Most major international grain houses have not been included in a draft list of exporters who will work with the two largest grain terminals in Russia’s Black Sea port of Novorossiisk in the new marketing season, sources familiar with the matter said.
Competition for access to grain export infrastructure has intensified in Russia as its ports are running at maximum capacity after it harvested a record crop in 2017 and prospects for 2018 are also bright.
While the majority of the key global grain houses did not get on the list, some local firms are aiming to build up their presence at the two largest Novorossiisk grain terminals in the 2018/19 season, which starts on July 1, traders at international firms said.
“Significant consolidation of business in hands of small number of market participants, mainly Russian, is happening there,” an industry source with direct knowledge of the matter told Reuters.
The list of these local firms include privately-held RIF, Russian largest grain trader, and the state grain trader United Grain Company, sources said.
RIF declined to comment. United Grain Company did not disclose the size of the quota it applied for citing the need to protect commercially sensitive information.
Novorossiysk Grain Plant, one of the two grain terminals, did not reply to a Reuters request for comment. United Grain Company controls the plant.
The second terminal – Novorossiysk Grain Terminal, co-owned by Novorossiysk Commercial Sea Port – was not available for immediate comment.
The draft list sets quotas for 12 million tonnes of grain in total in the 2018/19 season, one trader said. Russia, one of the world’s biggest wheat exporters, has exported 49 million tonnes of grain so far in the 2017/18 season.
A source, familiar with the work of one of the two terminals, argued that access is being reduced for those traders who did not fulfil their quotas in the current season.
Some of the international firms, which were not offered any quota for the new season, have their own Black Sea grain terminals in Russia.
However, the situation is more complicated for those who do not have their own terminals. For them, the loss of access to Novorossiisk means a high risk of losing the entire deep-water business in Russia.
The deep-water business allows traders to supply large cargoes to active buyers such as Egypt, the world’s largest wheat importer. Russia’s Azov Sea offers mostly shallow-water operations with small size cargoes, which may mean lower profit margins.
“Now all this is changing extremely in favour of Russian companies. If you cannot export out of Novo, your alternative is Azov Sea and Kavkaz transhipment which is more tricky and already crowded,” another trader said.
Dividing traders of Russian grain into domestic and international companies is only a nominal assertion because most local traders have trading arms or partners abroad.
However, some of the foreign traders told Reuters they regard the current situation in the Novorossiisk grain terminals as the process of Moscow reviewing its policy towards the Black Sea business.
In a move, which further intensified their concerns, RIF and the United Grain Company signed a memorandum for cooperation in late May. They said in a statement they would consider building a new grain terminal in Novorossiisk.
The timing of the project is yet to be decided and partially depends on whether one of Russian state banks provides financing for it, a source, familiar with the project told Reuters.