Other Logistics

Black Sea exports plummet as talk of war escalates

Feb, 14, 2022 Posted by Gabriel Malheiros

Week 202207

Ukrainian officials denounced Russian naval drills off its Black Sea coast last week, saying the presence of warships made navigating the busy trade route “impossible”. Traders have so far been more cautious in their assessment, but data from VesselsValue shows a visible impact on trade volumes.

The Black Sea is a major export region for several key commodities, including crude oil, refined oil products, liquified petroleum gas (LPG), steel, grain, and other agricultural products. Dry bulk exports registered a particularly strong January. However, shipments of dry commodities in February are on course for a -44% month-on-month fall, according to Vivek Srivastava, a senior trade analyst at VesselsValue.

According to analysis from Drewry, more than 700 dry bulk vessels are loaded at Russian and Ukrainian ports every month.

If a possible war were to erupt, disrupting shipments even for a month, these vessels might look for alternate cargoes elsewhere, increasing effective supply by more than 4%, according to Drewry, whereby the dry bulk market will face a “double whammy” – a sharp decline in trade and a surge in supply that has the potential to bring rates down.

Turning to oil exports, they are faring worse than dry bulk, although there are additional factors at play, with generally weak demand for the region’s Caspian grade of crude oil reported from Asian refiners, which make up much of its customer base. February volumes are on course for a -45% month-on-month decline, according to VesselsValue, and will be some -37% less than the five-year average for the time of year.

Meanwhile, LPG volumes show some impact but are not quite so badly affected. These include ammonia, mainly used for fertilizer production, and other chemical gases. Black Sea exports are on course for a -27% month-month decline, falling to some -24% below the five-year average.