Russia's Shipping Challenge: Lack of Ships and Shrinking Appetite for Business

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Russia's lack of ships and Western grain traders' shrinking appetite for business with Moscow are adding to rising costs of moving Russian wheat, at a time when the war in Ukraine has spilled perilously close to vital Black Sea supply routes

at its Novorossiysk naval base, next door to a major grain and oil port, has added to these new dangers for transport in the Black Sea.

The financial and security risks associated with trading with Russia - compounded by the Black Sea corridor collapse - are driving up costs of freight for Moscow and pushing it toward older and smaller vessels run by less established shipping operators, Reuters reporting based on conversations with 10 marine insurers, traders and shipping companies showed.

Last year, Russia exported a record volume of wheat on ships chartered from international companies and traders. While exports remain strong, in the past few months it has had to source more of its own freight, increasingly relying on a "shadow fleet" of older vessels typically operated by companies based in Turkey and China, three shipping industry sources said.

The requests for ships were up 40% from June, and are likely to climb further as the export season gathers pace. One shipping source familiar with the matter said even before insurance, ship operators were charging up to $10,000 more daily for Russian cargoes than for cargoes leaving nearby ports in Bulgaria and Romania, as the collapse of the deal and Black Sea escalation weighed.

Two sources said the escalation of tensions in the Black Sea was likely to impact Russia's export numbers, and was discouraging shipping companies from bringing vessels to Russian ports, especially newer ships that carry more.

 

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