Shipping Ukraine crisis

Impact of Russia-Ukraine conflict on shipping stocks

219 views

The ongoing Russia-Ukraine conflict has led investors to rush to safe-haven assets. They are selling assets with high price volatility such as equities, commodities, and high-yield bonds, preferring safer harbors such as gold acquisitions. The crisis’s effect on the shipping industry has been mixed: tanker, LNG and LPG shipping equities have trended up while other sectors have remained flat or declined, according to Drewry Maritime Equity Research.

Western governments have imposed a string of financial sanctions on Russia, including banning Russian ships to enter European ports, removing selected Russian banks from the international financial messaging system Swift, and putting sanctions on the import/ export of multiple commodities. Major brands have meanwhile continued to pull out of Russia.

US President Joe Biden has banned all imports of Russian oil and gas while the UK will phase out Russian oil imports by the end of 2022. Russia’s economy is heavily dependent on energy. It is the world’s third-biggest oil producer, behind Saudi Arabia and the US.

On a broader level, Drewry expects 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.

Tanker market

Drewry’s crude tanker equity index and Drewry’s product tanker equity index surged by 12.2% and 13.3% respectively since the beginning of the conflict. Scorpio Tankers (20.1%) and Torm (16.3%) were the top performing product tanker companies among the constituents of Drewry product tanker equity index.

Dry bulk market

Drewry’s dry bulk carriers’ equity index which gained only 2.5%   since the conflict began. DS Norden is the top performer and rallied 35.6%,  Navios Maritime Holdings (27.9%), Diana Shipping (20.5%) and Pacific Basin Shipping (10.3%) also registered double-digit gains

LNG market

Drewry LNG shipping equity index expanded by 5.2% YTD (as of 4 March 2022), outperforming S&P 500, which declined 9.2% during the same period. The share price of Golar LNG skyrocketed by 45.1% and that of Nakilat improved by 11.2%.