As we have been continuing to stress in our work, one of the biggest potential issues with the Russia/Ukraine conflict is if cargo volumes will experience any significant losses over time. The conflict is already lasting longer than many pundits initially expected, and odds are growing that the conflict will result in a loss of cargoes that cannot be fully offset from other exporters. The issue is not primarily that some nations shun Russian cargoes, but instead that Ukrainian and Russian cargoes are simply not able to be shipped.
Remaining of note regarding trade volumes is that Russia this year was expected to export 35 million tons of wheat and 9 million tons of coarse grain, and at least 145 million tons of coal and at least 15 million tons of iron ore. Ukraine this year was expected to export 24 million tons of wheat and 40 million tons of coarse grain, and at least 35 million tons of iron ore. A prolonged conflict (several weeks/months) would continue to increase the likelihood that the dry bulk market is unlikely to be able to fully offset a loss of Russian/Ukrainian cargoes from other nations. A loss of Ukrainian cargoes remains most at risk.
In our Weekly Dry Bulk Report, we discussed two dry bulk vessels being damaged by missiles and/or shelling, operations at Ukraine’s ports continuing to be suspended by Ukraine's military, and Russia continuing to suspend commercial activity in the Sea of Azov. New this week is that another bulk vessel (BANGLAR SAMRIDDHI) has been hit by a Russian missile and a general cargo vessel (HELT) was reportedly hit by a mine and has sunk. Each of these vessel incidents occurred in the Black Sea. Also of note is that while ceasefire talks remain ongoing, the Russia military last night reportedly captured the city of Kherson and now has its sights set on the major port city of Odessa (where the majority of Ukraine's grain is exported from).
While more Ukrainian cargoes this week are expected to be hit by force majeure, another concern is that the conflict in Ukraine will significantly affect planting and then later inland transportation -- particularly for Ukrainian coarse grain. Parts of Ukraine are literally a war zone, some roads and bridges have been destroyed, fuel and trucks are harder to come, etc. Prior to the conflict, Ukraine's coarse grain harvest was expected to total a very robust 53.6 million tons this year (with 40 million tons expected to be exported), but now it is all but certain that the harvest and exports will be much lower. While in the near-term ton miles could increase as nations try to source from other exporters, in time the absolute loss of Ukrainian coarse grain (and other commodities) could become a net negative for the dry bulk market.