Indian Transport & Logistics

Grain agreement could see 65% of Ukraine's seaborne capacity reopen

Deal valid for 120 days with an option to extend, allows bulkers to be escorted to the ports through safe corridor.

Grain agreement could see 65% of Ukraines seaborne capacity reopen

(Representational photo)

Russia and Ukraine signed an agreement with Turkey and the United Nations on July 22, 2022 to allow grain exports from three ports in western Ukraine: Yuzhne, Chornomorsk, and Odessa. Combined, the three ports accounted for 65 percent of the country's total grain exports over the past five years, according to data from BIMCO, an international shipping association.

The deal is valid for 120 days with an option to extend, and it allows bulkers to be escorted to the ports through a safe corridor, the update added. "To create a navigable passage, the corridor will have its sea mines removed, a process that is expected to take one to two weeks."

"With this deal, the UN hopes to increase monthly grain exports from Ukraine by five million tonnes," says Niels Rasmussen, Chief Shipping Analyst, BIMCO. "However, since over the past five years, these three ports have not ever handled such a high amount of grain, meeting this target could prove to be a challenge. Even if port logistics accelerate to expedite exports, the need to escort ships in and out of the ports is likely to cause some congestion."

Over 20 million tonnes of Ukrainian grains are ready for export, and the country's grain traders union (UGA) expects around 25 million tonnes more to come from the 2022 harvest, the report said. With the wheat harvest underway and the maize harvest to start in September, a swift export of grain is needed to ensure space in silos for the new harvests.

"A significant obstacle to Ukrainian grain exports will be the voyage risk and corresponding insurance premiums. For the shipping of Ukrainian grain to be attractive, high rates will be necessary to mitigate risk-related expenses," says Rasmussen. "Russia's recent missile strikes in ports such as Odesa will add to the insecurity and uncertainty of operating in the Black Sea."

Due to limited global supply of wheat and maize, a return of Ukrainian grain to the global market would positively impact the Panamax, Supramax and Handysize segments, the report said.

Read Full Article
Next Story
Share it