Market experts are divided on whether Russia’s backing out of an EU-led safe passage scheme for Ukrainian grain in the Black Sea will have an impact on the weakening dry bulk shipping market. Moscow made this move on Saturday in response to a supposed Ukrainian drone attack on its warships earlier that day at Sevastopol in Russian-occupied Crimea. The UN and Turkey are keeping the corridor open, having sent surveyors to inspect 40 outbound vessels in the Turkish straits on Monday, the Joint Coordination Centre (JCC) of the Black Sea Grain Initiative (BSGI) said.

Russia’s lack of support and adherence to the scheme should not affect the market because the grain corridor has had no market impact since opening in August, according to one expert. “I thought the initial deal also would not move the needle,” said John Kartsonas, founder of Breakwave Advisors, an asset management firm that runs a dry bulk ETF trading platform. “The dry bulk market has larger worries than the relatively low cargo flows out of the Black Sea.” But another market expert believes that Russia’s backing out of the scheme will benefit the dry bulk shipping market. “Grain will have to come from elsewhere and no doubt travel further, thus positive for freight rates,” Guiseppe Rosano, founder of UK broking house Alibra Shipping, told TradeWinds. Ukraine has exported 9.5 MMT of grain and foodstuffs from the ports of Odesa, Chornomorsk and Pivdennyi/Yuzhny since the initiative began on 1 August. There were 97 loaded and 15 empty inbound vessels registered for JCC inspection around Istanbul on Monday.

By comparison, Brazil exported 6.1 MMT of grain during the month of August alone, according to independent price reporting agency Agricensus. The main driver behind the dry bulk shipping market’s malaise is China’s “at best mediocre” demand for iron ore as its real estate sector continues to struggle, Kartsonas said. “China is the only region that can make a difference,” he told TradeWinds. “And it is making a difference now, by being a very weak spot in the dry bulk map. Unless there is some revival there, the dry bulk market will remain depressed for the months to come.”

Average spot rates for all bulker sizes on the Baltic Exchange fell on Monday to continue a steady two-week slide. The Capesize 5TC of spot-rate averages five key routes slid 6.6% on Monday to come in at $12,993 per day. Australian mining giant Rio Tinto hired an unnamed capesize to move 170,000 tonnes of ore at $8.50 per tonne from Dampier, Australia to Qingdao, China after loading the ship from 14 to 16 November. Rio Tinto fixed another unnamed capesize to move the same quantum of ore at $8.75 per tonne on the same route after loading the vessel from 10 to 12 November. The Panamax 5TC dropped 3.6% on Monday to hit $15,703 per day, while the Supramax 10TC declined 3.1% to $15,808 per day on Monday. Another expert also believes that China’s lackluster demand for ore will keep putting negative pressure on the market, but he pointed out that the futures market indicates that average spot rates will hit bottom soon. “The FFA curve points to rates averaging around $11,000 per day for the remainder of the year,” Jefferies analyst Omar Nokta wrote in a note on Monday. November contracts, which begin on Tuesday, slipped 9.7% to $10,596 per day, while December contracts declined 8.3% to $10,250 per day.

He noted that Chinese steel prices “hit new lows” on Monday, today with rebar slipping to $525 per tonne and hot-rolled coil down to $510 per tonne to their lowest points since the slow market seen in 2020.

Ships are continuing to carry Ukrainian grain, despite Russia suspending its participation in the Black Sea grain initiative. However, the viability of the trade route now hangs in the balance as insurers retreat from covering shipments. Ukrainian, Turkish and UN delegations have agreed to move 16 ships along the grain corridor without Russia’s participation, but it is not clear whether new charters will be supported. Lloyd’s insurer Ascot said it was pausing writing new cover for shipments until the situation becomes clearer. “Insurance that has already been issued still stands. It is new shipments, coming to the market since the news, that will need consideration. As such, from today, we are pausing on quoting new shipments until we better understand the situation,” said head of cargo Chris McGill. 

