Handy, panamax trade driven apart on Ukraine's contrasting corn outlooks

A lack of demand for staple corn volumes out of the key Ukraine corn market, and lingering expectations of niche demand from premium markets such as  China and Iran, is driving a wedge between the typical pricing dynamics for the country's logistics.  

Through heavy investment in ports and infrastructure, Ukraine is able to handle a range of cargo sizes, with some ports typically focusing on handy-size cargoes of around 30,000 mt, and others geared towards panamax volumes of up to 70,000 mt. 

Poor demand for handy size volumes, amid aggressively pricing South American supply, means that prices for smaller cargoes are under pressure. 

But with China and Iran looking for larger parcels, there is support amid the larger vessel size as sellers are reluctant to discount. 

The price difference between corn cargoes offered in ports operating only handy vessels and those that can also handle panamaxes has increased from the usual $1-2/mt to now stand at around $3-$7/mt over the last few weeks, as sellers in smaller ports struggle to find the demand and thus have to discount.

Offers for corn in smaller ports now stand at around $261- $265/mt FOB for a handy-sized cargo in a handy port for April loading.

That compares with offers at around $268-$270/mt FOB for handy size cargoes offered into a panamax port (HIPP).

In handy ports like Mykolaiv and Ochakiv, loading capacity is limited to around 25,000-30,000 mt for a vessel, but traders say there is no demand for that size, as most potential buyers prefer to book bigger volumes.

“Most MENA/EU destination players want 30,000 mt plus shipments, it is the law of supply versus demand,” a trader said.

Iran's potential demand and traders' expectations for China to return to the Black Sea for more volumes are also supporting prices in panamax ports.

The lack of demand for smaller volumes also stretches back to influence the supply chain into handy ports as well, with around 250,000 mt scheduled for loading in Mykolaiv in March, a small portion when compared to the total Ukrainian line up of 1.5 million mt.

That means demand for corn from the domestic market, and thus prices at this port, are also around $3-$5/mt lower compared to bigger ports where demand is more acute.

Usually, corn offers from smaller, handy size ports are around $2/mt lower compared to other deep sea ports because the freight is higher from there, leading sellers from such ports to discount in order to be competitive.