High Shipping Costs Are Here to Stay, Says Bloomberg
By Henry Ren (Bloomberg) Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers....
By Naomi Christie and Natasha Doff
March 4 (Bloomberg) — Ukraine’s ports and shipping operations mostly continued as normal even after Russia’s military occupied the Crimea.
Cargo movements out of Ukraine’s Black Sea ports have not yet been affected by the escalation, according to Western Bulk ASA, which operates more than 120 ships hauling commodities including grain. Ukrainian ports are working normally with the exception of Sevastopol, which requires “special permission” to enter and exit, according to Gulf Agency Co., a port agent.
“So far we’ve seen no disruptions to any shipments there,” Jens Ismar, the Oslo-based chief executive officer of Western Bulk, said by phone. “We have some commitments for cargo liftings out of Ukraine from before, and so far we believe that is OK.”
Commodities slid from the highest level in almost six months today on speculation that the threat to energy and agricultural supplies from Ukraine may be exaggerated. The nation is set to be the world’s third-largest corn exporter this year, and sixth for wheat shipments, according to the most recent estimates from the International Grains Council.
The Standard & Poor’s GSCI Index of 24 raw materials declined as much as 1.2 percent to 652.05, after surging 1.6 percent yesterday to the highest level since Sept. 6. The gauge was at 653.66 as of 2:38 p.m. in London. Wheat lost as much as 1.7 percent in Chicago, while corn fell by 1.1 percent.
The Joint War Committee, a group monitoring maritime risk for the insurance industry, refrained from calling Ukraine’s waters a Listed Area yesterday. The designation is applied to places including Iraq and Venezuela, where the committee combining Lloyd’s of London and global insurers perceives a greater risk of vessels being damaged or seized.
Shipping costs for commodities from Ukraine were little changed yesterday, according to data from AXSMarine, a maritime- information provider. It’s too soon to charge higher freight costs for Ukrainian cargoes, Ismar said.
It is now low season for grain cargoes from Russian and Ukrainian ports on the Black Sea, according to Peter Sand, chief shipping analyst at Baltic and International Maritime Council, a Bagsvaerd, Denmark-based trade group whose members control about two thirds of the merchant fleet. Grain season comes in the third quarter, he said. Shipping costs could rise if tensions in Ukraine were to last long enough to disrupt exports, Sand said.
Wait and See
“Owners are worried, but right now it’s still a wait-and- see situation,” said Marc Pauchet, an analyst at ACM Shipping Group, a London-based shipbroker. “The biggest part of the grain-exporting season is still far away and that’s where it would be felt most.”
Russian President Vladimir Putin told reporters at his residence near Moscow today that there’s no immediate need for Russia to invade eastern Ukraine, although he reserved the right to use force to protect ethnic Russians. Putin oversaw the end of military drills near the border with Ukraine yesterday and ordered soldiers to return to their bases, according to the Russian Defense Ministry.
The U.S. and Europe have threatened sanctions against Russia. U.S. Secretary of State John Kerry arrived today in Kiev today as part of an effort to increase economic and diplomatic pressure to deter Russian military escalation.
Western Bulk is evaluating daily whether to continue taking charters from Ukraine, Ismar said. The Joint War Committee will meet again on March 7 to consider whether or not to reclassify the Ukraine as a Listed Area.
“The situation is, as we understand it, quite tense and can change on an hourly basis,” Bimco said in an e-mailed statement. It would be wise for crews visiting ports in Crimea to limit shore leave, it said.
Copyright 2014 Bloomberg.
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