Any illusions for a peaceful resolution in the current Russo-Ukrainian conflict evaporated on the 24th of February, as Russia’s invasion of its Eastern-European neighbor began in earnest. Whatever the outcome, shipping markets will be significantly impacted with the threat to Dry Bulk from the dislocation of the important Ukrainian trade. In the short-term all Ukrainian ports have ceased operations, stranding several vessels in port, whilst two dry bulk vessels, an Ultramax and a Kamsarmax, have been hit and damaged by missiles.

Looking at the bigger picture, in 2021 Ukraine was responsible for approximately 100 MMT of Dry Bulk export trade numbering around 2,200 voyages, principally in grains, steel, iron ore, and minor bulks such as aggregates, alumina, fertilizers, and forestry products. Handysize tonnage accounts for about half of the vessels calling at Ukraine to carry its exports but all the other sectors are impacted as for instance Cape’s transport almost all the 20 MMT of iron ore shipped to China each year. But whereas Ukraine iron ore exports account for little more than 1% of world seaborne iron ore trade and this loss of cargo could probably be substituted by additional ore from Australia in Capes or India in Supras, replacing Ukrainian grain will represent a much greater challenge.

Last year Ukraine exported nearly 24 MMT of corn making it the world’s third largest exporter, as well as over 20 MMT of wheat and 5.5 MMT of barley as the fourth biggest global shipper of both these grains. For corn and barley, China is Ukraine’s biggest customer, importing 8 MMT of corn and nearly 3 MMT of barley in 2021 and the USA which already has limited existing additional supply, is the only realistic alternative, given that China does not buy from Brazil (due to its GM element) whilst it would have to substitute barley if available from either France or Australia. Other major importers of Ukrainian corn include Spain (2.5 MMT), Netherlands (2.2 MMT), Egypt (2.2 MMT), Iran (1.6 MMT), and Turkey (1 MMT) which at 0.9 MMT is also the other main customer for Ukrainian barley. Replacement corn could perhaps be sourced from Brazil or USA adding additional ton-mile demand but again concerns surround ever lower corn reserves. Should Ukrainian farmers be unable to plant corn and barley in March/April for this year’s harvest then global supplies could potentially become even more critical.

Ukrainian wheat is much more widely distributed with Egypt and Indonesia at around 3 MMT each the largest markets with Turkey third at 1.5 MMT. However, Ukraine is an important source for the demands of several African and Middle East countries with Yemen importing 0.75 MMT in 2021 (three quarters of all its shipments), Saudi Arabia (0.7 MMT) and at 0.6 MMT half of Libya’s wheat, whilst for Ethiopia at 0.6 MMT and Kenya 0.35 MMT; Ukraine is a vital supplier of wheat. But whereas Indonesia and Saudi Arabia could probably find additional supply from Australia which has had a bumper harvest, other countries closer to Ukraine may struggle for alternatives as doubts also surround the ongoing export capability of the world’s largest wheat exporter, Russia (25 MMT in 2021).

With some evidence of concerns over future security of grain supply in particular, trading activity within the Black Sea has been intense so far this year, with a record 340 Dry Bulk vessels currently recorded in the area, over 100 more than this time last year.