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November 30, 2023

Ukraine-Russia War Impacts Market; GE Shipping Might Jump Up to 5%

By Shivani

The Russian-Ukraine crisis kept investors on the edge as the shares of Great Eastern Shipping Company (GE Shipping), SEAMEC, and Shipping Corporation of India were mixed on Monday.

The war has engendered panic among Indian exporters as the prices spike up, especially since it comes after more than a year of high freight rates and container shortages.

According to shipping companies, the cost of chartering a 4,200 TEU (20-foot equivalent unit) has soared from around $8,000 a day eight months ago to around $70,000 a day now. As a result of the Russian-Ukraine war crisis, it is expected to touch $100,000 a day.

Freight rates to several Indian ports increased eight to tenfold last year and have continued to rise in the last week. According to Drewry’s composite World Container Index, global freight rates began surging rapidly in the aftermath of the Covid outbreak in 2020 and reached a peak of $10,377 per 40-ft container in late September 2021. Following that, rates began to fall, reaching $9,051 on February 12 before rising again to $9,477 on February 24. The index has now increased by 81 per cent over the previous year.

A spike in crude oil prices and a potential increase in insurance premiums will raise global shipping costs and have a chilling effect, particularly on dry-cargo shipments. In intraday trade last Thursday, international Brent crude oil prices surpassed $105 per barrel, the highest since 2014.

A wind-down period should be included in the sanctions announced by the US Office of Foreign Assets Control (OFAC) to address transactions in the pipeline.

India’s exports to Russia increased by 36% year on year to $2.55 billion until December of this fiscal year, but imports increased by 81% to $6.89 billion, resulting in a $4.34 billion trade deficit for New Delhi. Russia primarily supplies India with petroleum products, diamonds and other precious stones, and fertilisers. It also sends capital goods, pharmaceuticals, organic chemicals, and auto parts to Moscow.

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