Russia’s attack on Ukraine disrupts supply chains; may spike shipping costs

Posted by Chuck Chiang,

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The outbreak of war between Russia and the Ukraine this week will not have major implications on the global supply chain outside of one potential item – shipping costs.

That is the assessment of one leading analyst, who noted that while he does not expect any large effects on global supply chains and trade due to the type of commodities produced by the Ukrainian market, Russia’s role as a major energy producer means that the ongoing spike in oil prices may knock-on to the price of running cargo vessels and other transportation modes.

“Putin’s unprovoked and shameful war of aggression against the people of Ukraine is a humanitarian and political tragedy,” said Werner Antweiler, director of UBC Sauder School of Business’s Prediction Markets program and an associate professor. “What makes it worse is that Russia, as a large exporter of fossil fuel, is making money off it with every increase in the price of crude oil and natural gas.”

According to Freightos, which compiles data on a number of leading economic indicators such as freight prices, there has not been a large spike in recent days with the Baltic Index for containers – a figure economists refer to to assess current shipping costs for container freight. Similarly, Antweiler said the Baltic Dry Index for bulk goods – while up to 2,187 this morning (which is considerably higher than the 1,296 figure on Jan. 25) – is still well off the whopping 5,650 on Oct. 6 of last year…read more.