China rolls grain corridor into 12-point Ukraine peace statement
China’s ministry of foreign affairs has issued a 12 point position on the war in Ukraine, setting out what some had anticipated would be a peace plan for the region as it marks the first anniversary of Ukraine's invasion by Russia.
Among the points, the plan singles out the need for dialogue, assurances on the non-use of nuclear weapons and guarantees for the integrity of Ukraine’s nuclear power plants, but also calls for measures to protect grain exports from the Black Sea.
Point nine of the position paper, facilitating grain exports, urged all parties to implement the Black Sea Grain Initiative “in a balanced manner, and support the UN in playing an important role in this regard.”
The paper then highlights China’s cooperation initiative on global food security, released last year, which is says “provides a feasible solution to the global food crisis.”
While many of the points are thinly veiled rebuffs to the US, UK and European Union for its backing of Ukraine’s resistance to the Russian invasion, the country has benefitted from the Black Sea grain corridor more than any other nation.
United Nations data shows that nearly 21% of the agricultural goods exported through the corridor, which re-opened the key Ukrainian ports of Pivdennyi, Odesa and Chornomorsk back in August, have headed to China, making it the biggest recipient of Ukrainian produce.
As one of the world’s biggest importers of corn, China has looked to diversify its import slate recently, finally sorting out access to Brazil’s huge corn reserves to augment its buying from the US and Ukraine.
China used to be one of the key buyers of Ukrainian corn and barley, and while barley can be supplied from France, China still needs Ukrainian corn as it is non-GMO, a grade that is hard to source in volume from any other countries that are also able to send supplies to China.
China has increased significantly the import of Ukrainian corn in the last few months, after the invasion closed bulk export options, importing 2.4 million mt through December to February 22 dates.
More recently, with the corridor agreement coming up for renewal, demand has weakened amid the uncertainty over the corridor’s extension – but unlike other buyers, Chinese importers are not able to make a switch and import Ukrainian corn from Romanian ports.
Cross border links into the EU have been the fallback for Ukrainian products unable to trade from bulk deep water ports, with shippers using rail connections and Danube river connections to get volumes to alternate bulk export terminals.
However, according to the rules, all loading terminals have to be approved by China, which is not the case for Romania’s primary panamax export facility of Constanta.
Meanwhile, Bulgarian terminals have been approved, but the loading capacity is limited to 45,000-50,000 mt, while usually China needs bigger panamax-sized cargoes of 60,000-65,000 mt vessels.
For the corridor itself, mounting delays at the Istanbul inspection point have started to deter buyers of Ukrainian grains, with over 100 ships now waiting to be cleared by the combined Ukrainian, Turkish and Russian inspection teams.
Meanwhile, the number of vessels cleared per day has fallen to just 2.5 on average, while demurrage costs for many are racking up making Ukrainian grains unattractive despite exporters discounting their cargoes.