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Grain trades drive Black Sea ports

Grain handling is becoming increasingly important to the trading performance of ports in the Black Sea - this is highly significant as other cargoes have declined.

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Countries neighbouring the River Danube, plus Russia, Ukraine and the Central Asia state of Kazakhstan, which exports most of its commodities through Georgia, now control over 40% of global wheat exports.

 

The region’s share of the world market is set to increase further as production rates per hectare are ramped up due to more efficient farming practices, and costs continue to come down. In addition, the Russian Government has changed its agricultural policy, replacing a programme largely based on substituting imports with home-grown products to one where exports are now being actively encouraged.

 

“I’d like to stress that our key goal is to keep growth rates in the agriculture sector and raise the competitiveness of Russian produce on international markets,” said agriculture minister Alexander Tkachev. “In 2016, the value of our food exports rose 5% to US$17B, and I expect this to be maintained in 2017.” The minister is also increasing the sector’s budget, with approximately US$B4 being spent on agricultural support programmes in 2017. This is expected to rise to US$4.4B in 2018.


Vito Martielli, grains and oil seeds analyst at Netherlands-based Rabobank, is extremely bullish about the region’s prospects. “The Black Sea and Danube region has increased its cost competitiveness against rival suppliers in recent years, and growers have made full use of low freight costs and favourable exchange rates. It enables Russian wheat to be currently offered in South East Asian markets, sometimes more cheaply than US and Australian supplies,
despite their shorter shipping distances.”

 

Addressing delegates at the Global Millers’ Symposium, held in Hamburg earlier this year, he added: “These [Eastern European and Black Sea] countries will become even more important, as they have the scope to increase wheat production.”

 

Martielli believes the Danube corridor could become as important in the global grain trades as the Mississippi River in the US. While volumes remain vastly different, China and countries in the ASEAN trading bloc are definitely sourcing more of their grain from Eastern Europe, Russia and Ukraine.

 

Nations in sub-Saharan Africa are also buying more wheat from the region. Moreover, this demand is likely to increase strongly as populations rise, disposable incomes and the demand for processed foods and protein increase, and economies in the former region expand.


Under pressure


The surge in grain exports over the past five years has put pressure on grain handling facilities in the ports and on river and rail transport and logistics networks in general. But it has also resulted in significant investment, and private-sector companies, such as Archer-Daniels-Midland (ADM), Cargill and Bunge, have increased their presence in many ports. In addition, state sponsored projects have risen in number as all parties look to develop modern facilities and supply chain infrastructures.


Romania’s port of Constantza has been one of the main beneficiaries of the boom in grain exports, with another record tonnage handled in 2016. The 20.4 Mt of grain processed, compared with 19.6 Mt in 2015, a rise of 4.1%. Grain now accounts for more than 34% of Constantza’s total traffic.


Recent years have seen the port, which is located on the mouth of the River Danube, successfully expand its role as leading gateway for agrorelated businesses located in Romania, Moldova, Northern Bulgaria, Serbia, Croatia and Hungary, and this is set to continue.


Ports in Bulgaria have also benefited from the growing trade in grain, with exports between January and end-April 2017 totalling 3.9 Mt, up 62.5% on the corresponding period of 2015.

 

Russian growth


In Russia, cargo handling facilities located in the AzovBlack Sea Basin have also posted a strong start to the year, with the total 80.7 Mt of cargo handled in the January/ end-April period, up 8.5% on the same period of 2016.


According to the country’s Association of Commercial Sea Ports, it was the export of agribulk commodities that largely fuelled this growth, and resulted in the near 9% rise in dry bulk tonnage handled in the region. The 32.5 Mt processed compared with 29.9 Mt (+8.6%) in the corresponding months of 2016.

 

A number of important capital projects are being pursued in this region, with the expansion of the port of Taman, which saw its cargo volumes increase by 27.2% in the first four months of the year, hugely significant as it could transform shipping patterns and cargo movements in the region.


The next four years will see the port emerge as Russia’s second largest port (on a capacity basis) in the region, with the ability to handle at least 73 Mtpa of cargo. Its current handling capacity is estimated at 20 Mtpa.

 

Taman will handle mainly dry and liquid bulk cargoes, but with some berths and equipment allocated for general breakbulk and project cargoes.

 

The main developments include:

  • Dry bulk cargo terminal with the capacity to handle 35 Mtpa of iron ore, coal, sulphur and mineral ores. Its handling capacity could be increased to 60 Mtpa, depending on demand. The facility will be able to accommodate Capesize ships up to 220,000 dwt.
  • Dedicated grain terminal with a handling capacity of 14.5 Mtpa.
  • Heavy lift and project cargo terminal with annual capacity of 300,000t.
  • Modernisation of the port’s existing LPG terminal, including six storage tanks with a total 30,000 m3 capacity.

Handling capacity will be increased to 3.5 Mt a year.


River-sea terminal


In the port of Azov, Agroport Ustye Dona, which is owned by Louis Dreyfus Vostok, has invested about RUB2B (US$35.2M) in a new grain terminal that will specialise in handling river-sea type vessels. It features two berths, 10 storage bins with the capacity to hold 50,000t, and has a design throughput capacity of 0.8 Mtpa. This will be increased to 1 Mtpa by the end of 2020.

 

At the port of Novorossiysk, which the Russian Government is hoping to privatise by the end of the year, various facilities are being refurbished, including a grain terminal. The movement of grain has once again been strong, with throughput volumes for this commodity up 64% in the first four months of 2017.


Apart from coal, all other sectors of Novorossiysk’s dry bulk business declined, with the shipment of sugar down almost 44% (see table).


