The resumption of attacks on merchant ships in Ukrainian ports threatens 1% of global dry bulk cargoes and risks a rise in food prices, shipping body BIMCO said Oct. 23.
Since September 2024, five merchant ships have been hit by Russian missiles while in Ukrainian ports or waters, the first attacks on merchant ships since November 2023, BIMCO said in a statement.
“They could threaten 1% of the world’s dry bulk exports if safety is not improved. The price of war risk insurance has already increased but the impact on exported volumes has so far been limited,” Filipe Gouveia, shipping analyst at Gouveia said in the statement.
The panamax and handysize ship segments transport two thirds of Ukrainian cargoes and as such would be most affected by disruptions. Handysize ships mainly transport cargo to ports in the Mediterranean, while panamax ships are preferred for shipments to Asia. Most Ukrainian cargoes transported by panamax, handysize and supramax ships are grains.
Throughout 2024 Ukraine has been exporting dry bulk cargoes from its ports in greater Odesa via a corridor close to its coast. The corridor has replaced a UN brokered agreement allowing the export of grains and other food products, which ended in July 2023.
During the first ten months of 2024, dry bulk shipments out of Ukraine were three times higher than a year earlier. The new corridor has allowed for an increase in grain shipments and for shipments of iron ore to resume. Despite the improvement, shipments are still 27% lower than pre-war levels, according to BIMCO data.
Ukrainian government data showed that since establishing its own Black Sea corridor in August 2023, following the end of the Black Sea Grain Initiative, Ukrainian grain exports have continued apace, despite Russian attacks on its ports.
Demand has been robust, with grain exports for the 2024-25 season (July-June) nearly doubling to 12 million mt, up from 8.3 million mt the previous year, according to Ukraine’s agrarian ministry as of Oct. 21. This included 7.2 million mt of wheat, an 80% year-on-year increase, and 3.8 million mt of corn, up 18.3%. The reliance on deep-sea ports has led to a 13% year-on-year decline in the previously significant route through Constanta.
While Ukraine has been sending shipments from the ports, suppliers have to stick to some very limited sea routes, given the threat of the Russian navy and potential missile attacks, Vladyslav Vlasiuk, adviser to Ukraine President Volodymyr Zelensky and a sanctions expert, told S&P Global Commodity Insights previously.
Regional concerns
Exports may be growing but concerns persist. The European Commission, Ukraine and neighboring countries—Poland, Slovakia, Hungary, Romania, and Bulgaria—recently convened for the 14th Meeting of the Joint Coordination Platform on Export and Transit of Ukrainian Agricultural Product, to discuss revitalizing trade in the region, the Commission said in a statement Sept. 26.
Central to these efforts is the operational capacity of Ukrainian ports, including Pivdennyi, Chornomorsk, and Odesa, the Commission said.
The coastal corridor has been crucial in ensuring low global food prices. It has supported a 15% decrease on the year in the FAO cereal price index so far in 2024. Ukraine is a large grain exporter accounting for 7% of global seaborne grain exports. It is also the fourth largest maize exporter, and its wheat exports are significant, BIMCO said.
“If Ukraine’s seaborne exports were disrupted again, as they were during the start of the war, it would not only affect food prices, but also the dry bulk market. While the world’s reliance on Ukrainian grains has decreased, replacing its volumes would still be challenging. There are only three large maize exporters globally and the global wheat supply is strained,” Gouveia said.
Platts, part of Commodity Insights, assessed Ukraine Black Sea Wheat with 11.5% protein on a FOB basis at $228/mt Oct. 22, up 8% from the end of August.
Platts has suspended Black Sea dry bulk assessments as a result of the war.
“What I’ve observed is that the Black Sea freight market is experiencing a rapid increase, especially for cargoes loading at Kavkaz during challenging weather,” a shipbroker told Commodity Insights. “I’ve seen spot freight from Kavkaz and Novo ports rise by 10% week on week for Handysize vessels heading to Mediterranean destinations,” the shipbroker added.
Meanwhile, Russia is strengthening its grain trade by partnering with other countries and eliminating foreign intermediaries, according to market sources. Agreements with major importers like Egypt and India may drive smaller traders out, resulting in a freight market dominated by a few large players, a chartering broker said.
