The rates are affected by the volume of cargo traffic, the grain deal and other factors

After the start of the full-scale Russian invasion of Ukraine and the blocking of Black Sea ports, export and import cargo flows were partially redirected to Ukrainian ports on the Danube. During the year of the war, the ports of Izmail, Reni and Ust-Dunaysk tripled the transshipment of goods. Transshipment of goods through them amounted to almost 17 million tons of cargo.

Danube rescue

Ukrainian ports on the Danube have become a lifeline for exports. Through them in 2022/2023 (by the present time) passed 21% or 10.35 million tons of grain. With the opening of the Black Sea ports, the volume of grain transshipment through the Danube ports did not decrease significantly – in different months the decrease amounted to 300-500 thousand tons. In the second half of last year, an average of 1.4-1.5 million tons of grain was exported through the Danube ports per month, while through the Black Sea – 3-3.9 million tons.

The grain deal and the outflow of agricultural cargo to the Black Sea ports improved the situation with the expectation of ships in the roads of the Sulinsky Canal. If in June-August 2022, the waiting time was on average 12-15 days, then in March 2023 it was only 4 days.

Freight rates

Freight rates strongly depended on the general situation in the transportation and cargo market. They rose sharply in the first months of the war, starting to decline after the conclusion of the grain deal and the redirection of part of the grain cargo to the Black Sea ports. For example, the freight rates of Reni-Marmara (Turkiye) for vessels with a carrying capacity of 5-6 thousand tons reached their peak in June 2022 – an average of $102 per ton, having decreased in March 2023 to a level of $46 per ton.

The opening of the Bystre Estuary in July 2022 and the completion of dredging works there (until March 2023) also contributed to the reduction in rates. This made it possible to restore the passport depths in the Ukrainian section of the Danube (draft level – 6.5 m) and increase the number of ship calls. A pattern can be distinguished – the smaller the queue of ships in the roadstead of the Sulinsky Canal, the lower the freight rates.

According to the USDA forecast, in the 2022/2023 MY Ukraine exports 39 million tons, 34.8 million tons of which (89.2%) have already been sent to buyers. Thus, until the end of June, about 4 million tons remain to be exported (excluding carry-over balances of previous years). The expected reduction in the volume of grain exports in the coming months may lead to a further decrease in freight rates – shipowners will no longer be able to overestimate them without excessive demand. However, despite such expectations, currently (as of March 22, 2023) shipowners keep rates at $45-48 per ton, charterers insist on $40-42 per ton. Also, when forming the cost for transportation, shipowners take into account the level of freight rates from the Russian ports of the Sea of ​​Azov.

At present, there is a sufficient supply of fleet on the Danube, so that both cargo owners have a choice of carrier, and ship owners provide services at a market price. In any case, now there is more fleet and less cargo than it was in May-July 2022.

The Danube freight is also indirectly affected by the nature of the news on the extension of the grain deal. In particular, positive news on the grain deal may lead to a further reduction in freight rates on the Danube.

Danube difficulties

Among the difficulties of working in the Danube ports, I can note:

  1. Unpreparedness of the infrastructure and market operators for the increased volume of transshipment.
  2. Lack of consistency and proper organization of business processes among market operators. There is no progress in process optimization even after the unexpected emergency demand for their services has passed.
  3. Additional disbursement account for the transit passage of a vessel to Reni through the water area of ​​the Izmail port.
  4. Lack of pilots in the port of Reni. At the same time, the situation with pilots for escorting ships from the Romanian side has improved recently.