Danube drone strikes raise stakes for Black Sea ship insurers

Ukrainian ports and infrastructure along the Danube river in the south of the country were subjected to Russian missile and drone strikes overnight, in a move that has increased again the concerns around what is now Ukraine's primary grains export route.

According to Ukrainian officials, grain silos and ground storage capacity were destroyed along with stocks intended to be loaded into cargoes and a fire reported in some buildings, although no further details were given.

Authorities have not said officially which port was affected, but trade sources spoken to by Agricensus have said it was the port of Reni, a location right on the border with Romania.

The strikes have raised fears of potential escalation, with drones said to have landed close to the country's border, despite it being a member of both the EU and the NATO military bloc.

Along with the facilities in the port being damaged, according to trade sources the port has been partially working but hours of operation will be limited to 0800 through to 1900 local time, rather than the 24-hour operations that had been in place.

All the other ports in the Danube region (Izmail, Kylia) were said to be operating normally, alongside the Sulina canal, controlled by Romania, and the Bystre canal - both of which link the Danube river with the Black Sea and were also said to be operating normally. 

However, along with photos believed to show the damage at the port, and reports from trade sources who suggested that some of the barges - some owned by Romanian operators - were also affected and had suffered slight damage.

Agricensus could not confirm the reports, but trade sources have said that some ship owners have already partly moved their fleet to the Romanian Danube port of Galac, 26 kilometres from Reni.

As such, the risk associated with moving grain out of the Danube ports has increased - with the capacity the only sea-based alternative available to allow Ukranian shipments if the Great Odesa region ports remain unable to load following Russia's withdrawal from the Black Sea grain deal initiative.

That escalation may also impact the number of vessels willing to go to the region, but may also push up freight prices amid heightened risk.

Late on Friday, Agricensus contacted the International Union of Marine Insurance (IUMI) regarding the position of insurance coverage for vessels entering the Danube ports - amid mounting tensions following bellicose statements from both Russian and Ukrainian defense ministers.

“There is still cover for vessels in the Ukrainian Danube but this may change quickly if more traffic uses that route and the threat continues to increase,” the organization said.

Agricensus has contacted the trade body for further updates following the attacks, but no reply had been received at the time of publication.

The Danube ports have emerged as the key gateway for Ukrainian agricultural shipments over the last month, and has been a significant outlet for many months prior to the signing of the Black Sea grain corridor.

With relations between Ukraine and Russia breaking down after Russian inspectors were accused of undermining the agreement by dragging their heels on clearing inbound vessels and stopping the grain deal from working normally.

Working with just the Danube ports alone, Ukraine could potentially still export more than 3 million mt of grains and oilseeds per month - a result that the country has already achieved back in March 2023, but there remains potential to increase the flows even further.