Shippers will end up paying for ocean freight disruptions in Black Sea

by Krystyna Shchedrina

The disruption to ocean shipping in the Black Sea and Russia will end up increasing costs for shippers.

“If you look on a map, the Black Sea looks pretty innocuous, but if you want to know why it’s so important, zoom out, and you’ll see just how strategic it is,” said Simon Geale, executive vice-president at Proxima, a procurement and supply chain consultancy. “Vast amounts of oil, metals, and crops flow out of the region every year, making it a critical export route, but it is also a large and important link in the Eurasian route that flows east to west.”

Ukraine is bounded on the south by the waters of the Black Sea and the Sea of Azov, parts of which are now dangerous or impassable due to the escalating war. Ukrainian authorities suspended commercial shipping at ports on February 24, including the country’s main port in Odessa, which handles 75 percent of Ukraine’s sea trade.

Grain elevators in the background at the Port of Odessa, Ukraine in October 2021. (iStock image)

Ukraine is known as the main ‘breadbasket of Europe’, and restricted access to the Black Sea has immediately affected ocean shipping. The port of Odessa is Ukraine’s central hub for wheat, rye, corn and barley export. Both Russia and Ukraine account for nearly 70 percent of wheat imports to Turkey and Egypt, while Ukraine remains one of China’s top corn importers. Yemen and Lebanon are also heavily dependent on Ukrainian wheat.

“Imagine if all of that stops – how do you get goods to flow west in a cost-effective way when you can’t travel through the region or out of the ports?” said Geale. He says the answer is contingencies, which take longer and cost more. And while some cost increases can be swallowed, most will be passed onto customers.

“Long-term, the conflict is likely to have huge ramifications for countries, corporates and consumers,” he added.

Maersk surcharges

Maersk said recent sanctions against Russia and the constant adjustments they require had significant effects on the security and stability of its customers, employees, operations and global supply chains.

While Maersk has suspended cargo bookings to Russia, the company states it will continue calling at Russian ports with food, medical and humanitarian supplies (except dual-use items). However, by putting its vessels into the Black Sea area between Ukraine and Russia, an officially declared war zone, Maersk reports a notable increase in transit times, cargo detention and cost of transportation.

To cover the expenses, Maersk introduced an Emergency Risk Surcharge (ERS) earlier this month for all cargo loaded or discharged at Russia’s Novorossiysk port. The ERS tariff for regulatory and non-regulatory shipments is US$550 per 20-foot container and $1,100 for 40- and 45-ft containers.

CMA CGM waives fees

French-operated CMA CGM also suspended Russian deliveries in early March. After Ukrainian ports were closed, the carrier said it would redirect the floating cargo to the ports of Tripoli, Lebanon, Constanta, Romania, or Piraeus in Greece. The company also suspended all bookings to and from Belarus.

Special conditions for the cargo en-route to and from Ukraine, Russia, and Belarus have been implemented. These include the complete waiver of cancellation fees for these destinations and change of destination at cost.

Hapag-Lloyd also cancelled bookings for Ukraine, Russia and Belarus, re-routing and discharging the cargo in other Black Sea ports, such as Constanta, Burgas in Bulgaria and Gemlik in Turkey. All cargo originally headed for Odessa will be discharged in Romania, and cargo en route to Novorossiysk is rerouted to Istanbul, Turkey. The company is waiving change of destination and return to shipper fees.

Hamburger Hafen and Logistik AG (HHLA) has operated in Ukraine since 2001, managing a container terminal in Odessa. After the closure of Container Terminal Odessa (CTO), 480 employees on site were sent home. The EU sanctions took effect on Mar. 1, and no containers coming from or destined for Russia will be handled at HHLA’s Hamburg container terminals. These measures also apply to cargo transported by rail, barge or truck.

In a press release, Angela Titzrath, chairwoman of HHLA’s executive board, stated the terminal’s closure had not significantly impaired HHLA’s business activities. She added that the EU sanctions imposed on Russia will only have a minor impact on the company’s bottom line.