Global trade has its own deadlines. And they don’t always understand wars. The main shipping companies have joined the veto against Russia, but the decision caught some of their ships on their way to the ports of the Eurasian country, so now a destination is sought for the thousands of containers that had to be unloaded there and will no longer be able to do so. . Especially urgent is determining what to do with perishable products. “We have many containers with bananas from Latin America for which we are looking for solutions,” say sources from one of the most important shipping companies in the world.
The mess is remarkable. Some companies in the sector have established exceptions to the boycott for the delivery of medicines, food and humanitarian aid to Russia. Others are talking to their customers there to find an outlet for their containers, which in some cases accumulate between three and four weeks on board at a time when it is difficult to find alternative ports to store products because those facilities have been congested for months due to the strong demand and a lack of truckers and port workers.
The daily crisis meetings of these companies have Russia and Ukraine as their epicenter. From them have come decisions aimed at breaking ties with Moscow, such as that of the Danish Maersk, one of the largest owners of container ships on the planet, which has put up for sale its 30.75% stake in Global Ports Investments, a firm that owns six ports in Russia and two in Finland. Measures to guarantee the safety of personnel are also discussed at these meetings.
Efforts to evacuate employees operating in the Ukraine and put them safe from Vladimir Putin’s military machine have been successful in some companies and continue in others. Some of the workers have enlisted in the resistance against the invader or have preferred to stay in Ukraine so as not to be separated from their families. In the case of the Russians, many crew members can no longer leave the country. That opens up a new front: According to the International Maritime Council, one in seven sailors is Ukrainian or Russian, and the current supply chain logjam will be “exacerbated” by the lack of crew that is causing the dispute. Of the 1.89 million sailors who sail the waters around the world, 10.5% are Russians and 4% Ukrainians, the second and sixth nationalities respectively. Before the war, a shortage of 26,240 officers was already calculated. Russian sailors are also having trouble collecting their salaries amid international sanctions on their country’s banks, which are making transactions difficult.
The risks to the safety of those traveling on board are also evident. Earlier this month, a Bangladeshi seaman from the bulk carrier Banglar Samriddhi died after the boat was hit by artillery in the Ukrainian port of Olbia, on the Black Sea. In the fire that started, several of her companions were injured with burns. The Bangladeshi authorities organized a flight to repatriate them and they were received at the airport amid great expectation.
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According to the bulletin of the Association of Spanish Shipowners (Anave), two other bulk carriers have been hit by military fire: the yasa jupiterwith the Turkish flag, and the Namura Queen Panamanian. He too Millennial Spirit, of the Moldovan flag, which transports chemical products. The International Maritime Organization has urgently called for the establishment of a safe maritime corridor “allowing the evacuation of seafarers and ships from high-risk areas in the Black Sea and Sea of Azov.”
In this context, a move is being made to attend to the rights of the crews. The Joint Negotiating Group, which represents maritime employers, and the International Federation of Transport Workers, which brings together 708 trade unions in the sector, have designated parts of the Black Sea and the Sea of Azov as zones of war operations. This means that seafarers operating in the area are entitled to various bonuses, higher compensation for death and disability, and can refuse to set sail and ask to be repatriated at the company’s expense.
Another point is the consequences of breaking ties with Russia. Shipping companies have canceled all reservations to the country, and have tried to act quickly since the beginning of the war to quickly deliver the containers already contracted, fearful that due to sanctions, registrations or vetoes would be imposed on the road that would cause significant delays. For J. Mintzmyer, an analyst at Value Investors Edge, a consulting firm specializing in maritime trade, delays will be inevitable. “There will be significant delays and increased congestion. This will reduce ship supply similar to the disruptions we saw in covid lockdowns,” she predicts. In addition, she believes that the routes can be lengthened. “We are likely to see a shift towards less efficient trade channels around the world.”
The diversification of shipping companies, some of which have invested in intercontinental rail services linking Europe and Asia by crossing Russian Siberia, or in cargo planes that previously landed at Russian airports, has forced them to seek rearrangement of these goods, reducing the Available space. Bulk carriers can be particularly affected. “It’s hard to imagine that what’s left of Ukraine’s 2021 crop can be shipped soon,” says Niels Rasmussen, chief analyst at the Baltic and International Maritime Council (BIMCO). “Although there is an increase in the demand for maritime transport in ton-miles, the invasion affects the bulk carrier market very negatively, both due to the lack of supply of raw materials and due to the reduction in demand due to the increase in prices” , Add. Paradoxically, the analyst estimates that if the war continued and the threat of a recession translated into greater caution in consumer spending, the current bottleneck in ports could dissipate more quickly.
For Mintzmyer, even if maritime trade —which moves 90% of global goods— is damaged by the crisis, the companies that own cargo ships will resist the challenge. Partly thanks to longer journeys to avoid areas of geopolitical tension or transport grain and oil from other countries that fill the gap in Russia and Ukraine. “There may be a scenario where total shipping volumes decline but tonne mileage continues to rise, especially in grain and crude oil trade.” That can continue to generate increases in rates. If a ship has to go further to search for grain, its availability is reduced because it spends more time sailing and, therefore, can make fewer trips. As there is less supply, it becomes more expensive.
Jordi Espín, general secretary of Transprime, the Spanish association of cargo companies —customers of the shipping companies— points out that freight prices, which have skyrocketed in recent months, remain stable for now, although annoying cost overruns have appeared due to the new insurance for the additional risk of war and for the supplements that some shipping companies charge due to the rise in fuel. “We do not know if these surcharges that are being implemented are suffered by them to the same extent. You receive your normal invoice with the fuel supplement that the shipping company imposes. You cannot negotiate it”, criticizes him.
In an environment of runaway inflation, such policies carry extra risks. Surcharges may end up being passed on by shipping companies’ client companies to consumers in order to maintain margins. And that adds to other phenomena that can push prices up, such as the historical highs of maritime fuel. The uncertainty of war encourages the stockpiling of reserves so as not to run out of supply, which favors the contracting of more containers, which, being more in demand, can rise in price. As has happened in the past, it is also very likely that there will be shipping companies that reduce the speed of their vessels to save fuel: the slower they go, the less they spend. The consequences, in the form of delays and new bottlenecks, would be negative for global trade. And ultimately for the consumer.
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