First Hurdle for Ukraine Grain Deal Is Clearing Stuck Ships

By Megan Durisin and Archie Hunter (Bloomberg) —

Now that Ukraine’s grain-export deal has been signed, all eyes are on clearing a major obstacle: freeing the scores of ships stuck there since February. 

As many as 100 vessels carrying grain and agricultural products were trapped in Ukrainian ports when Russia’s invasion began, and seeing them sail would mark a first step in revitalizing seaborne trade. But even with a deal, traders say freight for new sales is difficult to nail down, with risks to insurers and shippers still lingering. 

Liberating the stuck ships would start to establish a standard on how the new corridors operate, said Ilya Medvenko, finance director at Barens Group, a private investment firm involved in Ukrainian agriculture trade. The United Nations expects the first to move within a few days, and an adviser to global insurers proposed a mechanism that might help cover the trade. 

For some ship owners, “one of the ways is to operate without a particular insurance, but even those are waiting to see when the precedent will be set and vessels start leaving the port area,” Medvenko said in an interview. “Only then, they’ll establish the freight price and go from there.” 

Wheat and corn futures in Chicago extended gains Tuesday as traders wait to see how far the deal goes toward restoring Ukrainian grain shipments. Attacks by Russian forces on the port of Odesa over the weekend also cast doubt on how quickly sales can resume. 

In response to the pact, the Joint War Committee, which advises global insurers on riskier areas for shipping, invited underwriters to participate in what it called a “special market facility” to support grain shipments. The JWC works with both Lloyd’s of London and other London-based insurers. 

A joint coordination center set up in Istanbul as part of the deal should publish details on the procedures for shipping soon, the UN said Monday. Ukraine’s government has published a call for ships willing to take part in grain-export caravans from the three ports involved in the deal — Odesa, Chornomorsk and Pivdennyi. 

Until there’s more clarity, shippers remain in limbo. For example, a vessel at Chornomorsk port with wheat loaded for Egypt is still waiting to be cleared to sail and for further details about the process for departing, according to traders who asked not to be identified.

Insurance companies are prepared to cover Ukrainian grain vessels only if escorts are provided and a strategy for combating sea mines is in place, analysis firm UkrAgroConsult said in a note. The monthly export capacity of the ports in the deal is 3.5 million tons, it said.  

“We need to see fresh vessels going in to get a confirmation if the market is ready to trade anything from Ukrainian ports,” Andrey Sizov, head of consultant SovEcon, said in a note.

–With assistance from Alex Longley, Abdel Latif Wahba and Salma El Wardany.

© 2022 Bloomberg L.P.

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