Latest Russia strike on Danube grain terminals compounds port’s mounting logistical difficulties

Russia destroyed 13,000 tonnes of grain — about 15% of total storage capacity — at the Port of Izmail.

Since its withdrawal on 17 July from the Black Sea Grain Initiative (BSGI), which for nearly a year allowed the safe passage of Ukrainian grain exports during the ongoing war between the two countries, Russia had repeatedly attacked grain infrastructure at ports on the Black Sea and along the Danube River.

In just over a month, Russia has destroyed 270,000 tonnes of grain at the ports, according to Ukrainian officials quoted in the report.

The latest drone attack added to the existing problems facing the Danube ports, which included high freight costs, low grain and oilseed prices and a lack of available vessels, according to trade sources quoted in an AgriCensus report on 17 August.

These problems could cut off the primary export route for much of Ukraine’s agricultural export flow, the report said.

Even prior to the official suspension of the BSGI – brokered by the United Nations (UN) and Turkey – trading had already been switching towards exporting from the Danube as exporters considered it a safer option, AgriCensus wrote.

Despite mounting congestion at the entrance and exit to the Sulina canal – linking the Danube River with the Black Sea – trade had continued almost as normal, the report said.

However, following the first attacks by Russian drones on the Ukrainian Danube ports in July, some owners had abandoned the region, while those who stayed have started to increase freight rates amid increased risks, particularly with Russian attacks continuing, according to the report.

Freight for coaster vessels had increased by almost US$25/tonne to the current US$65/tonne since the second half of July, the report said.

In addition, waiting times at the entrance and exit of the Sulina canal were long, with up to 90 vessels waiting at the entrance and up to 40 vessels in the queue to exit at the time of the report.

According to market sources, Romanian authorities were considering increasing the number of pilots operating in Sulina in a bid to improve the flow of traffic, but traders did not expect it to happen soon as Romanian authorities were said to be slow in taking any action.

Ukraine’s agriculture ministry was forecasting a 5% year-on-year increase in grains and oilseeds production this season of 76.7M tonnes with most of that volume expected to head to the export market, AgriCensus wrote.

Exports in the 2023/24 (July-June) season were forecast at 48M tonnes compared to 58M tonnes in the previous season, according to forecasts by the Ukrainian Grain Association (UGA).

“Exports of grains and oilseeds in the new 2023/2024 season can be expected to remain at the specified level if Ukraine is able to export through its Black Sea ports, as well as if the logistics of alternative routes, including the Danube route, are improved and cheaper,” UGA was quoted as saying in the 3 August report.

After shipping more than 33M tonnes of grain while the BSGI was in effect, Ukraine has been searching for ways to circumvent the Russian blockade of its southern ports.

It was reportedly considering a “humanitarian corridor” along the western coastline near Romania and Bulgaria.

In the week prior to the 27 August report, a Hong Kong-flagged container ship that had been stuck in Odessa since Russia’s invasion of Ukraine last February travelled the route without being fired on.

Ukraine is among the world’s leading wheat, corn and sunflower oil exporters, and its reduced shipments have caused increased uncertainty in global grain markets and a rise in food insecurity.

Tags: storage capacity, Danube River, Black Sea Grain Initiative, Sulina Canal, Ukraine, Port of Izmail, Russia, grain, prices, Oilseed, Black Sea, ports