Russia-Ukraine crisis impact on global shipping

The escalating tension on the Russia-Ukraine situation has many people wondering what will happen to the global shipping rates?
These Major geopolitical happenings are tragic and cost many human lives and also have an effect on the global economy which shipping is also a major part of it, this tension stems from the break up of the Soviet Union in 1991, then in 2014, Russia annexed the Crimea denying Ukraine their largest port, Sevastopol in the process.

Now again on February 25th, 2022, Russian forces have entered Ukraine’s capital, Kyiv. with this happening reports are emerging from merchant’s vessels in the region suggesting at least three vessels in the Black Sea area off the coast of Odesa and Yuzhny have been impacted by shelling.

Russia-Ukraine supply to the world

Both Russia and Ukraine are major importers of wheat and corn which makes them major food suppliers globally and besides that Russia provides around one-third of the natural gas to Europe and is considered a major player in the world energy sector.

Russia and Ukraine are also leaders in the global production of metals like Nickel, Copper, and Iron. Besides that essential Raw materials such as neon, palladium and platinum are also manufactured and exported on large scales around the world.

These two countries also have had 668 billion dollars trade between each other, according to OEC Ukraine had 276 billion dollars exports to Russia, dated March 2021, which were mostly Aluminium rolls Raw Iron bars, and hot-rolled Iron, etc. and Russia had 402 billion dollars exports to Ukraine dated DEC 2019 which were mostly Refined Petroleum, Iron Orem coal briquettes, etc. and now due to the current situation no longer will be done.

Major Imports of Ukraine

Imports The top imports of Ukraine are Refined Petroleum ($4.3B), Cars ($2.64B), Packaged Medicaments ($1.84B), Coal Briquettes ($1.76B), and Petroleum Gas ($1.49B), importing mostly from China ($7.36B), Russia ($6.62B), Germany ($5.33B), Poland ($5.18B), and Belarus ($4.14B).

According to the OEC statistics, Some of the Major imports of Ukraine are Refined Petroleum (4.3 Billion Dollars), Cars (2.64 BD), Coal Briquettes (1.76 BD), and Petroleum Gas (1.49 BD,), the countries that Ukraine imports from are China (7.36 BD), Russia (6.62 BD), Germany (5.33BD), Poland (5.18BD), and Belarus (4.14BD).

Needless to say, the current war affects the trading relationship and also the prices for all the countries and goods making it unstable and not a pleasant situation for exporters around the world.

In the following, we briefly refer to the Russian economy from the point of view of the Economist website:

In the two years following Vladimir Putin’s invasion of Ukraine, Russia’s economy has repeatedly defied the doomsayers. A financial collapse, widely predicted in the spring of 2022, never came to pass. The economy fell into recession, but it was less severe than expected and passed quickly. Inflation was the most recent scare. Last year prices accelerated rapidly; economists believed they could spiral out of control. Even Mr Putin was worried. In February he urged officials to give “special consideration” to rising prices.

Russia-Ukraine crisis effects on international transportation

After the Pandemic, Global transport already became severely disrupted, now a war happening creates further problems for the logistics business.

Since 2011, Rail freight has made links between China and Europe and recently the 50 thousand one made the journey, while it doesn’t contain all the freight between Asia and Europe, It has a very important role in the transportation of goods and had been growing steadily.

With the current situation, trains are being routed away from Ukraine but fortunately, all the experts in the rail freight arena are optimistic that disruptions won’t exceed and will be kept minimum, even though other countries like Lithuania should expect rail traffic to be affected by sanctions against Russia.

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As of Sea freight situation, even before Russia officially attacked Ukraine, ship owners tried to avoid the Black Sea routes, and all the insurance companies made it their prior question to know whether such a voyage happens or not.

Even though container shipping in the Black Sea is not very big compared to the global scale, Odesa is one of the largest container terminals, and with Russian forces cutting it off, the effect on Imports of Ukraine is quite considerable following potentially drastic humanitarian consequences.

With all this said Freight rates which had already increased a lot during the pandemic, could further rise.