Black Sea: naval freight costs on the rise, also for oil
Freight rates in the Black Sea have risen 20% since the beginning of the year due to higher war risk insurance premiums, Reuters said, citing unnamed industry sources. This while in the rest of the world the cost of naval freights collapses.
Additionally, some insurers have stopped providing coverage to ships and planes carrying cargo to and from Belarus, Russia and Ukraine. Reinsurers also withdrew from the region due to rising risks.
The Black Sea, shared by Romania, Bulgaria, Ukraine, Russia, Georgia and Turkey, is an important transportation artery for oil and petroleum products. "The effect (of the reinsurer exit) is reducing (underwriting) capacity in the war risk market and will mean that people will pay more this year," explained one of the Reuters sources.
These higher rates and the limited availability of reinsurance cover add to the industry's woes related to the G7 price cap on Russian oil exports. Under capping scheme rules, Western insurers, who make up about 90 percent of all marine insurers, are barred from providing cover to vessels carrying Russian crude priced at more than $60 a barrel.
According to a recent FT report, about a quarter of Russian oil shipments in December had Western insurance coverage, suggesting that at least this quarter sold for less than $60 a barrel. In fact, Russia's Urals has been trading below $60 a barrel for more than a month.
Raising freight rates for the Black Sea, however, would increase the costs of the goods being transported through the choke point.
“For shipments to and from Russia the premiums will increase. They could easily increase by 50% (compared to the end of last year) to reflect the cost of capital due to the lack of reinsurance,” another Reuters source said.
On the flip side, tanker tariffs fell despite expectations of a hike after the EU embargo on Russian crude came into effect. Among the reasons is the embargo itself: European refiners increased the purchase of Russian crude oil before December 5 and after that date the rush to buy has eased, effectively reducing the demand for tankers.
Thanks to our Telegram channel you can stay updated on the publication of new articles from Economic Scenarios.
The article Black Sea: increasing naval freight costs, also for oil comes from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/mar-nero-costo-noli-navali-in-crescita-anche-per-il-petrolio/ on Mon, 09 Jan 2023 12:03:46 +0000.