Shipping & Logistics

Russia, Ukraine conflict set to exert toll on local exporters

Flowers

Workers pack flowers for export. FILE PHOTO | NMG

geraldandae

Summary

  • The rising cost of fuel will also have an impact on imports with Kenyans expected to pay more in shipping goods to the country.
  • The price for a barrel of oil jumped to $100 last month, a rate that was last witnessed in 2014.
  • Russia started aggression against Ukraine on Thursday. The attack has been billed as the biggest invasion by one state against another in Europe since World War two.

The ongoing war between Russia and Ukraine will adversely impact exporters starting this March as freighters have adjusted the shipping charges by 10 percent in response to the rising cost of fuel.

The rising cost of fuel will also have an impact on imports with Kenyans expected to pay more in shipping goods to the country.

The price for a barrel of oil jumped to $100 last month, a rate that was last witnessed in 2014.

“Cost of freight will go up because of this war between Russia and Ukraine as a result of high cost of fuel,” said Astral Aviation chief executive officer Sanjeev Gadhia.

Russia started aggression against Ukraine on Thursday. The attack has been billed as the biggest invasion by one state against another in Europe since World War Two.

Mr Gadhia, whose airline operates all-cargo flights, said the situation could worsen in April as the cost is projected to rise by a further 10 percent.

“Kenyans should embrace expensive exports and imports in the coming days because of the expensive fuel currently,” he said.

The move will hit hard exporters of fresh produce, especially coming at a time when the horticulture industry is expecting to export more flowers to Europe ahead of the Mother’s Day celebration in May. The orders are normally ferried in advance.

Chief executive officer of the Fresh Produce Consortium of Kenya Ojepat Okisegere said they are waiting to see how the industry will react to the current disruptions in the coming days.

“We are waiting to see the full picture of the effects of this war in the coming days,” said Mr Ojepat in an interview with Business Daily.

Russia has been hit by tough sanctions by European countries and the US with most of these nations blocking their air space to Moscow-based airlines, creating a near air blockade on Moscow.

The interruption caused by the war will have an impact along the Black Sea, which is a major corridor for grain as Russia and Ukraine remain the two largest suppliers of wheat to Kenya.

For instance, Ukraine's military last week suspended commercial shipping at its ports after Russian forces invaded the country while Moscow had earlier ordered the Azov Sea closed to the movement of commercial vessels until further notice.

Shipping group Maersk said on Thursday it had halted all port calls in Ukraine until the end of February and has shut its main office in Odessa on the Black Sea coast because of the conflict, according to Reuters.

Industry data currently puts Ukraine's grain exports at about 5 million to 6 million tonnes a month, comprising 4.5 million tonnes of maize, a million tonnes of wheat and a remaining share of mainly barley.

Kenya imports up to 75 percent of all the wheat requirements from the two countries as the local supply is not enough to meet the annual needs.

With the local wheat having been exhausted, the country is banking on imports to bridge the deficit.

Kenya was supposed to import yellow maize for animal feeds from Ukraine but the current disruption in trade, which has pushed up prices will make it impossible for traders to ship in the commodity.

The government in December allowed traders and millers to import duty-free maize to address the rising cost of animal feeds that is currently at a historic high.

[email protected]