Container shipping and global value chains have been disrupted and many countries have had to look further afield for suppliers of oil, gas and grain in the wake of the Russian war in Ukraine.

The UN Conference on Trade and Development (UNCTAD) says the war in the Ukraine is stifling trade and logistics of the country and the Black Sea region, increasing global vessel demand and the cost of shipping around the world. The impacts on shipping rates will see the conflict filter across global supply chains independent of Russia and the Ukraine.

Many commodity markets are underpinned by shipping as a key part of the global supply chain. One key example is the steel and ferroalloys industry, which includes bulk ore shipping from global sources of iron ore, manganese, chromium and many others to China, a country which accounts for over 50% of global crude steel output.

Because of China’s dependence on seaborn imported raw materials for its steel industry to exist, the country’s competitive bid means that prices for raw materials globally now largely tally with CIF (cost, insurance, and freight) based price quotes. For that reason, many supply contracts, even those not linked to Chinese trade, are linked to the CIF China price, which is now considered the most accurate representation of market conditions. For several key steel raw materials, shipping costs in 2021 ramped up to over 40% of the raw material cost to reach Chinese ports.