January 25, 2010

Increasing freight rates slow Black Sea grain shipments to Asia 

Grain shipments from the Black Sea to Asia look set to decline, affected by a surge in ocean freight rates.

The cost of shipping grain in bulk from the Black Sea region -- a key supplier of corn and feed wheat to Asia -- has climbed by about a quarter, to US$65-US$70 a tonne for a handymax vessel in the last two months.

Freight rates across all sectors have steadily improved over the last two quarters, chiefly due to the increased demand for iron ore, said Voytek Chelkowski, managing director of Seamind, a freight consulting firm based in Singapore.

The rise in shipping cost could force Asian buyers, who import grains from Ukraine and Russia, to look for alternative origins such as Australia, Canada and South America, where shipping costs have risen by much less.

Bangladesh, which ships 80% of its annual wheat imports of 2.5-3.0 million tonnes from the Black Sea region, has been buying more from Canada.

The cost of shipping wheat from Canada has risen to around US$50 a tonne from US$45 in November, while the bulk freight rate from Australia to Asia is around US$30 to US$35 a tonne.

 
South Korea was a leading buyer of grain from Ukraine, taking 254,800 tonnes in December. Vietnam, Malaysia, Indonesia and the Philippines are other key destinations for feed wheat from the Black Sea.