Geopolitics has surpassed economics in driving shipping markets, a Posidonia forum has heard. But the profitable new landscape also carries risks, with Braemar head of research Henry Curra highlighting the “guilty pleasure” of supply chain inefficiencies from the situation in Ukraine benefiting shipping. “We’re in a very interesting junction in freight markets,” he told a Maritime London gathering in Athens. “This particular geopolitical situation that we’re facing could extend the strength of freight markets for the next few years to come.” The containers sector is making money “beyond anyone’s dreams” while dry bulk is doing very well and tankers were improving, he said. The smaller liquefied petroleum gas segment is benefiting from busy refineries. Liquefied natural gas has not fared as well, with US-Asia trade was replaced by US-Europe trade, but it was “by far the winner in this whole thing” as Europe seeks to substitute Russian gas supplies. Mr. Curra said rates for ships willing to brave the Black Sea were “extraordinary” but few were willing to load there and many were self-sanctioning.
Shipping was still working out how Europe’s insurance ban on Russian ships would affect global trade. Regulatory uncertainty over future emissions rules also dampened new ordering. “We are entering now a phase where we could see a requirement for more tonnage that simply cannot be satisfied,” he said. The rebirth of the coal trade in response to soaring energy prices had set back decarbonization. And while high fuel costs have encouraged slow steaming, the ‘backwardation’ of the oil market has encouraged tankers to speed up, since their cargoes will be less valuable in future. There was a clear shift to older tonnage, with a big chunk of tanker tonnage approaching 20 years. These could find work on Russia trades such as happened when Iran and Venezuela were slapped with sanctions.
Kirsty MacHardy, a partner at Stephenson Harwood, said London lawyers faced a “tsunami of work” getting to grips with sanctions by the UK and European Union on Russia and asset freezes on oligarchs. These applied not just to legal control but also de facto control of assets. So, an oligarch’s transfer of shares to a family member — say, to reduce their holding to under 50% — created a sanctions risk. She said operators now had to scour their supply chains for Russian links and be careful of cargoes such as coal and fertilizer made from Belarussian potash. “We’ve seen a lot of potential issues … where cargoes of coal are coming out of Estonia. A simple Google search will show you that 90% of coal from Estonia comes from Russia. So, you must be very careful as to where your coal or your cargo is coming from.” Mr. Curra said while many companies were self-sanctioning in response to the risks, “there are still companies willing to take the risk of trading Russian oil and bulk cargoes”.
Baltic Exchange chief executive Mark Jackson said the UK, EU and US governments relied on whistleblowers to find sanctions breaches. “Who is going to whistle blow? It’s going to be your competitor; it’s going to be somebody [who wants] to disrupt your trade,” Mr. Jackson said. “A lot of people fail to realize the fact it isn’t just the government. The government is requiring everybody to make the decision themselves as to whether their activity is sanction busting. And they are requiring your neighbor to ring up and say you are the one doing it.” [Same tactics used by the communist’s that have been castigated by the US/EU/UK for decades!!]