Coal buyers, shipowners avoid Black Sea ports

(Montel) Growing risks of vessel damage due to Russian military operations around the Ukrainian coast, and a related surge in insurance costs, is deterring coal buyers from seeking Black Sea-origin cargoes, market participants said on Tuesday.

“The situation is hectic and some shipowners don’t want to go there, but it’s mainly a cost thing,” said a Russian coal trader who deals with shipments from Black Sea ports.

He noted insurance costs for vessels entering or exiting Russian ports were up by as much as 5% in the wake of Russia’s invasion last week of Ukraine.

Since then, at least three vessels in the Black Sea were reported to have been damaged.

“One ship was hit with what looks like [a rocket-propelled grenade], but damage was limited,” said an analyst with a large shipping firm.

He noted that Turkey had sought to close the Turkish Straits – linking the Black Sea with the Mediterranean – to the Russian navy, but that this would have gone against the “right of navigation” international agreement.

Growing reluctance

“There is growing reluctance from owners and charterers to go anywhere near the Black Sea after a few ships got hit last week,” said Burak Cetinok, head of research at Arrow Shipbroking Group.

“It will become increasingly difficult to find ships to load and discharge in the region in the coming days and weeks,” he added.

Dry bulk data provider DBX estimated that nearly 10% of Russia’s seaborne thermal coal exports – or 1.5m tonnes/month – that come from the Black Sea and Sea of Azov, could be lost.

Market shortfall

This comes as market participants rushed to secure supplies in an ever-tightening market amid concerns of restrictions, or bans, on Russian exports. This has helped to push prompt prices to multi-year highs in the current session.

The front-quarter API 2 contract spiked USD 46, or more than 20%, on Ice Futures to USD 264/t – its highest level on a rolling basis since Montel’s data began in mid-2006.

According to VesselsValue ship-tracking data, no vessels have left Russia’s main southwestern coal export terminal at Taman – which exported 23m tonnes last year – since Saturday.

A spokesperson for Taman bulk terminal operator Oteko was not immediately available for comment.