International shipping costs projected to increase due to Russian-Ukrainian war

Daily News Egypt
5 Min Read

Amr Al-Samdouni — the Secretary of the International Transportation and Logistics Services Division at the Cairo Chamber of Commerce — expects that international shipping costs would spike in the coming weeks, especially after the price of ship fuel jumped by 23% since the beginning of the year.

Additionally, cargo ships are under great pressure due to economic sanctions imposed on Russia.

Al-Samdouni said that the war between Russia and Ukraine has prompted buyers of wheat, corn, and sunflower oil to search for alternative shipments, which is increasing global food prices to their highest levels in many years, especially since Russia and Ukraine constitute about 29% of global wheat exports, along with 19% of the world’s corn supply, and 80% of sunflower oil exports.

“The Egyptian government — the largest importer of wheat globally — took precautions in this regard and always maintained sufficient balances to ensure consumption for a period ranging between six and nine months, and therefore, there is flour available to be allocated for loaves of bread, according to the assurances of the Ministry of Supply and Internal Trading.”

He further projected that the Russian attack on Ukraine may add more pressures on the production of semiconductors, as Russia and Ukraine produce from 40% to 50% of the neon gas used in laser devices that help in the design of semiconductors, and Russia produces 37% of the world’s production of palladium metal that is used in electronic chips.

The Mining sector is also the most affected, especially since Ukraine is the fifth largest iron ore exporter in the world, which may negatively affect the construction sector in Europe, Al-Samdouni explained.

“European countries will be affected by excluding Russia from the Swift system, because there are at least 2,000 banks in Europe that deal with Swift, and more than 11,000 banks around the world in 200 countries deal with the system,” he explained.

“If European countries and the US stop dealing with Russian products, besides preventing Russian shipping from passing through waterways located in America and Europe, this will negatively affect international trade, which has just begun to recover a little after the COVID-19 pandemic.”

Regarding the development of global trade with Russia, Al-Samdouni expects that the US and European limits on Russian exports would negatively affect global trade in general and Russia and Ukraine in particular, as Russia has many products — not only oil and gas, but also manganese, mercury, barley, ammonia, and potatoes — noting that 29% of the world’s wheat imports come from Russia.

Regarding the role that China can play as a major market that absorbs Russian exports and the role of international organisations, Al-Samdouni said that in 2014, a meeting was held between countries that believed that they may run into disagreements with the US, and they gathered under the umbrella of the BRICS economic bloc — consisting of Brazil, South Africa, India, China, and Russia. These countries set up a parallel bank to the International Monetary Fund and directed more than $150bn to it.

Two days ago, China started using these amounts to trade with Russia, according to Al-Samdouni.

The Russian-Ukrainian war is devastating to the global economy, especially at the level of countries that import various products from Russia like wheat, he stated.

Earlier, the International Chamber of Shipping called on the international community to not make seafarers pay for the actions that governments or others may take, as the chamber indicated that Russian and Ukrainian sailors made up about 14.5% of the workforce in the field of global shipping in 2021, with about 20,000 Russian and more than 76,000 Ukrainian sailors.

The backlog of Russian ships has also closed the Kerch Strait, which connects the Black Sea and the Sea of ​​Azov, which means that no merchant ships will be able to pass, he concluded.

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