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In Turkey's 'back garden', trade continues: expect delays

MariTrace, 19 April 2023

Cargo vessels and tankers in the Black Sea, 12 April 2023 (source: MariTrace).

The Black Sea Grain deal was renewed on 18 March 2023 for at least 60 days. It allows for exports of grains (and related foods and fertilisers, including ammonia) from the ports of Odesa, Chornomorsk and Yuzhnyi, with transit times across the Black Sea typically under 24 hours. All vessels are inspected in Istanbul. Under the deal, cargo has so far been exported to 45 countries worldwide, mostly to China, also Spain and Turkey. The Black Sea Grain Initiative is remarkable for its success as an instrument of diplomacy between two countries at war – and for drawing attention to the vital role of maritime supply chains in the wider global economy. As a maritime humanitarian corridor, the Initiative may even be unprecedented. Interviewed for MariTrace, Ismini Palla at the Initiative’s Joint Coordination Centre in Istanbul explains, “the architecture of the agreement between Russia and Ukraine supported by the United Nations and Turkey, is a diplomatic success. We work around the clock to facilitate safe vessel movements through the Grain Corridor”. In practical terms, the Initiative has created an architecture of vessel overwatch, diplomatic oversight and coordination – features of which have produced a project and information management legacy that the UN can draw upon in future if needed.

Several factors – on land and at sea - may impede what can be achieved during the renewal phase. First, the Grain Initiative, while a laudable diplomatic success, is fragile. Arguments among vessel inspectors can halt vessel movements. Russia may suspend its participation next month if it perceives no progress on removing obstacles to Russia’s food exports; it also wants to reconnect its state-owned agricultural bank to the global SWIFT system and resume shipments of ammonia through Ukraine. Second, the Initiative should be perceived in the context of wider market disruptions in the Black Sea: for wheat, and for bulk cargo more generally. For wheat, the market disruptions from 2022 are likely to continue. So far this year, prices have fallen due to large harvests in Russia and Australia. In Ukraine, farmers are likely to turn to other crops during 2023, owing to the effects of the ongoing conflict on the infrastructure needed to ship out anything they produce. Third, the impact of war on local container trade in the Black Sea may have been overlooked by the wider market: while not directly affecting the Grain Initiative, container availability is among the factors shaping the regional context for vessel movements and trade. According to Lloyd's, through 2022, container movements in the Black Sea dropped by about 28%, with Turkish carriers gaining roughly half of Russia’s pre-war market (compared with 18% prior to the conflict).

Container vessels (loaded) arrivals in selected Black Sea ports, February 2021 - April 2023 (source: MariTrace)

Container vessels (loaded) departures in selected Black Sea ports, February 2021 - April 2023 (source: MariTrace)

İbrahim Berkay Doğan, a First Officer on contract to Turkish carrier companies since 2011, works mostly aboard smaller dry bulk vessels moving cargo from the congested ports on the Danube to busy ports on the Turkish coast. Interviewed for MariTrace, Berkay offered some observations on the practical aspects of commercial shipping in the Black Sea, since January 2022. While the long delays waiting for clearances are tiresome and sometimes stressful for embarked crew, Berkay says he has not observed significant changes in company operations and the labour market. “The Black Sea is Turkey’s back garden” he says, “Trade continues, but it’s slower and with smaller vessels.” He says it’s mostly Turkish companies out there, with Turkish crew. Vessels are old and poorly maintained, many purchased from China - but their smaller size is more suited to the shallow waters of the Danube, where old Soviet Union era river vessels are also common. “Transit times haven’t changed much” he adds: small vessels can cross the Black Sea in under 24 hours. However, waiting time at anchorage can be as long as 45 days in Romanian waters, and two to three in Ukrainian waters, “waiting for paperwork”. Waiting adds to the stress for embarked crew, while crew changes in Ukraine are very difficult: companies cannot switch out their crew members for Ukrainian replacements when a crew member falls ill or needs to reach their family quickly.

For commercial shipping in the Black Sea, the very long waiting time for vessel inspections in both directions has become expensive for owners and traders, who have moved to ports on the Danube to ease their costs. However, access there to the ports of Reni and Ismail is limited by maximum permissible draught and vessel size. Routes into the Danube were not designed to handle the volumes seen in the past year. Constanta (operated by DP World) became overloaded: at March 2022, Constanta was at 98% capacity (MariTrace observed 1,057 cargo vessels and and tankers calling at Constanta between 1 February and 1 April 2023, compared with 859 in the same period last year). Prior to the conflict, Ukraine’s ports handled about 1m TEU per year – volumes that can’t be handled by road and rail alone. Infrastructure challenges are currently compounded by a block on exports via Poland and Hungary. Alternative routes can handle perhaps 30% of pre-war capacities. Workarounds may yet be found. Maersk opened booking for delivery to Ukraine via Constanta in March 2023. And signs that Ukraine’s electricity grid is recovering may eventually help to restore service at Ukraine’s ports. But Ukraine’s maritime logistics are likely to continue in war mode long after the kinetic conflict ceases.

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