Prospects for Ukraine’s agri-exports via overseas ports

Ukraine - one of the world's largest grain and oilseed suppliers - is actively seeking to revive its seaborne shipments of agricultural products, considering re-export possibilities through third countries' ports amid the blockage of Ukrainian Azov and Black Sea ports since Russia's invasion on 24 February.

Ukrainian grain and oilseed exports have fallen drastically over the past two months, with the country cut off from the sea shipments that account for over 90pc of its agricultural exports. Ukraine and partner countries are actively searching new logistics routes to export agricultural products, including rail, with one of the new routes through Romania to the port of Constanta, and corridors through Poland and the Baltic ports also being developed.

Romanian ports

Romania's Black Sea port of Constanta represents the best logistics solution for Ukrainian reexports of agricultural products, as from there goods could be shipped directly to north African, Asian and African countries - major buyers of Ukraine's grains and oilseeds.

Ukraine has already shipped its first Panamax-sized cargo of corn since the start of the Russian invasion from Constanta last week, with Ukrainian trading company Ukrlandfarming loading 71,200t of product, which is believed to be headed to Spain.

The port of Constanta can hypothetically handle about 100mn t of cargo annually, with 67.5mn t handled last year, including 27mn t of agricultural cargoes, according to port data. This means Constanta could hypothetically handle around 40mn t/year of Ukrainian goods, including grains and oilseeds (see chart).

Meanwhile, the invasion continues with the Russian offensive in southern Ukraine, through which the best logistics routes for delivery of Ukrainian goods to the port of Constanta pass. And destroyed roads and railways, as well as the difference in gauges of European and Ukrainian railways, are significantly slowing delivery of Ukrainian goods through the Romanian border.

To facilitate Ukrainian goods shipments to Romania, the latter announced a tender to repair a broad-gauge railway connecting the Romanian port of Galati and the Moldovan port of Giurgiulesti. But even if realised, this is unlikely to significantly boost volumes of agricultural products railed from Ukraine to Constanta, given the limited capacity of the Romanian railway compared with Ukrainian railways leading to the ports of Odessa or Mykolaiv, market participants said.

And once delivered to Constanta, Ukrainian agricultural commodities will face strong competition from domestic products from the beginning of the new 2022-23 marketing season in July. Romanian origin is expected to be preferred by the port operators, as domestic producers can ensure delivery to port terminals, while for Ukrainian traders this could still be a challenge.

Latvian ports

The Baltic ports represent another alternative for Ukrainian agricultural reexports, with the Latvian government last week introducing an initiative to use the country's three main ports - Riga, Ventspils and Liepaja - to ship Ukrainian grains and oilseeds delivered by rail through Poland.

Latvian ports handled a total of 41.7mn t of cargo in 2021 - with maximum overall capacity of 98mn t/year - compared with 152.8mn t of cargo handled by Ukrainian ports in 2021. Grain cargo handling at Latvian ports stood at just 6.18mn t in 2021, eight times lower than the 49.5mn t of grain cargo handled in Ukrainian ports last year, port data show.

Besides local grains, Latvian ports also handle some Russian grain cargoes for re-export to northern Europe, Nigeria and Bangladesh. But sanctions on Russia over the invasion of Ukraine could result in lower volumes of Russian grain handled in the Latvian ports, freeing up capacity for Ukrainian goods.

This means that Latvia's ports could hypothetically handle around 56mn t/year of Ukrainian goods, including grains and oilseeds, with market participants expecting some volumes from Ukraine to be shipped from the Baltic ports, if the country's seaports are not unblocked (see chart).

That said, logistics in getting to the Latvian ports represents the biggest issue for Ukrainian goods, as they can currently only be delivered through Polish territory. A bottleneck has already developed at the Ukraine-Poland border because of very limited capacity for cross-border rail shipments, aggravated by the different gauge widths in the countries. "Some 6,409 of railcars were stuck along the Ukrainian border on 30 April," grains and oilseeds brokerage firm Maxigrain's business development manager Elena Neroba told Argus.

Both Ukraine and the Baltic countries have broad-gauge railways rather than the standard-gauge railway in Poland, meaning that Ukrainian railcars will need to exchange gauges twice - first, at the Ukraine-Poland border and then at the Poland-Lithuania border - to reach the Latvian ports. This will further slow the delivery of Ukrainian goods, significantly reducing the attractiveness of this logistics route.

"Despite the fact that the nearest European ports have lent a helping hand to Ukraine and are ready to transship our cargoes, they do not have enough storage capacity for their accumulation, and logistics routes to some of the ports are a real adventure," Neroba said. The only way for Ukraine to boost its seaborne shipments is to organise the escort of ships loaded with Ukrainian grain from Odessa under the auspices of the UN, Neroba said.

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