Russia's attempt to reroute grain exports away from Black Sea falls short
Alternative routes for Russian grain exports are not working (photo: Getty Images)
Russia's attempts to reroute grain exports away from the Black Sea to alternative routes are falling short, with new ports handling only a tenth of the volume, according to Bloomberg.
In response to Ukrainian attacks in the Black Sea, Russia is trying to change the logistics of its grain exports. According to consulting firm Kpler, the five main alternative ports managed to increase shipments of grain and oilseeds to 1.3 million tons during the peak season from July to September.
However, this figure remains negligible compared with Russia's main Black Sea ports, which can handle around 12 million tons of products over the same period.
"The harsh reality is there are no export routes, in principle, that can replace the Black Sea," said Andrey Sizov, managing director of SovEcon.
According to him, later this year Russia could potentially ship up to 3 million tons per month via alternative routes, but doubling exports is simply impossible.
Kremlin measures and rising logistics costs
To encourage the use of new routes, the Russian government temporarily abolished export duties on wheat, corn, and barley and introduced subsidies for rail shipments from southern regions to the Baltic Sea.
As a result, between September 1 and 22, daily rail shipments of agricultural products from southern Russia to the Baltic ports of Ust-Luga and Vysotsk increased by 465%.
Still, the main obstacle for Russia remains the economic unviability of such trade. Bulk market analyst Serena Piazza and shipbroker Barbara Rossi of Ifchor Galbraiths calculated that shipping grain to Egypt via the Baltic Sea costs 30-35% more per ton than via traditional Black Sea routes.
The calculations were based on Handysize bulk carriers with a capacity of 30,000-35,000 tons. The experts added that determining exact current freight rates in the Black Sea is difficult because of a lack of demand from buyers.
The impracticality of new routes
Shipping market experts stress that redirecting logistics flows runs counter to the main geography of Russian grain sales.
"If you look at the geography of Russian sales of grains, I think it just doesn't make sense. Russia sells many cargoes to North Africa — Tunisia, Algeria, Egypt," said Alexey Kuzmis, head of the Black Sea desk at shipbroker Thurlestone Shipping.
Estonia has banned the transit of Russian and Belarusian grain through its territory in response to Russia blocking exports of Ukrainian agricultural products.
Attacks on Russian ports in the Black Sea and Sea of Azov have effectively paralyzed Russian grain exports. Against this backdrop, Russian farmers could face a deep crisis and mass bankruptcies.
