by a prolonged conflict, including general and bulk cargo carriers transporting Russian grain, wood, and coal.
In addition to rocket attacks and mines in the Black Sea, the welfare and safety of crew, and the cost of bunker fuel are forcing many carriers to pull out of Russia. Meanwhile, the tanker sector has been hard hit due to considerable disruption and restrictions.
