It has been more than two months since Russia invaded Ukraine and blocked the country’s key export hub, its Black Sea deep water ports.
The move has forced Ukrainian operators to create new supply chains and try to increase export flows through the last remaining shallow water ports in the south of the country and via railway connections and checkpoints on the border with EU countries.
Despite the challenges, these efforts yielded the first panamax corn cargo loaded with Ukrainian product from the Romanian port of Constanta, which has led buyers to ask if other exporters are also able to execute their contracts in the same way.
But even if it was possible to load more, it still requires more time and more logistical costs, all of which have already jumped up sharply amid significant demand and are also putting pressure on Ukrainian grain prices.
The bottom line is, if Ukraine wants to stay competitive in the world market, then all those inflated logistics costs need to be included in the price.
Fatmarkets Agricensus looks at the landscape of new costs and logistics that exporters now face.
Ukrainian grain trade – domestic logistics
Internal truck logistic costs have increased amid the higher demand, a lack of oil, the destruction of some roads and a shift to new destinations that were not ready for the increased flow.
The rough idea for truck costs transported from the central part of Ukraine to the port of Reni or Izmail was heard at around $65 per tonne, a level that is around twice the pre-war rate – but the price can still vary as it depends on many different factors.
Railway transportation costs have also increased by around $10-30 per tonne since the war started, according to trade sources, for a variety of reasons including huge delays, and the enforced change of some routes after some parts rail lines were targeted by missile strikes.
Grains also have to be unloaded and re-loaded at the border as different gauge rail lines makes it impossible for Ukrainian wagons to pass directly into EU railways.
The trans-shipment costs in the only two shallow water ports also have increased a lot since the war started, almost doubling, until current ideas stand in a range from $15-18 per tonne.
In pre-war times, the deep sea port trans-shipment costs were at around $11 per tonne on average.
Ukrainian grain trade – external logistics
But as the only possible way for Ukraine to load vessels is in the shallow water ports and it is limited to 6,000-7,000 per tonne maximum cargoes, traders have to pay additional costs for external logistics to deliver the grains to European ports, where it can be finally loaded onto bigger vessels.
Thus, the cost of loading barges from Reni or Izmail to Constanta port were said to be at around €26 per tonne – a more than €15 per tonne jump since February, but traders acknowledge that strong demand is pushing the price even higher.
And in addition to that, the barges have to be reloaded at the final destination, so there is a cost for that and the last ideas were said to be at around €15 per tonne.
The delivery of grain to Romanian ports by rail is likely to cost even more, as the shipment through Romania alone will cost around €16-25 per tonne depending on distance – and that is on top of the transit costs for cargo passing through Moldova, which was said to have increased from $15 per tonne up to $36 per tonne.
Much the same cost exists for Polish ports, as the logistic costs from the Ukrainian border to Polish ports were indicated at around €36-40 per tonne as well, and that does not include the transhipment in the port.
And even after all the operations, delivered Ukrainian corn is still offered with a small discount in European ports.
Thus, exporters will have to discount at least around €65 per tonne in their price to be able to compete on the global market while selling Ukrainian grain.