Ascot and broker Marsh launched a facility for grain traders in late July to provide up to $50m in cargo cover for every voyage. “Our intention remains to help with these exports and support our clients. We are hopeful negotiations will be successful and we can re-commence quoting,” said Mr McGill, adding that any shipments that were quoted in the past week were valid for seven days. Russia pulled out of the deal after drone attacks on its Black Sea Fleet in Crimea, which it said Ukraine was responsible for. Kyiv has not confirmed or denied any involvement. The Russian defence ministry has further alleged, without producing evidence, that the drones travelled along the maritime humanitarian corridor and were potentially launched from one of the civilian vessels involved in the Black Sea grain initiative. The Kremlin also claims that Russian ships that were attacked were involved in ensuring the safety of vessels travelling the safe sea passage, citing this as another reason to abandon the deal. Russia’s only responsibility in terms of the safety of ships exporting Ukrainian cargo is to not attack them.

Russia told a plenary session at the Joint Co-ordination Centre that the suspension was for an “indefinite time”. However, the delegation will maintain open dialogue with the UN and Turkish delegation on pressing issues. “Russia has planned this well in advance,” Dmytro Kuleba, Ukraine’s minister of foreign affairs, said in a tweet. “The current queue with grain has accumulated in the Black Sea since September, when Russia started deliberately delaying the functioning of the corridor and seeking to undermine the deal. Russia took the decision to resume its hunger games long ago and now tries to justify it.” Sixteen vessels are due to travel the grain corridor, 12 outbound and four inbound. The JCC has informed Russia of these plans. One of the vessels, Ikaria Angel (IMO: 9194397), is chartered by the World Food Programme and is carrying 30,000 tonnes of wheat for an emergency response programme in the Horn of Africa.

At the time of writing, there are a total of 17 commercial vessels berthed at the ports of Chornomorsk, Odesa and Yuzhnyi, according to Lloyd’s List Intelligence data. One of these, Bomustafa O (IMO: 9114476), is due to travel today. There are nine vessels at the designated export ports that have been stuck there since the start of the military activity in February. Some experts argue that the best course of action is to end the grain deal, given the current circumstances. “Russia has no means to implement a blockade on Ukraine’s ports, as we witnessed this weekend,” said Yörük Işık, a geopolitical analyst from the Istanbul-based consultancy Bosphorus Observer. “This deal was a political one and it gave Russia an unequal say on what comes in and out of the Black Sea. Its de facto allowed Russia to continue its unlawful blockade on Ukraine’s ports.” The best solution, he said, was to pursue a new strategy, using escorts and government guarantees to get ships carrying Ukrainian goods out of the Black Sea safely. A total of 10 JCC inspections teams will be working today to continue moving ships under the initiative, with the aim of inspecting 40 outbound vessels.

More than 9.5 MMT of foodstuffs has been exported to global markets since the initiative launched in August. There are currently 97 loaded vessels and 15 inbound vessels registered for inspection around Istanbul, according to the JCC. There are an additional 89 ships that have applied to join the initiative.

Despite Russia suspending its cooperation with the Black Sea grain export deal, shipments are continuing.  Reuters in fact has reported that twelve ships with 354,500 tons of grain set sail today, which marks the largest volume shipped since the export deal began. 

Going forward, shipments continuing will be helpful for the dry bulk market. 

The region is at war, though, and there is now a chance that some sort of tragedy at sea could ultimately occur again.   As we discussed back in our work in late February and early March, several dry bulk vessels were hit by missiles and/or shelling in the Black Sea at the start of the war.  We will be continuing to monitor all related developments closely.

With multiple capacity levers deemed insufficient to halt the severe decline in container freight rates, the specter of ship lay-ups has been raised. Rates remain elevated in historical terms, but the plunge recorded over the past few months have spooked some in the industry with many smaller operators taking the decision to exit the main east-west trades. According to Sea-Intelligence, rates on the transpacific to the west coast of the US are still up 54% compared to the same period in pre-pandemic 2019, while prices from Asia to North Europe are up by 146% compared to the same period three years ago.

