Black Sea Watch: Potential extension of safe passage deal supports Ukraine grain flows

Upbeat sentiment regarding the potential extension of the UN-brokered safe passage agreement on March 18 has provided some support to falling weekly Ukrainian Black Sea grain flows, with data from the Joint Coordination Centre pointing to above-average grain shipment sizes so far in March.

With market participants slightly more optimistic than during the previous extension deadline in November, average daily Ukrainian seaborne grain flows via the Black Sea are trending close to 125,733 mt/d so far in March, some 4% higher than February's daily average, according to JCC data.

The UN-brokered Black Sea Grain Initiative -- first signed last July by Russia, Ukraine, and Turkey -- was renewed in November for four months from Nov. 19. It 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 flows reaching above 24 million mt as of March 13.

Looking ahead in the negotiations, the Black Sea Grain Initiative agreement states it will "be extended automatically for the same period [120 days], unless one of the parties notifies the other of the intent to terminate the initiative or to modify it."

"Traders are trying to book slots in the ports, basically most of the players are sure that the corridor will be extended," said a ship operator from the Black Sea region.

"I think they won't let it go, the deal will be extended... But let's see" said a Greece-based shipbroker.

According to a ship operator based in the Middle East, daily hire for Panamax vessels had been trending near the $27,000/d level for fronthaul trips via the Black Sea toward China, with Panamax time charters via the Black Sea headed to Eastern Mediterranean standing closer to $20,000/d.

Still, during the period March 6-12, grain flows via the three key Ukrainian ports eased 36% on the week to reach 654,034 mt as market participants focus on the prospective renewal of the deal March 18.

Notably, the average size for Ukrainian grain shipments via the Black Sea observed during the week March 6-12 was close to 40,877 mt, retreating some 20% lower on the week, having reached a record high of 51,080 mt during the period Feb. 27-March 5.

Yet, at 40,877 mt, the average shipment size remains almost 31% above the average weekly levels observed since the commencement of the safe passage operations earlier in August 2022.

The largest individual cargo consignment reported by the JCC so far in March has been a 70,530 mt parcel of corn carried aboard the 2012-built, 79,501 dwt Captain V. Madias, which departed from the terminals of Yuzhny/Pivdennyi March 9 and was last reported to be heading toward Portugal.

So far in March, corn has dominated Ukrainian seaborne grain exports via the Black Sea, accounting for almost 62% of the flows, with wheat volumes claiming a 20% share of the exports, according to JCC data. The rest have been sunflower products, soya beans, barley and rapeseed.

In terms of destinations, almost 46% of Ukraine's seaborne grain exports via the Black Sea so far in March were reported to be heading toward Europe and Central Asia, with another 39% destined for the East Asia and Pacific region, JCC data showed. The Middle East and North Africa region is expected to receive almost 10% of the Ukrainian Black Sea grain flows during the period March 1-13, with the rest headed to South Asia and sub-Saharan Africa.

As for the income distribution of the recipient countries, high-income markets have attracted over 41% of Ukraine's seaborne grain exports via the Black Sea in March so far, with another 49% headed to upper-middle-income destinations, according to data from the JCC. Lower-middle-income destinations are expected to receive about 6% of the March 1-13 flows, while low-income markets could see little more than 3% of the flows so far arriving in their terminals.

Grain market remains cautious

The Russian wheat market has weakened by $7/mt since Platts assessed 12.5% protein quality at $296/mt at the beginning of March. "[It has] been quite a fall since a week ago," traders said, reiterating market talks that Russia had an abundance of wheat to sell, which caused the steady decline in prices.

The Black Sea corn market was weak but largely inactive since the beginning of the new month as traders have been carefully monitoring updates on the grain corridor. The Ukrainian market weakened $2/mt on low offers for April delivery indicated at $252-$254/mt. In contrast to rumors in the freight markets, "traders/exporters are very unwilling to book anything," said one grain market participant, until "they see official JCC announcement that the corridor will be extended after March 18," another source added.

With little movement in the Ukrainian market, a source said more traders are offering through the Romanian route, where a trade was heard March 6 for end-March delivery at $287/mt. "Waiting time [at the grain corridor] is really huge and it's a very big and costly problem," a trader added.

Platts is part of S&P Global Commodity Insights.