Black Sea disruptions to weigh on vegoil carrier demand

The most significant development was the attack on Russia's Taman export hub, including EFKO's dedicated vegoil terminal, which resulted in the suspension of port operations. If disruptions persist, Russia’s sunflower oil exports will reduce significantly. In Ukraine, repeated attacks on port infrastructure, including damage to Kernel's sunflower oil terminal, have further constrained export capacity in the Black Sea region.

Alternative routes offer limited relief

Russian exporters are increasingly routing cargoes through Baltic ports, which could support tonne-mile demand given longer voyages to Asia. However, higher inland transport costs reduce the competitiveness of this trade route. Other alternatives are less supportive of shipping demand. The Caspian-Iran corridor relies heavily on rail and regional logistics, while Ukraine's growing use of Danube ports largely serves European destinations. As both routes reduce the seaborne component of trade, they generate fewer tonne-miles for vegoil carriers. Meanwhile, Argentina's growing role in global sunflower oil exports bodes well for global sunflower oil supply, but higher exports from the country are unlikely to fully offset supply disruptions from the Black Sea. 

From a global perspective, the impact of the Black Sea supply disruption extends beyond the trade of sunflower oil. As Russia and Ukraine are key price-setters in the sunflower oil market, lower exports are expected to tighten global vegoil balances and increase reliance on alternative oils such as palm oil, soybean oil and rapeseed oil. 

India to bear the brunt

India is likely to be among the hardest-hit importers, given the country’s heavy reliance on Black Sea sunflower oil supplies. This vulnerability comes at a time when Indonesia's B50 biodiesel mandate is already diverting more palm oil for domestic consumption, reducing exports and tightening global vegoil availability. As a result, India has increasingly been importing soybean oil from Latin America, but any disruption to Black Sea sunflower oil exports will further deepen the country’s dependence on long-haul shipments. Although a strong soybean harvest in Latin America bodes well for the vegoil market, helping bridge part of the supply gap, it is unlikely to fully offset lower palm oil and sunflower oil exports. Moreover, long-haul imports from Latin America will increase freight costs, thereby underpinning soybean oil prices in the price-sensitive Indian market, which could potentially result in demand destruction. Accordingly, we expect global vegoil trade to shrink this year.