The global shipping market is becoming more complicated and expensive as Russia’s invasion of Ukraine snarls regional logistics and rattles global commodities, Genco Shipping and Trading (GNK) CEO John Wobensmith told Yahoo Finance Live.
Hiking freight rates
“We do not have… ships in the Black Sea area right now because trade, for the most part, is very tamped down for obvious reasons,” Wobensmith said. “We do have several Ukrainian crew members on board our ships. The Ukrainian crew pool in the world makes up about 15% of the total industry. So it’s actually pretty significant.”
Wobensmith explained that as the war continues after more than a month of fighting, the industry is seeing “a lengthening of ton miles or trade routes or a rerouting. So we’re seeing quite a bit more grain coming out of inventory out of the U.S. Gulf, going into Europe, going into China. Brazil is in peak grain season right now. So, again, we’re seeing more and more volumes go longer distances, which helps push up freight rates.”
Coal market
Similar patterns are happening within the coal market.
“In terms of Russian coal typically going to Europe, that is obviously not happening now, so Europe is relying more on South Africa and Australia to source their energy needs, which, again, is longer ton miles and pushing up freight rates in the dry bulk industry,” he said.
And while the shipping industry is “still a very competitive market,” Wobensmith added, a relative lack of ships means that “it’s becoming a very tight market. … which is why we’ve seen healthy freight rates last year and continuing in 2022.”
IMF economists recently found that shipping costs in 2021 could increase inflation by about 1.5 percentage points in 2022, stating: “Studying data from 143 countries over the past 30 years, we find that shipping costs are an important driver of inflation around the world: when freight rates double, inflation picks up by about 0.7 percentage points.” (The IMF research predated the war in Ukraine.)
Severely impacted terminals
On top of the wartime setbacks, China’s most extensive COVID-related shutdown is underway in Shanghai, a major trade hub. A.P. Moller- Maersk A/S, one of the world’s largest container carriers, said on Monday that some depots that serve local ports have closed down indefinitely, and trucking to and from terminals will be “severely impacted.”
Nevertheless, despite sanctions against Russia that are clearly affecting trade, Wobensmith noted that the new reality hasn’t affected his business in the U.S., South America, Australia, China, and India.
“We are not lifting Russian cargoes, but having said that, sanctions on grain and coal out of Russia are not in place,” he said. “We actually don’t expect them to go in place.”
Wobsensmith said he’s concentrating more on U.S grain, in addition to Brazilian grain.
“Our larger ships, our capesize vessels are moving a lot of iron ore from Brazil and Australia into China for their steel industry,” he said. “So there’s a whole host of commodities that the dry bulk shipping industry moves that we’re benefiting from and moving globally.”
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Source: Yahoo Finance