Nevertheless, Sea-Intelligence, along with many other liner experts, is forecasting a hard landing for container shipping with rates continuing to slide in the coming weeks, potentially going below 2019 levels, before a rebound kicks in. “If the market continues to deteriorate rapidly in the coming week, and especially if this is driven by a sharp global recession, then the raft of blank sailings we should expect in the coming weeks and months, could in 2023-Q1 turn into carriers not only idling vessels, but temporarily placing them in lay-up, as we also saw in 2009,” Sea-Intelligence suggested in its latest weekly report, published yesterday.

Other analysts have been highlighting how blanked sailings and service suspensions have not been enough to halt freight rate declines, while scrapping, another traditional lever in the liner defensive armory, may not help as much as some liner executives are hoping. HSBC urged carriers last week to blank and suspend more services to stabilize spot freight rates ahead of the upcoming contract negotiations for the Asia-Europe route. “The blanked sailings have been ineffective in preventing freight rates from sliding on all main trades, with the Middle East the only notable exception,” noted researchers at Linerlytica in their latest weekly reporter.

On the demolition side, Alphaliner data shows there is a total of 655,149 teu of scrapable tonnage of 25 years of age and older, but a much bigger overall 2.5m teu of potential recycling candidates totaling 1,102 vessels which are 20 years of age and older. “Although the removal of 2.5m teu of capacity aged 20 years and over would be instrumental in helping mitigate the impact of the 5.1m teu newbuild capacity to be delivered within the next two years, this is just not going to happen overnight,” Alphaliner warned in its latest weekly report, highlighting the record orderbook due to deliver soon.

If carriers do decide to lay up ships, Sea-Intelligence has warned shippers to watch out for a rates surge once the markets rebound as carriers would be unable to reactivate vessels fast enough. The subsequent lag time would cause capacity shortages and a rate surge, like 2010, in the rebound after the financial crisis. “Shippers should therefore pay heed to the carriers’ actions in the coming months. If we begin to see carriers placing vessels in lay-up, then the scene is already set for a rate surge on the backside of the recession,” Sea-Intelligence advised.

Pacific Basin has named Stanley Hutter Ryan as its new chairman taking over from long-serving incumbent David Turnbull. Ryan, already an independent non-executive director at the Hong Kong bulker owner, will take up the post on 18 April 2023 after the company’s annual general meeting. He will see his current director’s fee of HKD 800,000 ($102,000) per annum increased to HKD 1.56m to reflect his added responsibilities.

Pacific Basin said Ryan’s renumeration was agreed between him and the company and was “determined by reference to the levels of emolument of other senior executives of the company and in the market generally. The board and believes that his extensive commercial, strategic and operational experience in the commodities business, together with his knowledge of the company and its business, will enable him to provide leadership for the board,” Pacific Basin said.

In May 2022, Turnbull announced he was stepping down as chairman of Pacific Basin after 14 years in the role.

The 60-year-old US-educated Ryan boasts a 25-year career at Cargill, joining the commodities giant in 1989, according to Pacific Basin. During this time, he is said to have “developed extensive hands-on leadership experience across a range of asset and operationally intensive multinational businesses, particularly concentrated in the international commodities trade, cyclical industries and spanning both developed and emerging markets”. His time at Cargill took him from the company’s global headquarters in Minneapolis to stints in Brazil, Venezuela, the Netherlands, and Australia.

More recently, Ryan also served as an independent director at US-listed Eagle Bulk Shipping between October 2014 and June 2016 and stepped in as interim chief executive officer of Eagle Bulk between March and September 2015. Pacific Basin currently has 252 ships on the water, of which 115 are owned vessels comprised of 73 handysize and 42 supramaxes.

It recently announced that it is going for green methanol as its future fuel of choice after a feasibility study into how new vessels can be commercially viable.

The company has been developing a new generation of zero-emission bulkers and bunkering infrastructure with Japan’s Nihon Shipyard and Mitsui & Co, after agreeing a cooperation deal in May.

