Black Sea Watch: Grain shipments ease further ahead of safe passage deadline

Ukrainian grain flows through the Black Sea declined during the week ended Nov. 13, a S&P Global Commodity Insights analysis of UN data showed, with markets still cautious until a clear renewal indication of the safe passage agreement is communicated from stakeholders of the Black Sea Grain Initiative.

"The Black Sea is dead as there are almost no orders in the Panamax and Ultramax markets," said a shipbroker, explaining that participants have adopted a wait-and-see approach ahead of the Nov. 19 deadline for Ukrainian grain shipments, while Russian sellers have been less active.

Indeed, the UN's Joint Coordination Centre reported that 525,699 mt of grains had been exported during the week ended Nov. 13, nearly 4% lower week on week and almost 55% below the mid-September peak in weekly levels, marking the lowest weekly export volume since mid-August.

In addition, uncertainty has weighted on the size of the shipments too, as smaller vessels accounted for the majority of the runs, with the average cargo size for Nov. 7-13 shipments down 27% week on week to hit a three-week low of 25,033 mt, according to JCC data.

The JCC reported late Nov. 13 that 61 inbound vessels were waiting to move, following inspection, into Ukrainian ports with the capacity to export approximately 1.5 million mt of grain and other food products; congestion appeared to have eased by nearly 20% over the weekend, with 76 vessels having waited in queue on Nov. 11.

However, 10 loaded outbound vessels were still waiting for inspection in Turkish territorial waters as of late Nov. 13, three more than the evening of Nov. 11.

Like the previous week, the largest cargo observed during the period Nov. 7-13 was a 62,900 mt shipment of corn departed from Chornomorsk Nov. 11, carried onboard the 75,200 dwt Nestor S destined for China.

In terms of cargo types, wheat shipments dominated exports this week, accounting for 176,368 mt, taking the lead from corn flows, which reached 134,150 mt, with the remaining cargoes containing sunflower products, rapeseed and other grains.

The proportion of shipments destined for high-income countries increased to 44% during the week ended Nov. 13, up from 41% the previous week, while almost 11% was destined for low-income countries, with the rest heading to mid-income destinations.

As for regional destinations, Europe & Central Asia attracted over 41% of the shipments in the week, unchanged week on week, with almost 32% heading to East Asia & Pacific, from more than 41% the previous week, and an additional 26% destined for the Middle East & North Africa, from less than 18% the previous week.

Market remains optimistic

The UN-brokered Black Sea Grain Initiative, signed July 22 by Russia, Ukraine and Turkey, enabled the resumption of exports of grains and fertilizers from the three key Ukrainian ports of Chornomorsk, Odesa and Yuzhny/Pivdennyi from the Black Sea.

According to the safe passage agreement, the "initiative will remain in effect for 120 days from the date of signature by all Parties and can be extended automatically for the same period, unless one of the Parties notifies the other of the intent to terminate the initiative, or to modify it."

Previously, Russia said it had suspended its participation in the agreement in late October but since backtracked, and now market participants are focusing on the Nov. 19 renewal deadline.

"The Black Sea Grain Initiative will be renewed, it's just that traders are not ready to take the risk at the moment," the shipbroker said. "There are too many vessels still waiting for inbound inspection -- some traders have to pay out millions in the compensation for the waiting time before the JCC inspection can be carried out."

A ship manager expressed confidence that the safe passage agreement would be extended, "as there is no reason to do otherwise."

"Probably Russia will get better conditions in an updated agreement, but we will see," the ship manager said. "At least I can see that cargoes are there in the ports, so shippers seem to be positive as well."

Looking ahead, the JCC is planning to maintain steady personnel Nov. 14, deploying three joint inspection teams to carry out the procedures.