Black Sea Watch: Ukrainian seaborne grain flows retreat on low cargo availability

Seaborne Ukrainian grain flows through the Black Sea retreated on the week to reach just below 611,000 mt during the Jan. 2-8 period, with the average cargo size at over 38,000 mt, holding 36% above average levels, an analysis of UN's Black Sea Grain Initiative Joint Coordination Centre data by S&P Global Commodity Insights showed Jan. 9.

"We haven't seen available cargoes from Ukrainian ports after the New Year holiday but there are a lot of vessels opening here, in the Sea of Marmara, in Eastern Mediterranean and in the wider Mediterranean Sea -- and they are looking for employment," said a shipbroker.

The decision by major marine insurers to stop providing war risk coverage in the region has added a new source of uncertainty for the Black Sea grain corridor in 2023.

"I cannot say that freight rates will dramatically increase," the shipbroker said, adding that other insurance companies should be able to insure and re-insure vessels, meaning some ships would be able to continue to trade with Ukraine.

Still, Ukraine's weekly seaborne grain flows through the Black Sea during the period Jan. 2-8 slipped again below average to 611,000 mt, posting a 35% drop on the week, data from the United Nations' Joint Coordination Centre for the Black Sea Grain Initiative showed.

The UN-brokered Black Sea Grain Initiative, signed last July by Russia, Ukraine and Turkey and renewed in November for another four months starting Nov. 19, enabled the resumption of exports of grains and other foodstuffs from the three key Ukrainian ports of Chornomorsk, Odesa and Yuzhny/Pivdennyi on the Black Sea, with cumulative grain shipments under the safe passage deal reaching almost 17 million mt as of Jan. 8, according to JCC data.

According to the JCC, the number of inspection teams remains at three, with plans to conduct 11 inspections on Jan. 9, five on inbound vessels and six on outbound vessels.

"Currently, 27 vessels are waiting for inspection: Five of them waiting to move into Ukrainian ports and 22 loaded with cargo waiting to sail to their global destinations. 71 applications for participation in the Initiative have been submitted," the JCC said Jan. 8.

Despite the lower volumes observed recently, the average cargo size grew 2% on week during the period Jan. 2-8, reaching over 38,000 mt and marking the second highest weekly average since the operational start of the corridor in August.

The largest cargo observed so far in 2023 was a 70,514 mt shipment of corn headed to China aboard the 81,886 dwt, 2015-built Presinge, which departed from Yuzhny/Pivdennyi Jan. 4.

Corn shipments dominated the Jan. 2-8 flows, accounting for over 60% of total cargoes, with wheat accounting for less than 21% and sunflower products close to 14%. Soya beans and peas accounted for the rest.

In terms of reported destinations, 60% of the grain volumes are headed toward the East Asia & Pacific region, while 18% were declared for Europe & Central Asia, with another 17% on its way to South Asia.

The remaining volumes were shipped to Middle East & North Africa, JCC data showed.

High-income destinations accounted for almost 15% of Ukraine's seaborne grain flows through the Black Sea, with 63% headed to upper-middle-income countries, and less than 22% reported on the way to lower-middle-income markets.

Faced with considerable headwinds and mounting economic uncertainty heading into 2023, global dry bulk freight rates have trended to exceptionally low levels, with the Platts KMAX 9 Index, a weighted average of spot time charter equivalent rates on key Kamsarmax routes assessed by Platts, last standing at $9,963/d on Jan. 6, slipping below $10,000/d for the first time since November 2020 and almost half the $19,684/d average for 2022.

2022 in review

Earlier in 2022, Ukrainian seaborne grain flows through the Black Sea came to a halt following Russia's invasion, with S&P Global Commodities at Sea detecting no shipment from the key three ports of Chornomorsk, Odesa and Yuzhny/Pivdennyi between end of February and late June.

This resulted in near-zero flows for Q2 2022, until the Black Sea Grain Initiative re-opened the trade corridor, contributing to a massive jump in flows, with CAS tracking over 4 million mt of agricultural flows in Q3 2022, quickly reaching almost half of the 5-year average levels.

As for Q4 2022, despite the substantial challenges faced due to inspection delays, Russia's temporary suspension of participation in the Black Sea Grain Initiative, and uncertainty regarding the extension of the agreement past November, CAS tracked almost 10 million mt of Ukrainian grain exports through Chornomorsk, Odesa and Yuzhny/Pivdennyi, just 7% below the five-year average levels.

Still, maritime trade in the region suffered not just in terms of volumes but also in terms of the quality of assets operating in the area, with the average vessel size in 2022 jumping by 27% on the year to 14 years, and the average size edging 13% lower to just over 52,000 dwt, according to shipments tracked by CAS, with many more small cargoes loaded to even smaller, coaster vessels.

Platts is part of S&P Global Commodity Insights.