How are bulk shipping equities getting impacted from Russia-Ukraine conflict

The ongoing Russia-Ukraine war has led financial investors to scramble for safer assets. Global indices have declined , while commodity indices have increased with surging commodity prices (especially, crude oil, LNG and grains). More specifically, S&P 500 has declined 1.3%, while Dow Jones Commodity Index rose 16.5% (between 23 February and 8 March 2022). The war’s effect on shipping has been
mixed - while tanker, LNG and LPG shipping stocks have trended up, other sectors have remained flat or declined. In this write-up, we analyse the impact of the current crisis on the equity performances of various subsectors of the bulk shipping industry: tankers, dry bulk, LNG and LPG shipping.

Amid this crisis, Western countries have come up with multiple financial sanctions such as - banning Russian ships to enter European ports, removing multiple Russian banks from the SWIFT system, and putting sanctions on the import/ export of multiple commodities. On 8 March, US announced an immediate ban on Russian oil and other energy imports. UK is also expected to phase out Russian oil
imports by the end of 2022. Even before these sanctions from the US on Russian energy sector, many countries were hesitant to trade oil and gas with Russia due to the potential sanctions and lack of clarity on the mode of payment. Some of the countries have opted for FOB destination clauses rather than FOB origin, which was previously there.

On a broader level, we expect shipping supply from Russia to be significantly impacted, shipping rates to rise on higher war premium, and tonne-mile demand to increase in the short term.