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Grain-Importing Nations Hampered by Rising Freight Rates

Pricier freight, longer transits or differing quality, will further accelerate food inflation

2 Lisa Selfie December 2020 Headshot
Martin Damboldt | PEXELS
Martin Damboldt | PEXELS

The war in Ukraine will put further pressure on grain-importing countries in Africa and Asia as a reduced number of vessels for delivering cargoes drives up shipping rates, according to the head of the International Chamber of Shipping.

According to reports, about 80 to 100 ships, mostly bulk carriers, have been unable to leave Ukrainian waters for almost two months due to underwater mines and military blockades, ICS Chairman Esben Poulsson said.

Bulk freight rates are rising as owners and charterers price in the fact that ships will be tied up for longer periods.

Trade flows of grains are undergoing significant shifts, he said, and the distance that ships will have to travel to get shipments from the Americas to customers is further than voyages from the Black Sea.

Soaring freight costs, port closures and supply-chain constraints have slammed exports from the Black Sea.

Buyers are on the hunt for alternatives, and sellers are finding ways to fill the void. India, which tended to keep its large wheat harvests at home, is jumping into the export market with record volumes.

Brazilian shipments for the first three months almost doubled those in all of last year. U.S. corn is going to Spain for the first time in four years, while Egypt is looking to swap fertilizer for Romanian grain and holding wheat talks with Argentina.

The emergence of new trades comes at a cost: pricier freight, longer transits or differing quality, which further accelerates food inflation.

In addition to the situation in Ukraine, freight rates also are being affected by China’s efforts to battle the spread of COVID-19. Hundreds of bulk ships are facing delays off China’s coast as authorities in cities including Shanghai lock down cities.

There were 222 bulkers waiting off Shanghai as of April 11, 15% higher than a month earlier, according to Bloomberg shipping data.

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