Low freight rates force shipowners to subsidize trade

Freight rates for grain transportation from the Black Sea region have already fallen below operating costs.

The freight market for grain transportation in the Black Sea has reached its lowest level, and rates have fallen so much that shipowners are operating at a loss. This was stated by Gennady Ivanov, director and co-founder of BPG Shipping, ASAP Agri reports.

According to him, as the end of the export season approaches, trade activity is likely to decrease even more, which may cause additional, albeit insignificant, pressure on freight rates in the near future.

At the same time, in the medium and long term, rates may increase due to fleet reduction. Some shipowners may send obsolete vessels for disposal or change routes, while others will prefer to idle rather than operate under unprofitable conditions.

Insurance costs are expected to gradually decrease, and additional premiums for war risks currently range from 0.5% to 0.85%.

Ivanov noted that large transnational companies are returning to the Black Sea, in particular to the Ukrainian grain trade. Thanks to their better financial position, they can increase competition, which is likely to make it more difficult for smaller Ukrainian exporters. This may force them to abandon CIF contracts and switch to FOB contracts.

The day before, USM wrote that Turkey is increasing imports of Ukrainian corn before the introduction of a new quota.