Ramping up Ukraine grain exports through the Sulina Channel

Romania’s Sulina Channel has become a key exit point for the war-torn country’s cereal exports since the ending of the grain deal in July.

More than 100 vessels now queue to enter the channel, but that number is expected to reduce as the number of vessels heading upstream, which already doubled from five to 10 per day will double again to 20 vessels a day.

Although Ivan Niyaki, the founder of logistics company Soul Marine, says he has been told that the increase in numbers will happen this autumn, a firm date has not yet been announced by the Romanian authorities.

“The increase in traffic will occur through simple measures,” explains Niyaki, “The Romanians have trained significantly more pilots to help navigate the narrow channel and they have given their permission for vessels to sail at night [as well as in the day].”

According to Niyaki the channel is wide enough to take a 25,000dwt handysize vessel, but the shallow 7m draught means that such a vessel could only load between 5,000-10,000 tonnes of cargo.

Even so using the river-sea route offers economies of scale. By using the Sulina Channel for exports, vessels exiting the channel need to only sail 100km or so south to Constanta, where the grain can be loaded onto larger ships for transport to wider markets.

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Sulina Channel links with the Danube just north of Tulcea, with the river effectively marking the boundary between Romania and Ukraine, by using river vessels exporters can move larger quantities of cargo for smaller amounts of money, while also taking pressure off road transport.

Trucks would need to travel hundreds of kilometres to deliver export cargoes, taking days to make the round trip for a 40-tonne load.

The costs involved in using trucks to move thousands of tonnes of cargo are prohibitive, and although the cost of shipping on the river has increased around four-fold, compared to pre-war levels, the $40 per tonne levied remains competitive. And it is a less than half the $100 per tonne being paid in the summer of 2022, shortly after the war started.

Nevertheless companies like Nibullon, Ukraine’s biggest grain exporter, have shifted operations from Mykolaiv, about 80km east of Odessa, and also a Black Sea port, to Danube River ports such as Izmail, Reni and Ust Danube.

These ports have seen more than $100 million invested in the infrastructure with modern terminal handling equipment and new storage facilities.

“Soul Marine is building a grain storage terminal at Izmail, with a capacity for 60,000-80,000 tonnes,” said Niyaki, who added that drone attacks happen every couple of weeks and are a threat, with businesses unable to secure insurance, from private or state sources, for their investment.

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Niyaki is, nevertheless, sanguine in his outlook: “Repairs happen every day, if we lose the storage facilities, we lose the money.”

Attacks on Danube River port facilities have increased since the end of the grain deal in July, and, as you would expect, there has been a decline in the annual exports from Ukraine, from 70 million tonnes, pre-war to around 50 million tonnes in 2022.

River trade has, however, expanded with exports totalling 3-4 million tonnes a year now that total has reached 3 million tonnes a month in August, up from 2 million in July and is expected to increase to 4 million tonnes/month by the end of this year, or earlier.

Whether that level of exports can continue remains to be seen, explains Niyaki. Farmers have switched to crops with higher returns such as sunflowers and rape seed, and this year’s exports were boosted by the 2022 harvest stored in silos around Ukraine.

Those storage facilities are more depleted today than they were last year, but then again, Niyaki says he has faith in Ukraine’s air defences, which he says are far stronger now than ever before.