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Ukraine is struggling to ship grain via the Black Sea as Moscow steps up strikes on commercial vessels in retaliation for a week of heavy attacks by Ukraine on Russian shipping.
Russian drone attacks on the port of Odesa, Ukraine’s biggest seaport, have caused storage capacity to drop by a third, according to maritime security company Ambrey, while shipowners are refusing to send ships into the area for fear of being struck. Some traders have paused buying in Odesa, according to analysts.
Ukraine’s port authority said on Thursday that 11 people had been killed, including port workers and foreign sailors, in dozens of Russian attacks on ports and vessels in the past two weeks.
Russia and Ukraine together account for around a third of global wheat exports. The attacks threaten one of the world’s most important grain export routes, which is also a vital source of revenues for Ukraine. Kyiv had relied on a coastal shipping route to restore exports from Odesa and nearby ports to prewar levels after Russia pulled out of a UN-backed safe corridor initiative in 2023.
“Russia has been attacking ports and terminals for four consecutive days. Now vessels don’t want to enter,” said Masha Belikova, a Dnipro-based grain analyst. “Crew members were wounded and died, that’s serious for any shipowner.”
As a result, she said, domestic purchase prices at Ukrainian ports have “vanished”, and shipowners are no longer providing freight quotes.
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Russia is also seeing seaborne export volumes drop, at least in part owing to the security risks of shipping in the Sea of Azov after Ukraine scaled up attacks on fuel tankers and support vessels in the area.
Analysts have cut their forecast for Russian wheat exports in July by up to 20 per cent, the Kommersant daily reported, because of the strikes and to a late harvest, as well as the fuel crisis in Russia.
The most active Chicago wheat futures contract hit a two-year high on Thursday, surging to $6.95 a bushel, while Paris milling wheat hit a 17-month high.
“The market is starting to realise that it’s not a typical short-term Black Sea rally, which is typically resolved quite quickly. But it could have bigger consequences, meaning that export estimates both for Russia and Ukraine should be cut substantially in the future, which will in turn make global grain supply and wheat supply less comfortable,” said Andrey Sizov, managing director of grain consultancy SovEcon.
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Traders are discussing diverting some grain exports by river through Danube ports for onward shipment from the port of Constanța on Romania’s Black Sea coast, a solution that came into play early in the war, Belikova said.
The escalation comes as the outlook for global grain supplies has begun to weaken after a period of relatively plentiful harvests, and as the war in Iran has raised the cost of fuel, fertiliser and shipping.
Some ships have paused outside Ukrainian waters to reassess the risk of Russian drone and missile attacks, while insurance premiums have soared, according to Pavel Sosnovsky, analyst at Ukraine-based International Seaborne Market (ISM). “Several underwriters have suspended war risk cover for voyages to Ukrainian ports altogether.”
Moscow’s strikes follow a week of relentless drone attacks by Ukraine on Russian shipping in the Sea of Azov aimed at cutting off fuel supplies to Crimea.
Ukrainian maritime drones struck 11 Russian vessels in the Black Sea and Sea of Azov overnight, including five oil tankers, an LNG tanker and three bulk carriers, according to Ukrainian Commander Robert Brovdi.
Russia’s transport ministry said it is taking all measures “to facilitate cargo logistics in light of the increasing number of enemy attacks” on ships in the Sea of Azov, Kommersant reported.
Russia is also seeing war-risk premiums soar, with some providers refusing to provide any ‘military risks’ cover to vessels in the region at all, Kommersant reported.
Cartography by Jana Tauschinski and data visualisation by Ray Douglas
