Bloomberg: Grain shippers set for more pain as Black Sea remains cold

02.02.2017

Published by Manisha Jha and Misha Savic, January 24, 2017

The icy conditions curbing ship movement in and around the Black Sea are set to last a little longer, potentially slowing grain exports and supporting prices. Temperatures in Black Sea countries will remain below normal through early February, Commodity Weather Group forecasts. Commercial traffic from the Hungarian part of the Danube river, which helps feed key ports such as Romania’s Constanta, won’t operate fully until the second half of next month, said Milan Maslac, owner and manager of Belgrade-based Danube Transport Logistics.

The blizzards, gales and ice are affecting rivers and ports after shippers were hit by low water levels on the Danube late last year, which caused the river to freeze quickly. Maslac said stranded barges and resulting grain-storage costs are cutting shippers’ earnings, while researcher UkrAgroConsult expects supply delays to support crop prices. The Black Sea region accounts for about a quarter of the world’s grain exports.

“Freezing temperatures are seen continuing for another few weeks, after which it will take at least 10 days for the ice to melt,” Maslac, who also represents shippers at the Serbian Chamber of Commerce, said by phone Thursday. “It takes around 10 days for most barges to reach the Black Sea from points such as
Hungary, so delays are obviously huge.”

Delays to shipments may push grain prices up by about $1 to $2 a metric ton, according to Olena Hesova, an analyst at UkrAgroConsult. Milling-wheat and corn futures traded at 170 euros ($183) a ton in Paris on Tuesday and have added at least 1.2 percent this month.

The Hungarian section of the Danube will probably stay closed through this week, according to Gabriella Siklos, a spokeswoman for the National Water Authority. Nighttime temperatures will dip to as low as minus 18 degrees Celsius (0 degrees Fahrenheit) in Hungary this week, the National Weather Service forecast. Slightly warmer conditions by the end of the month won’t be enough for the river’s ice to melt, MDA Weather Services said.

Ice on the Danube may curb Serbian supplies because exporters risk losing buyers due to barge delays, Vukosav Sakovic, head of the Zita Srbije agriculture institute in Belgrade, said by phone last week. The country may ship out 20 percent less corn that previously agreed this month, he said. In Romania, the Danube-Black Sea Canal, which is used by barges going to Constanta, may be the last to thaw, Maslac said.

“It will take the rest of 2017 to try to maybe compensate for what is happening now,” Maslac said.

Strong winds have closed ports in Bulgaria and Romania several times this year. While Varna, Burgas and Constanta are now open, Romanian river ports of Medgidia and Murfatlar remain closed, according to the Bulgarian Ports Infrastructure Co. and the Romanian Ministry of Transport.

Ukraine has introduced ice-related restrictions on ships, which can slow grain loading. The Administration of Seaports of Ukraine said it’s hard to predict when those curbs will be lifted and they may last into February.
The measures may delay cargoes and support grain prices, UkrAgroConsult’s Hesova said.

“The key commodity which may be affected is corn as it has its peak export time now, but the wheat price may also get slight support,” she said.

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