Middle East Grain Buyers Avoid Ukraine, Import Bills Could Rise

MarineLink.com
Wednesday, March 12, 2014

By Suleiman Al-Khalidi, Reuters

Turmoil in Ukraine is driving Middle Eastern grain buyers to shy away from striking new deals there and to consider rival suppliers, a shift that is likely to push up import bills.

The Black Sea region, mostly Ukraine and Russia, has become the major source of wheat and barley for Middle East importers from Libya, Egypt and Syria to Saudi Arabia and Yemen, dislodging U.S., Canadian and European suppliers who once dominated the market.

Middle Eastern commodities traders and officials said fears that tensions between Russia and Ukraine could come to a head, however, are discouraging most buyers from striking deals with Ukraine suppliers for the new season, which starts in July.

"At this time of the year, end of March, people are selling forward contracts for the new crop. Traders and trade houses start selling July shipments. This is not happening now. People are very reluctant; they don't know what to expect," said Tony Mudallal, a senior commodities trader in an international house.

Ukraine, the world's third-biggest maize exporter, also has come to dominate in corn exports, taking market share from traditional suppliers such as Argentina and Brazil.

"Ukraine proved to be a powerhouse in the trade of grains in the last 10 years. It affected the region positively in terms of supply, mainly in wheat, corn and barley," Mudallal said.

On the supply side in Ukraine, foreign trading houses are avoiding fixing new grain export contracts as well. Russian corn export prices also have been rising for two weeks.

Ukraine's main ports continue to operate, but Middle Eastern traders were concerned that shipping could be affected.

"The situation could change if fighting breaks out," said Malak Jehad Al Akiely, a dealer in International Grain Suppliers-Jordan operation.

"If Ukraine enters into more turmoil, this could mean declaring force majeure, and that would definitely cause tension around other Black Sea origins and raise insurance premiums," an Egyptian government source said.

Conflict-torn Syria, which has relied mainly on Ukrainian wheat in the last two years to cover a shortfall in local production, is likely to be the hardest hit by the Black Sea conflict, traders say.

Any delays in grain shipments could exacerbate Syria's food shortages as western financial sanctions make it more difficult to switch to alternative markets, according to two Damascus-based Syrian traders.

Import Bills to Rise

The quality of Ukraine's grain and its proximity to Mediterranean ports have helped it win lucrative business from Middle East state importers with lavish budgets to subsidise bread and basic foodstuffs at low prices.

Middle Eastern countries have already sealed deals for around 80 percent of the grain they need for the current season to end-June, traders said.

A switch to other sources is likely to push up Middle Eastern import bills substantially in the coming season, however, with prices rising by $120-$150 per metric tonne from levels in existing contracts of around $280 per tonne FOB for Russian and Ukrainian wheat, according to regional experts.

"Ukrainian grains are very competitive price-wise, and they are as good or even better quality than say western European or other sources," another commodities trader based in Jordan said.

"If the situation escalates, it means the Middle East consumers will pay a higher bill by up to $150 per tonne," he added.

A Cairo-based trader said the crisis was already driving up prices for new deals.

"Egypt had banked on doing more buying from the U.S. for example, but now prices are up as far as $304 a tonne on a fob basis," the trader said.

Middle Eastern state and private importers are likely to diversify to Romania, Bulgaria and western European suppliers, particularly France and the Baltic states.

"Russian and Romanian and other Black Sea origins could replace Ukraine, but also French wheat, which is priced slightly higher," the Egyptian government source said.

Egypt, the world's largest wheat importer, has said it will reconsider a rule that limits moisture content and excludes mostly French wheat.

That issue has to be resolved, the source said. "We need to open the door to as many origins as possible and then choose."

Even U.S. and Australian wheat exporters may also see a comeback in shipments of corn to Egypt, which has relied on Ukraine for years.

"Today Ukraine is still exporting. Yes the price is going to differ. Eastern Europe will love this," a Lebanese grains trader said.

As for shipments so far, Egypt's main state grain buyer, the General Authority for Supply Commodities (GASC), has said the crisis would not affect any shipments already purchased.

If grain exports are disrupted through the port of Sebastopol in Crimea, Ukraine can still export to the region through its main deepwater ports of Odessa, Illichivsk and Yuzhny, traders say.

A significant volume of Russian and Ukrainian grain exports is shipped directly in 5,000 tonne vessels from small Black Sea ports in the Sea of Azov on the southern coastlines of Russia and Ukraine to ports in Egypt, North Africa and eastern Mediterranean such as Latakia and Beirut.

