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

Finance

VEB Guarantees $3 Bln of Yamal LNG Debt

Russian development bank VEB said on Friday it had provided a guarantee for $3 billion of debt to the Yamal liquefied natural gas (LNG) project, led by Russian gas firm Novatek.

US Oil Drillers Cut Rigs after 3 Weeks of Additions

U.S. oil drillers cut rigs this week for a 20th week this year after three weeks of additions, according to a closely followed report on Friday, as crude prices

World Stocks Tumble as Britain Votes for EU Exit

Global capital markets reeled on Friday after Britain voted to leave the European Union, with $2 trillion in value wiped from equity bourses worldwide, while money

News

HCI Capital Renamed Ernst Russ AG

A vote was passed at the ordinary shareholders’ meeting of HCI Capital AG yesterday to change the company’s name to Ernst Russ AG. The Executive Board and Supervisory

ABP orders Two Gottwald cranes

Terex Port Solutions (TPS) has received an order from Associated British Ports (ABP) for two electric Terex Gottwald Model 8 portal harbour cranes in the G HSK 8424 B four-rope grab variant.

Traffic Separation Schemes off Western Australia

On 1 December 2016 two new Traffic Separation Schemes (TSS) will come into effect off the south-west coast of Western Australia. Australia’s proposal to establish

Logistics

Maersk Takes Coffee Very Seriously

Maersk acknowledges that coffee is very special, mainly in regards to the processes and requirements involved for it’s shipping. "So we have adapted the way we work so we can meet your needs,

World Trade Routes Won't be the Same with Expanded Panama Canal!

On 26th June 2016, a landmark development for the shipping industry will occur with the opening of the new third set of locks at the Panama Canal. Clarksons Research takes a look.

CMA CGM to use Kingston As Transshipment Hub

French shipping giant CMA CGM plans to use Kingston Container Terminal,  Jamaica as a strategic Caribbean transshipment hub for an enlarged Panama Canal. The Port connects to US East Coast,

Middle East

ST Marine Delivers 4th Patrol Vessel to Oman

Singapore Technologies Marine Ltd (ST Marine), the marine arm of Singapore Technologies Engineering Ltd (ST Engineering), has held the Interim Acceptance ceremony

OOCEP Ships First Crude Oil from MGP Terminal

Oman Oil Company Exploration & Production LLC (OOCEP) shipped its first crude oil cargo from the Musandam gas plant (MGP) with the support of UAE-based Marsol International.

US Aircraft Carrier Docks in Crete After Islamic State Battles

The USS Harry S. Truman aircraft carrier arrived in Crete on Tuesday, giving its 5,500 crew members a Greek island break after seven months at sea and over 2,000

 
 
Maritime Contracts Naval Architecture Offshore Oil Pipelines Pod Propulsion Port Authority Salvage Ship Repair 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: 0.1284 sec (8 req/sec)