In the 40 days since July 22, when Russia and Ukraine signed a UN sponsored 120-day deal brokered by Turkey, 2.1 million tonnes of grain have been exported through the Ukrainian ports of Chornomorsk, Odesa and Yuzhne. After a slow start, around 0.5 million weekly tonnes of grains are now being exported, according to BIMCO, which says that, at this pace, monthly exports will surpass 2 million tonnes.
On September 7, however, Russian President Vladimir Putin raised concerns over how the deal has been working, saying that most shipments are headed towards the European Union and Turkey rather than the emerging economies in Africa it was designed to aid.
Russia has expressed an intent to renegotiate the deal and restrict grain exports to the EU. Now according to Reuters, Turkish President Tayyip Erdogan says he wants grain from Russia to be exported too, adding that Putin was right to complain that Ukraine grain was going to wealthy rather than poor countries.
IMPLICATIONS FOR SHIPPING
“In spite of limited exports so far, the grain agreement has helped cool down global food prices. These are now back to February levels according to FAO’s food price index. If Russia attempts to alter or stop the deal, this progress could be reversed,” says BIMCO’s chief shipping analyst, Niels Rasmussen.
In August, Ukraine showed interest in expanding the deal to include cargoes such as metals. In addition, the country expressed hope of opening the port of Mykolaiv under the deal, another key port for grain exports.
While a restriction of Ukraine grain exports to Europe could benefit bulk shipping through increased average haul, says BIMCO, a risk to loss in volumes remains. Crop spoilage remains a risk in Ukraine with storage at capacity and the ongoing maize harvest adding further pressure.
“Insecurity remains a factor among those shipping Ukrainian grain,” says Rasmussen. “The ships operating in Ukraine are on average six years older and 32.9% smaller than a year ago, reflecting risk aversion and higher insurance premiums on hull value. Russia’s dissatisfaction with the deal is likely to further hinder Ukrainian exports as decision makers remain hesitant to risk their assets.”