Shipping companies are in no rush to export millions of tons of grain caught in Ukraine, despite a landmark deal to provide safe corridors through the Black Sea. That’s because explosive mines are floating in the waters, shipowners are weighing the risks, and many still have questions about how the business will develop.
The complexity of the deal prompted a slow, cautious start, but it’s only good for 120 days – and the clock started ticking last week.
The goal is to get about 20 million tons of grain over the next four months from three Ukrainian seaports that have been blocked since the Russian invasion on February 24. That gives about four to five large bulk carriers a day to move grain from ports to millions of impoverished people suffering from hunger around the world.
It also provides ample time for things to go wrong. Just hours after Friday’s signing, Russian missiles hit Ukraine’s port of Odessa — one of those included in the deal.
Another key element of the deal offers assurances that shipping and insurers transporting Russian grain and fertilizer will stay out of the broader net of Western sanctions. But the deal brokered by Turkey and the United Nations clashes with the reality of how difficult and risky the pact will be to implement.
“We have to work very hard now to understand in detail how this is going to work in practice,” said Guy Platten, secretary-general of the International Chamber of Shipping, which represents national shipowners’ associations that make up about 80% of the world’s fleet.
“Can we ensure and guarantee the safety of the crews? Also what will happen to the mines and the minefields? So right now there is so much uncertainty and unknown,” he said.
The supply of wheat and other food is vital for farmers in Ukraine as they run out of storage capacity in the face of a new harvest. These grains are vital to millions of people in Africa, parts of the Middle East and South Asia who are already facing food shortages and in some cases famine.
Ukraine and Russia are major global suppliers of wheat, barley, corn and sunflower oil, with fighting in the Black Sea region known as the “breadbasket of the world” driving up food prices, threatening political stability in developing countries and leading countries some Ban food exports, making crisis worse.
According to the deal, Russia and Ukraine will offer “maximum guarantees” to ships attempting the voyage through the Black Sea to Ukraine’s ports of Odessa, Chernomorsk and Yuzhny.
“Obviously, the main risk we face is mines,” said Munro Anderson, head of intelligence and founding partner of Dryad. The maritime security consultancy is working with insurers and brokers to assess the risks ships along the route could face if sea mines laid by Ukraine to deter Russia drift.
Turkey’s defense minister said Wednesday demining the water was not required immediately, but plans could be made if ordered later.
Ukrainian officials have expressed hope that exports could resume from one port within days, but have also said it could take two weeks for all three to be operational again. Experts in Ukraine are working to determine safe routes for ships.
Meanwhile, shipowners, charterers and insurance companies are trying to understand how the business will develop in real time.
“I think it will depend on the position of shipping insurers that are taking risks of war and how much they are going to charge extra for ships going into that area,” said Michelle Wiese Bockmann, shipping and commodities analyst at Lloyd’s List, a global Maritime News Magazine.
Bockmann said ships carrying this type of cargo typically have between 20 and 25 sailors on board.
“You cannot risk these lives without something concrete and acceptable for shipowners and their charterers to ship grain,” she said.
Oleksiy Melnyk, an analyst at the Kyiv-based think tank Razumkov Center, said security issues remain largely unresolved as Russian missiles could hit warehouses storing grain and ports.
“Shipping companies and insurance companies are afraid they have not received reliable safety guarantees,” said Melnyk.
“We only see words and promises that are of little value in wartime,” he added.
Ship insurers reached by AP declined to comment on whether they would offer coverage for those ships.
The war has devastated world trade and stranded over 100 ships in Ukraine’s many ports.
In the three ports covered by the export agreement, 13 bulk carriers and cargo ships are stranded in Chornomorsk, six in Odessa and three in Yuzhny, data from Lloyd’s List Intelligence shows.
Some of these ships may still have crews on board who could be mobilized to begin exporting grain.
Ukrainian traders were able to send some grain across the Danube, which helped boost exports to about 1.5 million tons in May and up to 2 million tons in June, although that’s still less than half of monthly grain shipments from April 4-5 Million is tons before the war, according to Svetlana Malysh, Black Sea agricultural markets analyst at Refinitiv.
In the 2021-2022 marketing year, Russia exported about 30 million tons of wheat, according to Refinitiv trade flows. That’s the lowest level since 2017, partly because of the deterrent effect of sanctions. Russian fertilizer exports also fell 25% in the first quarter of the year compared to the same period last year, Malysh said.
For ships calling at Ukraine’s three ports, smaller Ukrainian pilot boats will guide the ships through approved corridors. The entire operation, including planning ships along the route, will be overseen from a joint coordination center in Istanbul staffed by officials from Ukraine, Russia, Turkey and the United Nations.
Once the ships reach port, they are loaded with tens of thousands of tons of grain before heading back into the Bosphorus Strait, where officials from Ukraine, Russia, the UN and Turkey board the ships to inspect them for weapons. There will likely also be inspections for ships embarking in Ukraine.
Because the process is so complex and slow, it is unlikely to have a significant impact on global grain prices.
“The balance of power in this deal still rests with Russia,” said Anderson, Dryad’s intelligence chief. All Ukrainian ports outside the deal are at increased risk of attack, he said.
“I think what Russia wants … is to be seen as the state that controls the Black Sea narrative,” Anderson said.
https://www.independent.ie/business/farming/agri-business/agri-food/ukraines-grain-is-ready-to-go-but-ships-arent-why-risk-41873535.html The grain of Ukraine is ready for use. But ships are not. Why? risk