Posted on September, 19, 2023 at 08:00 am
Exports of grain from Ukraine are ready to restart using a temporary corridor, with the first dry bulk carriers in place, a Ukrainian government official said Sept. 16, although doubts remain about the durability of such a deal.
Russia pulled out of the Turkey-brokered grain corridor that allowed for shipments of grain out of Ukraine in July. Moscow's withdrawal, during a period of food price inflation and depleted harvests in key producing nations, came after several of its demands, including reconnecting the state-owned Russian Agricultural Bank to the SWIFT (Society for Worldwide Interbank Financial Telecommunication) payment system, were not met by the West.
"The bulk carriers Resilient Africa and Aroyat confirmed their readiness to use the route to the port of Chornomorsk to load almost 20,000 mt of wheat for Africa and Asia," Oleksandr Kubrakov, deputy prime minister for the restoration of Ukraine said Sept. 16 on X, formerly known as Twitter.
A full revival of the grain deal with Russian participation would be difficult without SWIFT, Frederic Denefle, CEO of French maritime and war risk insurance company Garex and IUMI President, told S&P Global Commodity Insights Sept. 17 on the sidelines of the International Union of Maritime Insurance Conference 2023 in Edinburgh.
"One big reason why Russia pulled out of the grain deal was because its access to SWIFT remains blocked and that will be a difficult obstacle to overcome in reinstating the grain corridor," Denefle said.
Insurance cover in the war zone of the Black Sea remains also remains a problem, Denefle said separately Sept. 18 as he addressed the IUMI conference.
"Marine insurers are not prepared anymore to provide insurance for those Ukrainian shipments," Denefle said.
Turkish ship owners and cargo owners have suffered due to the lack of marine insurance and have been in talks with the Turkish authorities over state-backed cover, he said.
"Lately, the Ukraine government has tried to deal with the marine insurance market in order to build up a collateral financial arrangement, and this is underway," Denefle said.
"This shows that from Russia to Turkey and Ukraine that the marine insurance is a key element to support the trade, and it's so important that at some stage, governments could jump into the market in order to face the potential lack of availability of marine insurance," Denefle said.
Insurance brokerage Marsh has been working to arrange a marine facility to allow grain shipments to resume from Ukraine's Black Sea ports by the end of September, Marsh's global head of marine, cargo and logistics Marcus Baker told S&P Global in August.
Baker's remarks came as Ukraine's state news agency Ukrinform reported Aug. 18 that Marsh McLennan, parent of Marsh, was coordinating with the country's economy and reconstruction ministries and Lloyd's underwriters over marine insurance coverage in the region, citing Oleksandr Hryban, adviser to Ukraine's economy minister.
However, this comes as Russian companies are suffering severe supply chain disruptions because of the cutoff of the country from SWIFT.
As ship operators need affordable insurance to return to the Ukrainian trade, Marsh McLennan has been in discussions over recent weeks with Kyiv about a new insurance mechanism to cover war risks.
Ukraine is expected to have two state banks and a $500 million fund to cover ship losses under the mechanism before insurers from the private sectors step in.
Ukraine is expected to export 10 million mt of wheat in the marketing year 2023-24 (July-June), compared with 15 million mt in the previous year, according to Victoria Sinitsyna, a senior grains analyst with S&P Global.
Platts, part of S&P Global, assessed EU Wheat 11.5% FOB CVB Basis Constanta at $246/mt Sept. 15, down from $324/mt Jan. 3.
Source: SP Global