The prospect of reduced hostilities in Ukraine has sparked optimism among grain traders, potentially leading to a shift in Black Sea trade flows. A stabilization of the conflict could significantly impact insurance and freight costs, while also raising the possibility of reopening Mykolaiv port, one of Ukraine’s key agricultural export hubs.
A major consequence of the war has been the spike in shipping costs due to war-risk premiums and logistical bottlenecks. Since the onset of the conflict in February 2022, Ukraine’s insurance costs have been volatile.
Initially, the additional war risk premium (AWRP) stood at 0.75% of a vessel’s value, but by early 2025, it fluctuated between 0.9% and 1.6%, depending on insurers and trade routes. If hostilities ease, insurance costs could decline, reducing overall grain transport expenses.
Freight costs have already begun trending downward . Example : rates for Ukraine-to-Egypt shipments dropping to $13/mt from highs of $30/mt in late 2022. A more stable security situation would further normalize freight rates, enhancing Ukraine’s competitiveness in global markets.
Mykolaiv, a crucial agricultural export port, has been inoperable since 2022. If security conditions improve, its reopening would help decongest Pivdennyi, Odessa, and Chornomorsk (POC) ports. This would optimize grain flows, reducing delays and lowering elevation costs, which have already fallen from $15/mt in October 2024 to $9/mt in February 2025.
Before the war, Ukrainian grains were primarily shipped via the Black Sea ports, but disruptions forced traders to use alternative routes, including barging grain to Constanta, Romania. However, as Ukraine established its own maritime corridor, exports through Constanta fell by 3.7 million metric tons (mt) year-on-year from December 2023 to August 2024.With an improved security landscape, Ukrainian grain exports could re-expand their direct Black Sea routes, bypassing the need for costly alternative transit hubs. Nevertheless, Ukraine's total export volumes remain constrained by the loss of 32% of its arable land due to war-related damage in key agricultural regions like Dnipro, Zaporizhzhia, Kherson, and Donetsk.
Ukraine’s grain output has seen significant declines since 2021 due to land loss, labor shortages, and logistical challenges.
Despite these production cuts, export dynamics have shifted:
The war caused an initial price surge in 2022, but since then, Ukrainian grain prices have plummeted due to supply stabilization and global market shifts:
As of February 12, 2025 :
Before the war, Ukrainian exports were split between FOB (Free on Board) and CIF (Cost, Insurance, and Freight) trades, with FOB comprising about 70%. However, as security risks rose, CIF contracts became dominant, reaching 90% of total trades.With lower freight and insurance costs, FOB trades are making a comeback.
Currently, 75% of Ukrainian exports remain CIF, but traders anticipate a return to a more balanced 50-50 split as buyers regain confidence in taking direct control of logistics and transport.
If security conditions continue to improve, Ukraine’s agriculture sector could recover, stabilizing global grain markets. The potential reopening of Mykolaiv port and declining freight/insurance costs would reshape trade flows, enhancing Ukraine’s competitiveness in global markets. However, full recovery remains uncertain due to significant losses in farmland and infrastructure.
In the short term, logistics costs will likely continue falling, trade confidence will increase, and supply chain efficiencies will improve, benefitting both Ukrainian exporters , and Buyers .
GrainFuel Nexus® will continue to provide real-time updates as new trends emerge.
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