Ongoing maritime logistics challenges pose concerns for the grains market

January 15, 2024

2 mins read

The Euronext wheat milling futures MAR-23 contract price [Mintec Code: WHT2] settled at €216/mt, down 2.15% week-on-week (w-o-w) at Friday’s close, 19th January 2024. Last week, a decline in prices sparked some purchasing activity for the previous crop. However, the persistent dominance of Black Sea origin supplies and their competitive pricing continued to exert pressure on the wheat market. 

On another note, market players have reported that the drought conditions affecting the Panama Canal have created significant challenges for maritime traffic, leading to low water levels that restrict vessel movement. This has resulted in extended waiting times for ships, prompting shippers to explore alternative routes. One such alternative is the Suez Canal, located in the Red Sea. However, logistics in the Red Sea have been complicated by Houthi rebel attacks on merchant vessels, causing a spike in insurance premiums and introducing uncertainties through that route. Despite the presence of US-led naval forces in the Red Sea, Houthi attacks on commercial vessels persist. This has led major carriers, such as Maersk, to suspend transit through the Red Sea to mitigate the risks associated with these attacks. Shippers are opting for alternative routes, such as sailing through the Cape of Good Hope (South Africa), although it adds approximately 10-11 days to the transit time, according to information from market players. The decision to divert vessels away from the Red Sea raises concerns among some market participants. There is speculation that this shift in shipping routes could potentially result in port congestion and shortages of empty containers. While no backlogs have been reported as of now, the situation remains subject to change based on how shipping companies adapt to the challenges presented by the drought conditions in the Panama Canal and the security issues in the Red Sea. Market players have told Mintec that, “somehow the Red Sea tensions have not added much support for dry bulk freight cost, the primary concern appears to be centred around container shipping.”  

Also, uncertainties regarding vessel insurance continue to prevail in the Black Sea region due to the war in Ukraine. Yet, Ukrainian grain exports continue, and market players have told Mintec that the market gained some liquidity after the Christmas holidays. 

Topics: Grains & Feed
Zanna Aleksahhina
Zanna Aleksahhina

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