Russian President Vladimir Putin arrived in Iran on Tuesday to discuss a UN-backed plan to unblock Ukrainian grain exports in a potential boost for the bulker market.
Senior UN and EU diplomats have expressed confidence that a deal could be done this week with Putin due to discuss the issue in Tehran with Turkish President Recep Tayyip Erdogan, a key mediator in breakthrough talks last week to allow the safe passage of millions of tonnes of grain.
“The resumption of seaborne grain flows could lead to stronger growth in dry bulk demand in tonne-days in the third quarter of this year and higher revenues for vessels,” said Maria Bertzeletou, an analyst at Signal Group.
Even if an agreement is secured at the Tehran talks this week, government subsidies may be needed to counter rising shipping costs, according to experts.
The European Union is believed to be considering supporting exports because of the likely high cost of ship insurance in mined waters of the Black Sea, said Arnaud Petit, executive director of the International Grains Council (IGC).
He said some 3m tonnes of grain a month — double the amount currently exported on alternative overland routes — would need to be shipped from Black Sea ports in July and August to clear storage space for new harvests. Ukraine’s maize exports represent 18 per cent of the global total and sunflower oil 50 per cent, according to the IGC.
“This figure can only be achieved if the deep sea ports open,” he said. “We know that an agreement is not enough.”
London-based underwriters have told TradeWinds that they would be prepared to insure ships to take out Ukrainian grain, if such a deal had the backing of the UN.
Any agreement could involve Ukrainian vessels guiding bulkers through mined Black Sea waters. Russia would agree to a truce during the shipments and Turkey would inspect the ships, according to reports last week.
About 50 non-Ukrainian ships over 10,000 dwt are trapped in Ukraine ports, including a large number of Greek bulk carriers, after Russia invaded the country on 24 February. Bertzeletou said the blocked Ukrainian grain exports had led to sharp cuts in global seaborne grain flows from May to June compared with the last two years.
Kremlin spokesman Dmitry Peskov said that Moscow was willing to do its best to ensure Ukrainian grains reached the market, Russian news agencies reported on Tuesday. But he said only that talks on the issue were set to continue.
Talks last week in Istanbul hosted by Erdogan were declared a “critical step forward” in ensuring the safe export of Ukrainian food through the Black Sea by UN Secretary-General Antonio Guterres.
Goodwill and commitment
He said he was hopeful of a deal this week but said it would require a “lot of goodwill and commitment by all parties”.
Any deal would also allow the export of Russian food and fertiliser. African countries had blamed EU sanctions for blocking Russian exports, pushing up the prices of food and leading to shortages in poorer nations.
“We have never imposed sanctions on agricultural production on food, never, ever,” said a senior EU official on Friday.
But he accepted there would be “tweaks” to the EU sanctions regime to ease the passage of Russian grain exports.
