Seaborne

Grain export deal could lead to reopening of 65% of Ukraine’s maritime capacity

Written by

Nick Blenkey

Before Ukrainian grain exports can resume, sea mines will have to be cleared. [Romanian Navy photograph]

There are at least some encouraging signs that maritime grain exports from Ukraine could resume in a few days. Under a deal Turkey brokered on July 22, bulk carriers will be escorted to ports through a safe corridor. To create a navigable passage, the corridor will need to be demined, a process that is expected to take one to two weeks.

The BBC today quoted Ukraine as saying that work has started at three ports, aimed at forming “green corridors” to enable grain exports. Presumably, this work will include demining. A spokesman for Odessa’s military administration told the BBC that naval teams would build roads from southern ports in Odessa, Chornomorsk and Pivdennyi (Yuzhne). Once the routes have been established, “caravans” of ships led by Ukrainian warships will cross the Black Sea.

In another positive move, Turkish Defense Minister Hulusi Akar today unveiled a center in Istanbul to oversee the export of Ukrainian grain under the terms of the deal. The Joint Coordination Center (JCC) will oversee departures from three Ukrainian ports in which ships must circumvent mines, and carry out inspections of incoming ships for weapons. A total of 20 people from Ukraine, Russia, Turkey and the United Nations will work side by side at the CCM.

HARD TARGET

According to BIMCO, the three ports currently set to resume operations accounted for 65% of Ukraine’s total grain exports over the past five years.

“With this agreement, the UN hopes to increase Ukraine’s monthly grain exports by five million tonnes. However, given that in the last five years these three ports have never handled such an amount of grain, achieving this goal could prove difficult,” says Niels Rasmussen, Chief Shipping Analyst at BIMCO. “Even if port logistics are ramping up to speed up exports, the need to escort ships into and out of ports is likely to cause some congestion.”

Ukrainian grain exports
BIMCO chart

More than 20 million tonnes of Ukrainian grain is ready for export and the country’s Grain Traders Union (UGA) expects around 25 million more tonnes to come from the 2022 harvest, according to BIMCO. With the wheat harvest underway and the maize harvest due to begin in September, a rapid export of grain is needed to secure silo space for new crops. To speed up exports, Danube ports, as well as overland routes, will likely continue to play an important role in the shipment of Ukrainian grain in the short to medium term.

“A significant barrier to Ukrainian grain exports will be travel risk and related insurance premiums. For Ukrainian grain shipping to be attractive, high tariffs will be needed to mitigate risk-related expenses,” Rasmussen says. “Russia’s recent missile strikes at ports such as Odessa will add to the insecurity and uncertainty of operations in the Black Sea.”

Due to the limited global supply of wheat and corn, a return of Ukrainian cereals to the global market would have a positive impact on the Panamax, Supramax and Handysize segments. In addition, increased Ukrainian exports would help fight inflation and food insecurity, especially in emerging economies, and help bring needed stability to the global economy.

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