Grain shipments from Black Sea ports are slowly gaining importance: sources

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

“There is some minor trading activity from the Romanian and Bulgarian ports in the Black Sea region, but grain volumes are significantly lower compared to the Ukrainian and Russian grain exports we were used to,” said a broker.
A second broker said: “There are no shipments on Panamaxes or Supramaxes yet, but there is a definite flow into smaller sizes, Handysize and below.”

Market sources said that some grain packages are being transported from Ukraine by rail to ports in Romania and Bulgaria and shipped across the Black Sea to their final destinations by sub-supramax vessels.

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

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

While some owners avoid sending their ships to Russia altogether, some are charging premiums of around $2,000 a day to enter Russian ports, market sources said.

Grain shipments from Ukraine were halted when Russia invaded the country. Odessa and other cities were attacked on February 24 and loading of cargo in Ukraine began to be canceled.

In the days leading up to the invasion, trade activity out of the Black Sea had increased as exporters rushed to move volumes out of the country.

According to estimates by S&P Global Commodity Insights, the 60,000t Odessa to Qingdao grain route traded at $48/mt on Feb. 23, up more than 13% since Feb. 14. The 60,000 mt grain route from Odessa to Alexandria was $20.50/mt. mt, up more than 38% since Feb. 14.

S&P Global suspended a series of Black Sea assessments on February 24, including all dry matter reports to and from the Black Sea.

Black Sea ports are particularly important for grain shipments from Ukraine and Russia; The two countries account for around 26% of global wheat exports. Russia has so far exported 26 million tons of wheat 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 tons, accounting for 90% of the USDA estimate.

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

Buyers are looking for alternatives

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

However, according to market sources, quick shipments may be limited due to port capacity issues and domestic food inflation.

Russia is the world’s largest wheat exporter, while Ukraine is among the top 5.

The main exporting countries for wheat on the Black Sea – including Egypt, Turkey and Indonesia – are hardest hit by the trade disruptions.

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

Additionally, India, sitting on huge wheat stocks, has emerged as a major exporter, market sources said.

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

While Australian wheat prices have risen sharply in the last few weeks since the start of the war, Canada and the USA are facing serious supply shortages due to extreme drought.

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

“India’s surge in wheat exports may open a new grain route in dry bulk markets while the route’s liquidity and trading activity remains to be seen.”

India is targeting new buyers like the Philippines, South Korea and Lebanon while maintaining exports to traditional importers like Bangladesh, Sri Lanka and the United Arab Emirates.

The Philippines, South Korea and Lebanon typically look for wheat from Australia and Russia.

“As buyers seek to substitute Russian and Ukrainian cargoes and look for alternative routes, this will in turn have a positive impact on tonne miles,” said a second shipowner.

For corn, buyers are likely to turn to the US, market sources said. The main destinations for Ukrainian corn – the fourth largest source country – include China and the EU.

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

Further spot activities have already been reported from the east coast of South America.

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

In addition, there has been an increase in activity and rates for ECSA’s transatlantic routes to the Mediterranean/continent, market sources said.

“Bids are $40,000/day, offers are high $40,000/day for LMEs and over $50,000 for Kamsarmaxes, APS base, Tubarao-Recalada area,” said a fourth broker.

Freight rates for grain from the US Gulf have also increased. According to estimates by S&P Global, the 66,000-ton grain route from New Orleans to Qingdao arrived on January 5th.

The 60,000-mt New Orleans-Alexandria grain route hit 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 February 3, as data from S&P Global showed .
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