Traffic and inspections of ships carrying Ukrainian grain will continue in the Black Sea on Monday, despite Russia suspending its support for a UN-led safe passage scheme in the area. The UN and Turkey will deploy surveyors to inspect 40 outbound vessels in the Turkish straits on 31 October, the Joint Coordination Centre (JCC) of the Black Sea Grain Initiative (BSGI) announced. “This inspection plan has been accepted by the delegation of Ukraine. The Russian Federation delegation has been informed,” the JCC said. This statement is in line with expectations by a shipping source on Saturday, which said that ships currently chartered to carry grain in the corridor would probably not be blocked by Russia’s decision to withdraw its support for it.

The government in Moscow had said earlier that day that it was temporarily pulling out of the scheme. The country’s defence ministry accused Ukraine and some of its NATO backers of having abused the corridor to launch an attack on Russia’s war fleet in the annexed city of Sevastopol, Crimea. Russia, which has long had misgivings about renewing the safe passage scheme expiring on 22 November, also wants the West to lift some economic sanctions to facilitate its own agricultural exports. Ukraine’s foreign minister responded by accusing Russia of just seeking a pretext to scupper the deal and to continue playing “Hunger Games” with the world’s food supply to increase pressure on Ukraine and the West.

While the future of the BSGI is thrown into doubt, the UN pointed out on Sunday that Russia has not completely withdrawn from the negotiating table. During an emergency session held by the JCC in Istanbul on 30 October, the Russian delegation “informed that while it suspends its participation in the implementation of the activities of the Initiative, including in inspections, for an indefinite time, it will continue the dialogue with the UN and the Turkish delegation on pressing issues,” the JCC said. “The Russian Federation delegation also expressed its readiness to cooperate remotely on issues that require immediate decision,” the UN body added.

According to latest UN data, 9.5 MMT of grain and foodstuffs were moved from the three Ukrainian ports of Odesa, Chornomorsk and Pivdennyi/Yuzhny since the initiative got up and running on 1 August. There are currently, 97 loaded and 15 inbound vessels empty registered for JCC inspection around Istanbul. Inspections continued in Istanbul on Sunday, with 11 vessels surveyed. Ship traffic came to a halt in the Black Sea on Sunday but is said to resume to some extent on Monday. According to the JCC, Ukraine, Turkey and the UN agreed for 12 outbound and four inbound ships to sail under the scheme on 31 October. As per JCC procedures, all participants coordinate with their respective military and other relevant authorities to ensure the safe passage of commercial vessels under the Black Sea Grain Initiative.

Another 21 vessels are in Ukrainian waters loaded, loading, or about to load. That includes the 46,700-dwt Ikaria Angel (built 1999), a Greek-controlled vessel cleared for departure and chartered by the World Food Programme with 30,000 tonnes of emergency humanitarian food for the Horn of Africa. Attracted by above-average freight rates for vessels carrying Ukrainian grain, another 89 ships have applied to join the BSGI. Handysizes involved in the Ukrainian trade were said earlier this month to be earning at least $30,000 to $40,000 per day compared with industry averages — net of heightened insurance payments. This is a considerable premium, especially for the kind of smaller and older cargo ships usually involved in the trade. On 28 October, Greek brokers reported two fixtures for Ukrainian grain voyages at elevated levels.

Cargill fixed the 60,300-dwt Ellirea (built 2017) for a spot trip via Ukraine at $38,000 per day. Separately, Admi is said to have fixed the 32,600-dwt Bosphorus Asia (built 2002) for a spot trip via Ukraine, delivery Marmara and redelivery Ravenna, at $37,000 per day.

Comprising nearly 60% of global aluminum production and approximately 85% of total bauxite imports, China dominates these trades. Annual bauxite imports have risen from 52 MMT in 2016 to 107 MMT in 2021 and at 86.5 MMT (+ 13.5 MMT YoY) in the first eight months look set to be a record in 2022.