In Ukraine, grain exports rose by 7.5% to a record 40.31 Mt in 2016, up 7.5% on the previous year, and with over half of the tonnage shipped to Asia (China, Indonesia, Thailand and India). The increase meant that grain was the most important commodity handled at Ukraine’s ports last year, accounting for 30% of the near 132 Mt of cargo processed.


In contrast, iron ore, which accounted for 29% of total throughput in 2015, saw volumes fall by 23% and its share of total traffic dip to 25%. Substantial declines were also posted in the coal (-33%) and ferrous metals (-8.5%) sectors, and it was these falls that led to the country’s total maritime trade declining by 9% in 2016.


The bullishness of the grain and cereals sectors means that this is where the biggest investments are taking place, with new terminals planned in several of the country’s main ports. Currently, Ukraine’s capacity for handling grain
amounts to approximately 50 Mtpa, but this could rise to over 70 Mtpa by 2020 if all developments currently underway and in the planning and/or conceptual stages come to fruition.


Effectively, these developments are needed, as most grain handling facilities in the country were operating at utilisation levels of 80% or greater for much of 2016.

 

Grain giant

 

At Yuzhny, the giant agricultural trading company Cargill and MV Cargo are jointly constructing a new grain handling facility that will be capable of accommodating postPanamax tonnage.


Initial work will be focused on expanding the terminal’s rail yard so that 4 Mtpa of grain can be successfully processed. In addition to this, new drying equipment and conveyor belts will be installed, along with a grain loader capable of
processing 2,000 tph. In addition, new warehouses for the storage of grain will be built.


The new terminal will feature a 385m wharf with draught alongside of 16m, and it is scheduled to commence operations in H2 2018. Over US$100M is being invested in the terminal itself, with the Ukrainian Sea Ports Authority (USPA) spending about US$50M on dredging work, a project that it has to complete by end-February 2018. USPA recently awarded the dredging contract to China Harbour Engineering Company.


The new terminal will have an initial throughput capacity of 5 Mtpa. A second phase could raise this by another 2-4 Mtpa, depending on the configuration, capacity of silos, equipment and/or cargo handling systems selected.

 

Swiss seed site


Switzerland-headquartered Allseeds has also invested in the port of Yuzhny, developing a specialised terminal for handling oilseed meals. The group owns a seed crushing plant in Ukraine, and the new terminal and storage capacity
(for 75,000t), which will be scheduled over three phases, will allow the company to control its supply chain more efficiently and reduce its overall transport costs.


It will also allow Allseeds to process more third-party business. “We expect to achieve an annual meal handling volume of roughly 1 Mtpa and revenues of US$10M on the basis of the new infrastructure and implementation of our revamped logistics programme,” said group chairman, Vyacheslav Petryshche. But it is not only about providing additional facilities for the handling of agricultural commodities, as Ukraine’s economy is also heavily reliant on heavy industries.

 

With this in mind, the port authority of Yuzhny is planning to invest approximately US$30M this year to expand the port’s coal and iron ore handling facilities. The project will include the development of a complex of wagon dumpers with defrosting devices that allow for uninterrupted operations during winter, the erection of new shiploaders and stackers, and the installation of new conveyor belts.

 

Bulk Materials International understands that the port has secured the backing of SCM Group for the project and that more than 90% of volumes handled will be made up of that company’s iron ore exports and coking coal imports.


US/China funding


At other ports in Ukraine, two new grain terminals have been developed in the port of Mykolaiv with funding provided by US -based agri-trading group Bunge and China-domiciled Cofco Agri. The handling capacity for grain has also been expanded at the port of Chornomorsk (formerly Illichivsk), with Geneva-based Risoil backing the venture.


Bunge has also developed a new oilseed crushing plant and grain handling facility in the port of Nikolayev. The oilseed processing plant is the largest in Ukraine, and a significant amount of its business will involve sunflower seeds, as Ukraine is the world’s largest exporter of sunflower oil.


Bunge believes its series of investments in Nikolayev will improve its competitiveness in the region and allow it to serve its growing agricustomer base in Europe, the Middle East and India.

 

In other developments, London-based ED&F Man Holdings, which only added grain to its mainly coffee and sugar trading activities in 2015, has established a strong presence in Russia and Ukraine, recently opening a new office in Kiev.

 

It is vital that the modernisation and expansion programmes taking place in the nation’s ports are supported by improvements inland, as Ukraine’s road and rail infrastructure is in poor shape. In addition, there is a general lack of rolling stock, while that which is available is old and not well maintained.

 

This means that it is both expensive and slow to move cargoes to/from the ports. Moreover, importers/exporters face higher levels of losses and damage than their counterparts in most neighbouring countries. The problems are particularly severe as over 75% of freight is moved by rail in Ukraine.

 

Georgian era

 


Elsewhere in the region Batumi Sea Port in Georgia recently completed a dredging programme of its main access channel, thus giving it greater operating flexibility and the capacity to handle more fully loaded vessels.


But a new transformational project is also taking place in this country as the Anaklia Development Consortium, which has a 52-year BOT concession for the port of Anaklia, moves forward with its plans for the integrated port and free
trade zone complex. The first phase of the project is due to come on stream in 2020.


While this stage of the development programme will mainly involve the construction of facilities for handling containers, bulk terminals with the potential to handle 6 Mtpa will also be built. Indeed, management views Kazakhstan’s increasing grain exports as offering significant potential cargo volumes for the port.


The increasing competitiveness of agricultural production in Eastern Europe, Russia, Ukraine and Central Asia Republic and the area’s growing role in the world’s grain trades is providing a real cargo boom for many of the region’s ports. It is also driving the majority of the capital improvement and expansion programmes, but with this comes risks as commodity flows can suddenly shift.

 

 

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