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BIMCO: Ukraine War Will Slow Growth, Hurting All Shipping

While much of the focus to date has been on the near-term impact to the tanker and bulker markets from Russia’s invasion of the Ukraine, shipowners’ association BIMCO is looking toward the wider analysis indicating that it sees the potential for sustained spill-over impacting the global economy and all sectors of the shipping industry.

 BIMCO is looking at the impact on consumer confidence and the global economy

While saying that the full impact of the war is likely a ways off, BIMCO is looking at the impact on consumer confidence and the global economy pointing out despite longer-term contracts having already been set for 2022, that the war will likely lower growth prospects and be the factor to finally reduce demand after a year and a half surge in volumes related to the pandemic.

“The National Institute of Economic Research in the UK has estimated that the war could reduce global GDP growth by as much as one percentage point,” says Niels Rasmussen, Chief Shipping Analyst at BIMCO

Near-term the obvious impact has been on shipping from the Black Sea region, where Ukraine and Russia export a broad range of commodities.

” While none of the commodities are currently sanctioned, BIMCO believes that the Black Sea exports are at a higher risk of seeing disruptions due to the lack of shipping companies’ willingness to serve the area and/or increasing shipping costs.

Further adding to the near-term concerns is the fact that Russia controls about 10 percent of all seaborne exports of both crude oil and refined products. BIMCO highlights that the majority of the oil products are exported from Black Sea ports, while Russia’s coal also comes from its Pacific ports.

BIMCO reports that European buyers appear to be shying away from Russian crude oil

While the energy products so far, despite pressures in the EU and U.S., are not included in the sanctions, BIMCO reports that European buyers appear to be shying away from Russian crude oil. “It is being reported that as much as 70 percent of crude exports do not have a buyer despite being heavily discounted,” says BIMCO while speculating that China could emerge as a buyer from Russian crude, which would help alleviate some of the current global supply concerns.

 The EU could buy more oil from the Middle East if China takes up the Russian supply.

Some segments of shipping are likely to have a less direct impact from the closing of ports and sanctions

Supply shortages may also hurt the shipping industry.

All segments of the industry, however, are experiencing increased shipping costs due to historically high bunker prices that will only further add to the inflationary pressure. BIMCO believes OPEC + sticking to its already planned increases and crude oil price futures indicate that oil prices will remain above $100 per barrel likely to cause demand destruction while supply shortages may also hurt the shipping industry.

The slowing growth could ease congestion in ports

“The impact of the war on the global economy and consumer confidence,” BIMCO concludes, “may weaken growth prospects.” While saying that the impact is likely some way off, BIMCO sees a weakening of growth prospects combined with high prices which it believes could lead to an earlier “return to normal,” from the current elevated demand levels. They, however, see one positive, noting that the slowing growth could ease congestion in ports.
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