Ukraine's Black Sea grain export success tested by Red Sea crisis

Ukraine has achieved a notable resurgence in Black Sea grain exports, reaching pre-invasion levels, despite facing a new challenge with the Red Sea shipping crisis. 

After Russia's withdrawal from a UN-backed Black Sea export deal, Kyiv's successful implementation of its own shipping scheme has alleviated concerns for Ukrainian farmers and global food markets. In December, Ukraine shipped approximately 4.8 million metric tons of food, predominantly grain, surpassing volumes under the previous UN-sponsored corridor. This export turnaround helped stabilize Ukraine's economy and contributed to easing global food prices following Russia's 2022 invasion.

The unexpected success is attributed to effective drone use against Russian navy ships and the recapturing of an island near the Danube delta, enabling the establishment of an alternative Black Sea export corridor. Ukraine aims to enhance the corridor's security, serving three ports in the Odesa region, by seeking recognition from the UN's International Maritime Organization.

Despite this achievement, the Red Sea shipping crisis, caused by Houthi strikes affecting trade between Europe and Asia, poses a new hurdle. Ukrainian grain exports by sea in January may drop by around 20% due to this crisis. Passage through the Red Sea is crucial for Ukraine, as almost a third of its Black Sea exports, including shipments to China, rely on this route.

Nevertheless, Ukrainian Black Sea exports continue to surpass expectations. London insurers' support encouraged shipowners to utilize the route, reducing costs and favoring larger vessels. Ukrainian producers prefer this sea route over alternatives, considering it the best time for farmers in terms of logistics since the invasion. Plans to reopen the port of Mykolaiv and increase total cargo shipments from Black Sea and Danube ports indicate Ukraine's commitment to expanding its role in global grain trade, even as security concerns persist. With competitive prices and resilient demand, the sea corridor is expected to play a substantial role in global grain shipments

Source: Reuters