This week, the UN and Turkish government successfully negotiated a 120-day extension of the Black Sea trade corridor agreement which initially came into effect on August 1st. From the February 24th invasion till August, the Ukrainian grains market had experienced a near cessation in trade, first cutting short Ukraine’s corn export season, then delaying its wheat export season, but ultimately severely disrupting both. From Mar-Jul, only 1 MMT of Ukrainian corn and 1 MMT of wheat cargoes were shipped, compared to a combined 14 MMT in 2021. Dry Bulk vessel demand fell from 337 to only 32, resulting in 151 fewer Handies, 60 fewer Supras, 85 fewer Panamax, and 9 fewer Post-Panamax employed in Mar-Jul 22 y-o-y.

Ukraine may only account for 10% of total grains trade annually (2021: 50 MMT), but its 30 MMT of exports account for 20% of second half trade. Moreover, 15 MMT, or two-thirds of Ukraine’s total annual corn and wheat fronthaul shipments, were shipped in the second half last year. This 15 MMT of H2 fronthaul demand employed 276 Dry Bulk vessels (sans Mini bulkers). Only 46 Dry Bulk vessels carried Ukrainian fronthaul corn and wheat cargoes since 1st Aug 22, stranding at least 200 vessels in an already over-tonnaged Atlantic basin. The loss of Ukraine’s wheat trade has been particularly detrimental to the Supra/Ultra sector, which commands a majority of the 11 MMT of H2 fronthaul wheat trade. Since Aug 1st , however, only 4 Ultramax vessels have loaded fronthaul wheat cargoes compared to 40 cargoes last year.

The Kamsarmax sector has suffered a similar decline in Ukrainian grains fronthaul demand, and for mostly similar reasons, reduced stem sizes coupled with a greater share of short haul Atlantic demand benefits less fuel-efficient vessels. The total share of Atlantic trade stood at three-quarters as of November compared to less than half last year. Thus, Europe and N. Africa’s 3.8 MMT y-o-y decline to 5.9 MMT was eclipsed by the 6.7 MMT decline in fronthaul shipments to only 2 MMT from Aug-Nov, with long haul shipments to the F. East and SE Asia collapsing from 4.5 MMT to only 0.2 MMT.

Despite the obvious benefits of the UN’s extension of the Black Sea Corridor, there clearly exists an upward bound on its immediate benefit for the Dry Bulk market. The three Ukrainian port regions included in the UN export agreement have a combined throughput capacity of only 3 MMT per month, suggesting that Ukraine’s monthly demand in September and October describes its limit. More importantly, if the long-haul Pacific market continues to suffer as it has to the expense of greater market share to the Mediterranean and AG, then the next 120 days will do little to improve Dry Bulk fronthaul demand.