State of the industry in times of conflict

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Peace in Europe is fractured and the International Criminal Court is investigating possible war crimes – a few months ago these headlines would have been hard to believe. 

But today, the Russia-Ukraine war is a very tangible conflict reshaping geopolitics and trade flows. 

While it’s still too early to know the full impact of this war, here’s a brief summary of what’s happening so that you can stay up-to-date with the situation and understand the potential impacts on our sector.    

Oil and natural gas:

Russia is the second largest producer of oil and natural gas in the world. The uncertainty of the war and the sanctions applied to Russian products are dramatically affecting prices. 

  • Strained fuel market:
    The fuel market was under strain even before the war, with other circumstances bringing additional challenges: countries opting for greener alternatives, oil inventories falling and unstable conditions in important crude oil and fuel producers like Kazakhstan and Libya.

  • Diesel:
    Retail and wholesale diesel prices are highly volatile, with some prices now falling but only after weeks of increases.

  • Jet fuel:
    Jet fuel’s cost is rising due to a number of events: the increased demand from travel picking up as the world learns to live with COVID-19 and the Russia-Ukraine conflict. As a consequence, jet fuel is at record-breaking highs and is driving the diesel market higher. Jet fuel and diesel are both distillates, so refiners are incentivised to shift the production towards jet fuel, which is currently the most profitable out of the two.

  • Shipping prices:
    Port congestion usually results in higher shipping prices. European ports are likely to see congestion because of the war and Chinese ports because of the latest COVID-19 lockdowns.

  • Scrubbers:
    Ships with exhaust-gas scrubbers have become more cost efficient: a scrubber allows cheaper higher-sulphur marine fuels to be used by injecting water into the exhaust stream to reduce emissions. As oil prices go up due to the war, ships with these expensive scrubbers have benefited by being able to burn cheaper fuel.

  • Containers & charter rates:
    The price to rent container ships hit a record-high. After weeks of price rises, charter rates have now started to stabilise and plateau as a result of the Russia-Ukraine war. There are other events affecting the container sector, like inflation and a potential recession in Europe as a consequence of the war.

  • Bulk carriers:
    Demand for dry bulk carriers may decrease as the Russia-Ukraine war could potentially halt a high volume of exports from both countries. 

Larger capesizes can benefit from Europe needing to replace Russian coal with coal from Asia and other sources. Coal travelling from Australia to Europe can also be beneficial for ton-miles.

Against the current backdrop of the international logistics and freight forwarding market, we know there’s never a one-size fits all solution. That’s why our platform fosters the right balance between technology and people, creating a new standard for the logistics industry. Our operations specialists are ready to help if you have any questions or concerns about your cargo and can solve any transportation dilemma.