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Most exporters of agricultural products from Ukraine have sought alternatives to shipping from Black Sea ports — such as exporting from Danube River ports or transporting by truck or rail — with the Black Sea grain corridor not operating as it should.
Even if the agreement — signed by Ukraine and Russia and backed by the United Nations and Turkey — is extended again beyond the current deadline of July 18, exporters fear the risks and costs of loading grains are too great, trade sources said on Friday June 23. Russia has repeatedly said it will not extend the grain corridor agreement beyond July 18.
Although the deal was extended for another 60 days in May, inspections have been very slow, and the Russian inspectors have been accused of deliberately slowing the approval process.
Most inspections have been on outbound vessels, with 52 vessels capable of carrying 2.23 million metric tonnes of agricultural products cleared to leave Ukrainian Black Sea waters since the date of the extension.
Inbound inspections have been at least twice as slow, with a maximum of one cleared per day recently.
As of June 23, there were 34 vessels with total deadweight of 1.86 million tonnes awaiting inbound inspection. Since June 4, no new vessels have been registered by the Joint Coordination Center (JCC) — which facilitates the implementation of the agreement — other than a single vessel under the World Food Program, sponsored by the UN to help countries in need of food.
Should the inspections for inbound vessels continue at the pace of one per day, not all of the ships in the queue will be able to pass inspection.
At the same time, there is confusion regarding the inspection rules. Although up to three vessels have been cleared on some days, on other days, none has been cleared. No reason for the inconsistency has been provided.
“I know one of Russia’s JCC arguments is that a lot of vessels have shipped to the EU, which has no food security problems, but there are many vessels reviewed/ready to ship to Africa, Bangladesh, etc., where food security is an issue,” a trader said. “Why don’t they allow vessel registrations for such countries?”
All of this makes planning impossible and creates complications in trading, market sources said.
Even if the grain corridor deal is extended with Russia’s participation in mid-July, market participants are skeptical about any improvement in the pace and scheduling of inspections. This is prompting them to explore alternative routes such as Danube ports and train or truck transport, sources said.
“We still have some operations in deep-sea terminals (moving out grains already at terminals)… Otherwise, we no longer have a role in the deep sea, as it is costing us too much money and we can’t really anticipate any cost,” a second trader said.
This trader’s company continues to work from shallow-water Ukrainian ports along the Danube, which many other traders are doing, he said.
This switch in export routes is evident in falling export flows through the Black Sea corridor — these have fallen to 43% in June from 72% in January, while the total leaving Ukraine is broadly unchanged at slightly above 4 million tonnes.
Traders are also considering the Ukrainian government’s Plan B, under which the country would continue loading from deep-sea ports without Russia’s participation in the agreement. But this would require guarantees from the UN and Turkey of safe transit.
In Russia, the chemical products group Uralkhem said it has finished work on a domestic ammonium pipeline, which means it no longer requires the Togliatti-Odessa pipeline in the Kharkov Region to be reopened.
The pipeline, which runs from the Russian region of Samara via Kharkov to Odesa on the Black Sea coast, was critically damaged in an attack on June 5. It usually transports ammonia — a raw material that is vital in the enrichment of natural fertilizers — for export. Russia had insisted on repairs to the pipeline before agreeing to an extension of the grain corridor deal.
Russia’s influence in the flow of exports from Ukrainian ports is evident in the spike in inspections in October, when it briefly pulled out of the grain corridor deal. At that time, in a matter of days, more than 40 vessels were inspected.
Russia is Ukraine’s main competitor in exports of wheat and vegetable oil. Any escalation of the conflict in the region could affect global prices.