Espreso. Global

Not just grain: Ukrainian steelmakers seek to resume exports by sea

21 October, 2023 Saturday
18:38

In October, a cargo ship called at one of Ukraine's Black Sea ports to export a large consignment of iron ore to China. Will Ukrainian steelmakers be able to resume exporting iron ore products by sea?

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NV Business writes about it

Due to the full-scale invasion, Ukrainian mining companies were unable to ship their products through the Black Sea ports.

However, in October, one of Ukraine's Black Sea ports received the Liberian-flagged Jolanda bulk carrier, and this may change the situation in the industry.

Ore to grain

The new grain corridor from the ports of Odesa area has been operating for a month now. Thirty-one vessels have used the route for civilian ships to Odesa ports: they were mostly loaded with agricultural products, but several bulk carriers transported products from Ukraine's mining and metals sector, including Primus, Anna Tereza and Ocean Courtesy with products from Metinvest Group.  

Their movement was called a breakthrough in the transport blockade, waiting for new ships to load steel and ore. And it happened in early October.

"Three bulk carriers with agricultural products and iron ore have left the ports of Chornomorsk and Pivdennyi, and five new vessels are heading to the ports for loading," said Oleksandr Kubrakov, Deputy Prime Minister for the Restoration of Ukraine and Minister of Community, Territorial and Infrastructure Development, optimistically.

So far, Ukrainian steelmakers have called this corridor temporary, not daring to make long-term optimistic predictions. Moreover, there are doubts about its safety. Ukraine's military and political leadership and business still need to make additional efforts to turn it into a full-fledged route.

Ferrexpo, a mining company with Ukrainian assets in the Poltava region, sees this event as a promising start to the potential full unblocking and resumption of logistics by sea.

"We are currently monitoring and assessing the situation very closely. Security issues remain important to us," Ferrexpo said. The press service explains that this security issue affects, among other things, the number of shipowners willing to work in the established area. "Today, this list is significantly limited," Ferrexpo said, adding that high risks affect freight rates.

Oleg Panasenko, editor-in-chief of Ports of Ukraine, agrees that the situation is improving: the Jolanda's carrying capacity of 180,000 tonnes will allow it to transport large volumes of iron ore products over long distances.

The sea will help

Before the full-scale invasion and the start of the naval blockade, more than 60% of Ukraine's mining and metals sector exported to Chinese ports. The destination of the Liberian-flagged vessel will be known after it is loaded. And if the destination port is Chinese, this could be another good news.

According to Andriy Klymenko, an expert at the Black Sea Institute for Strategic Studies, the flag under which the vessel is flying or the owner also plays a role. "Any export to China - no matter whether it is grain or ore - plays a kind of security role. For the Russian Federation, it's not a good idea to interfere with Chinese imports... The situation with Turkish imports is exactly the same," Klymenko says.

In addition, after Ukraine's attacks on the Russian Black Sea Fleet, the latter can no longer safely stay on the high seas and stop merchant ships for inspection.

If the sea route for ore is reopened, not only will exports improve, but also the production volumes of Ukraine's mining companies, which are currently operating at 25-30% of their maximum capacity.

An increase in the number of ship calls will lead to a reduction in freight costs and other mandatory payments.

"This will definitely be facilitated by the willingness of international insurance companies to cover shipowners' risks when working with Ukrainian deepwater ports in the Black Sea," Ferrexpo says.

  • In an interview with Espreso in October 2023, Oleksandr Kalenkov, President of Ukrmetallurgprom, said that shipowners' fear of entering the Black Sea security corridor could be reduced by the willingness of international insurance companies to cover shipowners' risks when working with cargo transported by sea.
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