Imports from Guinea have risen exponentially since the early shipments of 2015 and up to August this year total 48 MMT (+8.7 MMT YoY) as China has invested heavily in both Guinea’s inland logistics as well as transhippers and floating terminals to enable virtually all the cargo to now be carried by Capesize tonnage. Imports from Australia, the second largest supplier, have remained steady at 22.5 MMT to date with their bauxite export ports of Groote Eylandt, Gove and Weipa operating at almost full capacity, with the vast majority carried on Post Panamax tonnage from the latter two ports. With an export ban from Indonesia imminent at the end of the year, China has clearly ramped up imports from Indonesia, up 45% YoY to 14.8 MMT, the lion’s share of which is transported in Supramax tonnage.

However, there is growing evidence that China may not be able to absorb such additional quantities of bauxite as with industrial production faltering, since Q2 exports of refined alumina have sharply increased to 1.5 MMT up 0.6 MMT YoY whilst imports of alumina have nearly halved to 1.1 MMT.

The Russian government said on Saturday that it is suspending the operation of a UN-led safe passage scheme for Ukrainian grain in the Black Sea. Moscow said it took the step after a Ukrainian drone attack on its warships earlier on Saturday at Sevastopol in Russian-occupied Crimea. “The Russian side cannot guarantee the safety of civilian dry cargo ships participating in the ‘Black Sea Initiative’ and suspends its implementation from today for an indefinite period,” the Russian foreign ministry said in a statement on its website translated from Russian. ”Appropriate instructions were given to Russian representatives at the Joint Coordination Centre in Istanbul, which controls the transportation of Ukrainian food.“ Moscow blamed Ukraine of having used the Black Sea [Grain] Initiative as a cover to carry out the attack, launching “massive” drone strikes against its fleet in Sevastopol. According to Moscow, the Russian warships had been used to protect grain convoys as part of the corridor.

Ukraine foreign minister Dmytro Kuleba reacted on Twitter on Saturday, accusing Moscow of playing “Hunger Games”. “We have warned of Russia’s plans to ruin the Black Sea Grain Initiative,” Kuleba said. “Now Moscow uses a false pretext to block the grain corridor which ensures food security for millions of people. I call on all states to demand Russia to stop its hunger games and recommit to its obligations.” Under the terms of the Black Sea Grain Initiative agreed at the end of July, empty inbound and laden outbound ships are vetted by UN, Turkish, Russian, and Ukrainian officials in Istanbul to check documentation and make sure there are no weapons or unauthorized cargo and personnel on board. According to the latest UN figures, 8.7 MMT of grain and foodstuffs have left the Ukrainian ports of Odesa, Chornomorsk and Pivdennyi under the scheme over 383 ship voyages. The deal was set to expire on 22 November and talks were underway to renew it.

Speculation that the agreement might not be extended had intensified, however, as its initial expiration deadlines neared, and the Ukraine war turned against Russian President Vladimir Putin. Ukrainian President Volodymyr Zelenskyy last week blamed Russia for dragging its feet over the deal, leading to about 150 ships being clogged in the Bosphorus, waiting for surveyors to inspect them. Following Russia’s announcement of suspending the deal, the commercial situation for the vessels currently carrying Ukrainian grain cargo, or for those that have been chartered to do so in the future, remains unclear. One shipping source involved in the Ukrainian grain trade suggested that laden ships waiting in Istanbul will probably be allowed to sail through and reach their destinations. As for future loads, there is speculation that a new NATO-protected corridor might be in the works. Such an option, however, would raise the question of higher insurance premiums. Turkey, which has been trying to steer a neutral course between Russia and Ukraine and was instrumental in negotiating the UN deal, may also be against it.

