Shipping leaders suspend Russian cargo booking

MSC and Maersk, the world’s two largest container shipping companies, halted cargo bookings to and from Russia on Tuesday as new Western sanctions wreaked havoc on already strained global supply chains.

The suspension, which did not include food or medicine, came after rival shipping companies Ocean Network Express and Hapag-Lloyd took similar steps to avoid transporting cargo subject to Western sanctions.

According to Maersk, Russian sanctions are beginning to affect trade, causing delays and cargo detention by customs authorities.

This is expected to create further supply bottlenecks as ports worldwide remain heavily congested due to an unexpected recovery in demand for goods from the lockdowns caused by the Covid-19 pandemic.

On Monday, the UK banned all Russian vessels from entering its ports. “This is making an already difficult period for global logistics even worse,” said Peter Sand, an analyst at Xeneta, an Oslo-based shipping research group.

The disruption has also spread to the air freight market, where industry executives expect prices to rise as planes are forced to change routes.

The loss of Russian and Ukrainian aircraft specialized in transporting large goods is expected to exacerbate an existing aircraft shortage. “By dropping them now, you’re removing real capability from the market. As a result, freight rates will most likely start to rise,” said Neel Jones Shah, global director of air freight brokerage Flexport.

Russian and European airlines are almost entirely banned from each other’s skies, complicating flight routes for planes that deliver goods and raw materials from Asia to Europe.

According to the International Chamber of Shipping, the shipping industry is also facing new challenges due to difficulties in switching Russian and Ukrainian personnel, which supply 14.5 percent of the world’s sailors.

Last week Russia halted commercial shipping in the Sea of Azov, while Ukraine ceased operations at all its ports, including those in the Black Sea on its southern coast.

The invasion of Ukraine has also prompted insurers to quote additional premiums worth hundreds of thousands of dollars to cover ships traveling to the Black Sea against the danger of being caught in the crossfire. In addition, three non-military vessels may have been hit by missiles since the conflict began.

Several industrial metals are seeing their prices rise due to the suspension of shipping services.

Aluminum, used in electric vehicles and planes, rose 1.8% to a record $3,457 a tonne on Tuesday. Russia accounts for about 6% of the world’s aluminum supply.

Additionally, freight rates for oil tankers have increased, with traders betting that more oil will be exported from West Africa, the Middle East, and the US to replace Russian supplies.

Source: Valor Econômico

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