After attacking Ukraine wheat exports, Russia faces own shipping challenge

After attacking Ukraine wheat exports, Russia faces own shipping challenge

Russia is facing challenges in moving its wheat due to a lack of ships and reduced activity from Western grain traders. This is leading to increased costs and concerns about the security of supply routes in the Black Sea, which have been affected by the war in Ukraine. President Vladimir Putin has pledged to replace Ukrainian grain with Russian shipments to Africa, but the escalating conflict has created new risks for transport in the region. Eduard Zernin, head of Russia’s Union of Grain Exporters, warns that these challenges could result in higher freight and insurance costs for Russia, which would impact global wheat prices.

While agriculture exports are not directly subject to European and U.S. sanctions, Russia argues that restrictions on banking and Russian individuals are “hidden sanctions” on the food trade. The financial and security risks associated with trading with Russia, combined with the collapse of the Black Sea corridor, are driving up freight costs and pushing Moscow towards older and smaller vessels operated by less established shipping operators. This situation raises doubts about Russia’s ability to maintain its record pace of exports and could further increase global wheat prices.

Even before the expiration of the deal, grain carriers and commodity houses had reduced their exposure to Russia. Major global commodity houses such as Cargill, Louis Dreyfus, and Viterra have stopped helping Russia with the mechanics of trading its grain, putting more pressure on Moscow to handle all aspects of grain deals, including transport. Cargill has stated that it will continue to ship grain from Russia’s ports, but other companies have declined to comment. The industry executive with knowledge of grain exports believes that it will not be easy for Russia to overcome these challenges.

Russia has been increasingly relying on its own fleet of older vessels, known as the “shadow fleet,” which are typically operated by companies based in Turkey and China. The number of requests for charters in July has doubled compared to the same month last year, indicating Russia’s growing hunt for vessels. However, the collapse of the Black Sea corridor and the escalating tensions in the region have discouraged Western shipping companies from bringing vessels to Russian ports. Insurance costs for ships heading to Russia’s Black Sea ports have also increased significantly, adding to the overall costs of transporting Russian wheat.

The Black Sea terminals in Russia handle about 70% of the country’s grain exports, making the region critical for Russian exports. The tensions in the Black Sea are likely to impact Russia’s export numbers and discourage shipping companies from bringing vessels to Russian ports. Russia’s agriculture ministry has forecasted a decrease in grain exports for the upcoming season, and wheat exports are expected to be slightly lower as well.

To address the challenges, Russia announced a plan to build a fleet of 61 new grain ships. However, no orders have been reported for Russian companies, and it is unlikely that Russia will be able to build its own fleet in the short term. The focus will be on chartering from the commercial market. The age of the current Russian-operated fleet of dry bulk carriers also poses challenges, as some ports have strict requirements for ships over a certain age.

Overall, the lack of ships and reduced activity from Western grain traders are increasing the costs of moving Russian wheat and raising concerns about the security of supply routes in the Black Sea. These challenges could impact global wheat prices and Russia’s ability to maintain its record pace of exports.

About News Team

Hi, I'm Alex Perez, an experienced writer with a focus on lifestyle and culture news. From food and fashion to travel and entertainment, I love exploring the latest trends and sharing my insights with readers. I also have a strong interest in world news and business, and enjoy covering breaking stories and events.

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