Ukraine’s land-based counteroffensive against Russia appears to be encountering difficulties, but at sea, the war-torn country has achieved significant accomplishments.
One of the most notable achievements is the establishment of a new grain corridor in Kyiv, safeguarded by its forces, as a replacement for a United Nations-led initiative boycotted by Russia in July.
Defying skeptics, Ukraine is on track to complete 100 voyages from the previously blocked ports of Odesa, Chornomorsk, and Yuzhnyy/Pivdennyi, facilitating the shipment of approximately 2.5 million tons of predominantly grain produce.
As of November 8, 66 loaded vessels had departed from these three ports, collectively called “Big Odesa,” according to data from AIS and S&P Global, compiled by UN sources and TradeWinds. An additional 37 vessels are currently en route.
These voyages encompass a variety of vessel types, ranging from smaller cargo ships to capsizes, with an average size of approximately 44,000 deadweight tons (dwt).
This accomplishment is awe-inspiring for a trade that initially appeared doomed when Ukraine initiated it in August, lacking commercial insurance options due to the ongoing threat of mines and Russian port attacks.
Of the Ukrainian cargo that has left the country, roughly one-fifth has been delivered to Spanish ports, with Egypt being a close second and Turkey, Romania, and Italy following behind.
Some shipowners have been notably active, with Germany’s Blumenthal JMK leading the way by using the corridor to extract two stranded vessels from Ukraine and introduce another 10 from outside.
Nonetheless, this trade remains fragile, heavily influenced by insurers, charterers, and cargo shippers.
Dimitris Fafalios, the president of the bulk owners association Intercargo, emphasized that it extends beyond a purely shipping situation, with insurers playing a significant role. Due to substantial premiums, insurers determine the size and value of vessels entering the Ukrainian corridor.
The average age of ships that have utilized the new Ukrainian corridor thus far is 20 years, indicating reluctance among insurers and owners to send in young, valuable vessels.
Insurance costs remain exceedingly high in terms of war risk standards. While TradeWinds reported a gradual reduction in war risk rates, with brokers quoting around 2% of values, a shipowner revealed that the cost still stood at approximately 3% for a trip at the end of October. Trust in knowledgeable charterers was a determining factor in making such voyages.
The potential rewards for shipowners venturing into Ukraine’s portion of the Black Sea are evident, as they can secure above-average freight rates. However, earnings have gradually decreased. As the new trade gained traction in September, owners could expect proceeds two to three times higher than non-Ukraine businesses. Nevertheless, recent market reports and shipping sources suggest that the premium has considerably narrowed, possibly ranging from 20% to 50% above non-Ukraine business.
Greeks lead ship traffic in the new corridor
Greece-based companies dominate the ship traffic through the new corridor, with vessels managed from Athens and Piraeus representing approximately one-third of all completed or ongoing voyages. This share closely resembles their participation in the previous UN-guaranteed scheme.
Among Greek entities, Kriton Lendoudis, with Evalend Shipping, leads the way, overseeing two tankers and four bulkers, including a 2022-built kamsarmax. The Stefanou brothers, through Bright Navigation, come in second place with three bulker voyages.
It’s worth noting that some of the Greek-based companies on the list are actually managed by Middle Eastern interests.
Despite the corridor’s success, there is still a prevailing sense of distrust in its reliability. While Russians may be hesitant or incapable of disrupting the trade through forced naval inspections or direct attacks, the presence of floating mines in Black Sea waters and ongoing aerial assaults on Ukrainian port infrastructure pose a significant and ongoing threat.
Notably, publicly traded shipping companies and major industry players continue to steer clear of the Ukrainian trade. Even Thanassis Martinos-controlled Eastern Mediterranean Maritime, the leading player in the old UN-controlled corridor, has only dispatched a single ship through the new route.
As one cautious Greek participant told TradeWinds, “Everything seems to be going smoothly, until it doesn’t.”