How Will the War in Ukraine Affect Container Shipping?
Possible Effects on Container Shipping due to the War in Ukraine
The world has seen a considerable amount of volatility over the last few years. The war in Ukraine is a more recent extension of those uncertainties.
There is a concern among importers and exporters about how the war in Ukraine will affect international freight shipping. Will there be further ocean shipping price rises? Will there be other impacts to businesses requiring container shipping?
Whilst it is impossible to know for certain, and future events may change the outlook, here are a few things we are seeing.
Shipping to Ukraine
Ukraine’s economy is expected to be severely reduced due to the war. When it comes to exporting goods to Ukraine there is likely to be a reduction in demand for any luxury goods in particular. As the country is literally fighting to survive, much of the economic demands will go back to basics.
Furthermore, there are obvious restrictions with regard to shipping. A number of Ukraine’s ports are severely damaged or destroyed. There is risk to shipping anywhere close to the conflict zones. There will also be ongoing uncertainty for the foreseeable future.
When it comes to exports from Ukraine, much of the trade is in bulk goods. This will not affect businesses needing container shipping to any great degree. Obviously, though, there will be a drop in the production of bulk and agricultural goods being exported from Ukraine.
Trade with Russia
Russia has been hit with increasingly severe economic sanctions for its actions in Ukraine. Many larger (and smaller) businesses have pulled back from trading with Russia as a result. Even if not directly affected by sanctions, many businesses wish to show solidarity with the Ukrainian people.
The risk of trade with Russia at the moment is also extremely high. Sanctions in the financial sectors mean that it may be difficult to pay or get paid in anything other than Rubles.
Additionally, Russian-registered shipping vessels are beginning to be refused entry into many ports. This will further restrict trade with Russia.
Similar to Ukraine, much of the trade with Russia is in bulk goods (and obviously energy products; oil, gas, and coal). Its relative trade in other goods is fairly small.
Global impact on container shipping
As both Ukraine and Russia are relatively small markets for container shipping, there is one positive aspect. Access to shipping containers should not be greatly impacted.
One primary concern with regard to international sea shipping will be the increase in oil prices. This will likely flow through to higher shipping prices, including freight shipping.
Also, as international shipping was already under strain from the impact of Covid-19, there is little room for flexibility at the moment. The war in Ukraine may further exacerbate existing issues. Any changes in routing and further pressure on maritime logistics will have a greater than normal impact on pricing.
For importers and exporters in general, global rises in the price of living will affect their business. For Australia, the increase in shipping prices due to these factors should be relatively modest. Unfortunately, economic modeling has suggested that the impact will be felt most by small island nations and developing economies.
SPLS Freight Forwarding
If your business trades in Europe, speak with us about any concerns you may have with your freight shipping. We can help develop a clear shipping plan that includes the current local and global outlooks.