Grains shipments from Black Sea ports slowly gain traction: sources

Grains shipments from Black Sea ports have slowly restarted, including from Constanta in Romania and Varna in Bulgaria, on sub-Supramax vessels, market sources said, as buyers look for alternatives to Ukrainian and Russian cargoes.

“There is some minor trading activity coming out of the Romanian and Bulgarian ports in the Black Sea region, but the grains volumes are substantially lower in comparison with the Ukrainian and Russian grains exports that we were used to seeing,” a broker said.
A second broker said: “There are no shipments on Panamaxes or Supramaxes as of yet, but there is a definite flow on smaller sizes, Handysize and below.”.

Market sources said some grains parcels are being transported from Ukraine by rail to ports in Romania and Bulgaria and from shipped via the Black Sea on sub-Supramax vessels to their final destinations.

“The market is finding a way to slowly rebalance itself,” a charterer source said.

Meanwhile, many international owners of larger vessels are still unwilling to load cargoes from Russia, market sources said.

While some owners avoid sending their vessels to Russia altogether, some are requesting premiums of around $2,000/d to enter Russian ports, market sources said.

Grains shipment out of Ukraine halted when Russia invaded the country. Odessa and other cities were attacked on Feb. 24 and cargoes loading in Ukraine started to be cancelled.

In the days leading up to the invasion, trade activity out of the Black Sea had ramped up as exporters hurried to get volumes out of the country.

According to S&P Global Commodity Insights assessments, on Feb. 23 the Odessa to Qingdao 60,000 mt grains route traded at $48/mt, up more than 13% since Feb. 14. The Odessa-to-Alexandria 60,000 mt grains route stood at $20.50/mt, up more than 38% since Feb. 14.

S&P Global suspended a number of Black Sea assessments Feb. 24, including all dry bulk assessments to and from the Black Sea.

Black Sea ports are especially critical to grains shipments out of Ukraine and Russia; the two countries account for around 26% of global wheat exports. Russia has exported 26 million mt of wheat to date in the 2021-22 marketing year (July-June), accounting for 80% of the US Department of Agriculture’s estimate for the year, and Ukraine 18 million mt, accounting for 90% of the USDA’s estimate.

The USDA also expects Ukraine to supply 13% of global corn outflows for the year. It has exported nearly 18 million mt of corn so far in MY 2021-22, reaching 65% of the USDA’s full-year estimates.

Buyers seek alternatives

Dry bulk charterers could switch their attention to other regions, including the EU, Argentina and Australia, to replace Black Sea cargoes, a third broker said.

However, prompt supplies might be limited due to port capacity issues and domestic food inflation, market sources said.

Russia is the world’s largest wheat exporter while Ukraine is among the top five.

The top Black Sea wheat buying countries — Egypt, Turkey, and Indonesia among others — are the worst hit by the trade disruptions.

Demand for Black Sea wheat is likely to shift to European nations like Germany, France, Romania and Bulgaria, in the near term, sources said.

Furthermore, India, sitting on huge stockpiles of wheat, has emerged as a major exporter, market sources said.

India is likely to benefit from a disruption to Black Sea flows, as export prices of wheat from Australia and Canada are sharply higher and concerns about global supply shortages are exacerbating food inflation worries, market sources said.

While Australian wheat prices have gained sharply over the past few weeks since the war began, Canada and the US are facing severe supply shortages due to extreme dry conditions.

“The tight supply and rise in grain prices from major exporting countries have made Indian wheat competitive,” a shipowner said.

“India’s increase in wheat exports will potentially start a new grains route in the dry bulk markets while the liquidity and trading activity of the route remains to be seen.”

India has been targeting new buyers, such as the Philippines, South Korea and Lebanon, while maintaining exports to traditional importers, including Bangladesh, Sri Lanka and the United Arab Emirates.

Philippines, South Korea and Lebanon typically seek wheat from Australia and Russia.

“As buyers look to replace Russian and Ukrainian cargoes and look for alternative routes, this in turn will positively affect ton-miles,” a second shipowner said.

For corn, buyers are likely to turn to the US, market sources said. Major destinations for Ukrainian corn — the fourth-largest origin, include China and the EU.

In the longer term, corn buyers could also turn to South America when its corn harvest begins.

More spot activity has already been reported out of the East Coast South America region.

The Santos to Qingdao 60,000 mt grains route reached a year-to-date high of $75/mt on March 28, up more than 57% from its year-to-date low of $47.75/mt on Feb. 4, according to S&P Global data.

Moreover, there has been an uptick in activity and rates for ECSA trans-Atlantic routes going to the Mediterranean/Continent, market sources said.

“Bids are at $40,000/d, offers are in the high $40,000/d for LMEs and over $50,000 for Kamsarmaxes, APS basis, Tubarao-Recalada range,” a fourth broker said.

Grains freight rates have also been increasing out of the US Gulf. According to S&P Global assessments, the New Orleans to Qingdao 66,000 mt grains route reached a year-to-date high of $75/mt on April 5, up almost 30% from its year-to-date low of $57.75/mt on Feb. 1.

The New Orleans to Alexandria 60,000 mt grains route reached a year-to-date high of $36.50/mt on March 24, up almost 70% from its year-to-date low of $21.50/mt on Feb. 3, S&P Global data showed.
Source: Platts