Also traders are concerned about the military buildup taking place in Crimea near the Strait of Kerch, a major transhipment point for Ukrainian and Russian grain shipments to the Middle East, where 5,000 tonne barges cross and 50,000 tonne cargoes load.

"Kerch is now witnessing a lot of military activity that is beginning to affect commercial vessel activity," said one senior Middle Eastern commodities dealer.

"Even if you want to speak commercially about loading a vessel or doing some transhipment operation at this strait, the priority is going for the army not for the commercial," the trader said.

"It disrupts Middle Eastern traders thinking of getting from Russia small barges and to top it off with mother vessels. You will think twice," he said.

Dealers said the potential that the conflict could lead to EU trade sanctions against Russia was another factor weighing on their calculations.

Maritime Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter July 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Bulk Carrier Trends

Safe Bulkers Reports Q2 Loss, Expands Fleet

The Athens, Greece-based Safe Bulkers Inc. (SB) has reported a loss of $9 million in its second quarter.  It had a loss of 15 cents per share.   Net revenue for Q2 of 2016 decreased by 18% to $26.

Asia Dry Bulk-Capesize Steady as Owners Spurn Low Rates

Owners anchoring ships rather than fix at low rates. W. Australia-China capesize rates hit over two-month low. Freight rates for large capesize dry cargo ships

Scorpio Bulkers books Net Loss

USA-Monaco based bulk carrier Scorpio Bulkers has reported a loss of $24.7 million in its second quarter of 2016, pushing the carrier's deficit up to $ 83 million.

Finance

Swiber Applies for Judicial Management Instead of Liquidation

Singapore oilfield services company Swiber Holdings Ltd said on Friday it has applied to place itself under judicial management instead of liquidation.   Swiber

US Oil Drillers Add Rigs for 5th Week in a Row

U.S. drillers this week added oil rigs for a fifth consecutive week, Baker Hughes Inc said on Friday, but the oilfield services provider and some analysts cast

Daewoo Shipbuilding: $1.4 bln order Cancelled

Cancelled order part of Statoil's Bressay project. South Korea's Daewoo Shipbuilding & Marine Engineering Co Ltd on Friday said a 1.58 trillion won ($1.41 billion)

News

Horizon Delivers Towboat Marty Cullinan for FMT

In June 2016 Horizon Shipbuilding, Inc. of Bayou La Batre, Ala. delivered the M/V Marty Cullinan, a 120’ towboat with a retractable pilot house, to its home port of New Orleans, La.

First US LNG Shipment Goes to China

The first liquefied natural gas vessel from the lower 48 U.S. states is on its way to China, according to a Reuters interactive map on Friday, the latest sign that

Swiber Applies for Judicial Management Instead of Liquidation

Singapore oilfield services company Swiber Holdings Ltd said on Friday it has applied to place itself under judicial management instead of liquidation.   Swiber

Logistics

Asia Tankers-VLCC Rates Falter on Oil, Tanker Supplies

MidEast, West Africa rates hit 11-month low. Freight rates for very large crude carriers (VLCCs), which hit an 11-month low this week, could slide further next

Asia-N.Europe Box Rates Jump 58 pct

Freight rates for shipping containers from ports in Asia to Northern Europe jumped 58 percent to $1,125 per 20-foot container (TEU) in the week ending Friday, a

LNG Market Needs More Vessels than Currently on Order

Despite the current weakness in LNG shipping rates, Drewry maintains its bullish long-term outlook for LNG shipping and believes that the market will require more

Middle East

Libyan Oil Exports to Resume from Closed Ports

Libyan oil exports from closed ports should resume in no more than one to two weeks after a deal was signed between the government and an armed brigade controlling the terminals,

Sanmar Building 150th Robert Allan Designed Tug

Robert Allan Ltd. and Sanmar Denizcilik A.S. have reached a milestone in their ongoing relationship: scheduled to be launched later this year, a RAstar 2800 will

Bahri Q2 Net Profit Soars

National Shipping Company of Saudi Arabia (Bahri), the exclusive oil-shipper for Saudi Aramco, reported a 47.2 percent increase in second-quarter net profit on Tuesday.

 
 
Maritime Contracts Maritime Security Naval Architecture Navigation Offshore Oil Pipelines Pod Propulsion Port Authority Ship Simulators Shipbuilding / Vessel Construction
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1196 sec (8 req/sec)