On 24th February 2022, Russia declared war on Ukraine by launching its first military attack; since then, countless repercussions on the world market have begun.
Our focus obviously remains on the shipping’s markets and in particular, in this case, the trades of grains out of the two countries involved in the War.
As soon as the conflict broke out, a deep silence, characterized by fear and uncertainty, fell on the Dry Bulk market (and all maritime ones in general). For the first month, no shipowner dared to approach the Ukrainian and Russian ports, sometimes avoiding even the total transit inside the Black Sea. The ships waiting in front of the ports involved have started to ballast towards alternative countries, while some of those who were already loading (in Ukraine) remained “trapped” in the ports with the cargo on board for several months.
As it is normal, after a few weeks the market started to “adapt” and some shipowners (mostly of Turkish, Syrian, Lebanese or Greek nationality) started to quietly look back on those trades become “high-risk content” (HRA).
Given the very high insurance premiums needed to call these ports and the financial prices of grain skyrocketing, shippers were forced to pay extreme levels of freight to secure the transport of the cargo. Panamax class ships fixed daily rates above 100,000 USD with delivery and redelivery Cape of Passero for trips via Russian Baltic to the Med, fluctuating therefore about two or three times over the current market of those businesses that were now called instead “vanilla trades” (not involving Russia or Ukraine).
The most important part of this premium for the owner, was precisely to secure a hire base delivery DOP (Dropping Outward Pilot), thus ensuring the payment of the freight for the entire ballast until the port of loading. The ships of class Handysize, also, fixed hire levels equal to 37-40.000 USD per day with delivery East Mediterranean for loading in the Russian Baltic for trips to West Africa / South Africa.
Later, thanks to international initiatives, the ships started loading in Ukraine, with the so-called “safe corridors”, which at intervals helped the Ukrainian state to export cargo. Over time, then, shipowners started to transit also “independently” in Ukrainian waters without protection initiatives but managed to exploit these exorbitant freight levels.
What happened to that freight premium today, about 3 years after the outbreak of the War?
Today, the mentioned “Russian and Ukrainian Prime” almost lost the track.
Gradually, thanks to the decrease in insurance premiums, shipowners began to accept lower freights. Moreover, the fundamental element that has dragged down this premium (and therefore the market) was the fact that some shipping companies started not to insure their ships anymore, so as not to lose any kind of profit.
Thus, the “acceptable” freight rates for these shipowners have been reduced more and more, giving to the charterers the opportunity to match again the levels of the Russian – Ukrainian market to those of the non-risky market.
At the moment, the prize has almost disappeared, fluctuating between 1,000 and 2,000 USD per day for these businesses. If a ship class Handysize fixes 8.500 USD with delivery Canakkale for a classic cargo out of Romania to the West Mediterranean, the same cargo, coming from Russia or Ukraine, will pay about 9.500 USD per day.
The only real prime left is the ballast paid from the charterers, since at least, the delivery base remains DOP for these businesses (time being). The Panamax class ships, today, fix levels under 10.000 USD per day with delivery East Mediterranean, for trips via Russian Baltic to the Atlantic.
Of course, the frustration increases for those shipowners who, on the contrary, continue to insure their ships, but watch day by day this premium vanish and the market in general, decreasing.
We will see, but the general sentiment remains negative now and for the next 4-5 months at least, in which you will probably have to face a low and depressed market.