In the months that it operated, the Ukraine grain trade under the UN scheme provided a welcome opportunity for dozens of ships that had been trapped in Ukraine when Russia invaded the country on 24 February, to get out. In the weeks that followed its implementation after 1 August, the Ukraine trade also represented a lucrative employment for bulkers, paying above-average freight rates for vessels that carried grains under the scheme. Handysizes involved in the trade Ukrainian were said earlier this month to be earning at least $3,000 to $4,000 per day compared with industry averages, net of heightened insurance payments. This is a considerable premium, especially for the kind of smaller and older cargo ships usually involved in the trade. On 28 October, Greek brokers reported two fixtures for Ukrainian grain voyages at elevated levels. They said Cargill fixed the 60,300-dwt Ellirea (built 2017) for a spot trip via Ukraine at $38,000 per day. Separately, Admi is said to have fixed the 32,600-dwt Bosphorus Asia (built 2002) for a spot trip via Ukraine, delivery Marmara and redelivery Ravenna, at $37,000 per day.

Russia’s continued support of the Black Sea grain export deal has been in jeopardy.  We first discussed how renewal of the agreement was in question after Russia submitted concerns to the United Nations insisting that demands regarding its own grain fertilizer exports were not being met.  New this weekend is Russia has in fact pulled out of the agreement and now will no longer peacefully allow Ukrainian grain to be exported from the Black Sea.  Russia has pulled out of the agreement after its fleet near the port of Sevastopol in Crimea came under a large attack by drone.  Overall, a suspension of the Black Sea grain export deal was already appearing quite possible, and now this is a very unfortunate reality.  The United Nations had been continuing to expect that anywhere from 2 – 5 MMT of Ukrainian grain would be shipped per month from the Black Sea as part of the deal.  The world needs these cargoes as food scarcity and inflation remain significant.  The dry bulk spot market has also been needing these cargoes as well.

P&I Club West of England is to ask members for a constitutional amendment that will enable it to move into the hull and machinery space, according to an announcement on its website. The three-paragraph statement added that no further comment will be forthcoming at this stage, promising simply that details of any new product launch will be published in due course. Hull cover has traditionally been dominated by Lloyd’s syndicates, but they have been overtaken by the Nordic, Singapore, and Chinese markets over the past few years.

Several P&I clubs, led by Scandinavian affiliates of the IG, already write hull books on a commercial basis, using any profits to subsidize liability and legal insurance provided on a not-for-profit mutual basis. Leading the pack is Gard, the biggest club in the IG, which is already the world’s largest single hull insurance entity. In 2015, the American Club took over the old Hellenic Hull Mutual Association to launch American Hellenic Hull Insurance on a for-profit footing. In Britain, North Group, set to merge with Standard next February, entered the Bluewater H&M niche in 2020, expanding on an existing base in fishing vessels and small craft offered by its Sunderland Marine subsidiary.

Proponents of such diversification also make the point that commercial hull underwriting helps P&I clubs even out the inevitable volatility in their core business. West said in its statement, published under the name of its chief executive Tom Bowsher, that it is committed to supporting its members and others in the maritime community by providing a broad spread of insurance products and services. “As part of that process the club continually evaluates new opportunities which could add value without unnecessarily exposing our members’ capital. Consideration is currently being given to a potential hull and machinery venture. “As a prudent step in that evaluation, permission is being sought from the club’s membership and our regulator to expand the classes of insurance business which the club may potentially underwrite.” The club has already diversified to some degree, through joint ventures such as legal consultancy Qwest and cyber security provider Astaara.

West’s push into H&M may well have one eye on shoring up its balance sheet, following last week’s decision by rations agency Standard & Poor’s to downgrade its Insurer Financial Strength Rating from A- to BBB+, considering a recent fall in investment returns. But more positively, the club has recently returned to better-than-breakeven underwriting performance, recently unveiling a 97.9% all-business combined ratio at the halfway stage. Attention will now be fixed on its pricing strategy for the 2023 renewal round, which is likely to be unveiled shortly.

The only club to declare so far has been Steamship Mutual, which on Wednesday confirmed its intention to seek a 7.5% general increase. In a recent interview with Lloyd’s List, Mr Bowsher has hinted that an increase could also be on the cards for West.