Freight market on Azov Sea looks optimistic after recent prolonged holidays. Spot tonnage numbers are quite low, which is unusual for the post-holidays weeks, while Ship Owners are keeping calm and not oversupplying the market with their opening vessels. Rates have moderately declined during the long day offs in Russia followed by decrease of cargo orders amount. This factor has been countered by Rostov’s Harbormaster’s ice dues introduction decree as of 4-th of January for vessels intending to call ports Azov or Rostov: now on it is imperative to sustain no less than 1st ice class, which decimated numbers of able fleet for local Charterers.
All in all, current ice conditions in the region are stable. There are no severe delays in navigation ‘in’ or ‘out’. 3-rd week may yet hamper this, as high winds are expected, which may last up to a week and make an impact on local ice conditions. Occurrence of strong ice-drift is predicted, impeding fleet passage through ADSC.
Firm cargo orders with spot laycan dates ex Russian Azov’s ports are few and rare these days. Holidays, Traders’ lack of activity and current commodity inner market conditions, – are among major reasons. Many suppliers find it more profitable to work on domestic market, wherein feedstuff producers and poultry farms are willing to offer higher price than Exporters. Charterers consider that rates shall not increase during the next few weeks. That idea is supported by substantial ruble strengthening, compared to previous year’s end. The bulk of grain flow towards the southern Russian ports is delivered under previously concluded contracts, as of now producers are reluctant to agree on offers’ conditions which Traders can propose. Highest activity is demonstrated by shippers of niche goods, such as bran and meal.
Astrakhan, on the contrary to Rostov, is suffering severance of ice conditions in port limits and channel, wherein situation became more unfavorable during the Holidays and applies adjustments to vessels schedule. Many Ship Owners have decided to reposition their fleet on voyages ex ice-free ports of Caspian Sea, such as Makhachkala and Aktau. Moreover, the sharpest rates decline has been noted on hauls from Astrakhan. Volumes ready for shipment have been thinned out, due to defection of continuous on-carriage of goods, which gives ground to expect further rates decline.
Azov’s area market has slowly turned the tide towards Charterers’ favor. Almost every Ship Owner is now actively looking for cargo orders with laycan on the holidays dates, however scarce they may be, as in general Charterers postpone their shipments till 9 of January onwards in order to ascertain serene day offs. So the rates came to be clearly divided on ‘before’ and ‘after’. Demand for spot tonnage is dramatically high with rates retaining the previous week numbers. First half of January, on the other hand, is a laycan which many Owners would prefer to discuss now, even despite low freight.
At the end of December unfavorable weather conditions have plagued the Azov’s Sea once again. Due to dramatic water level fluctuations at local ports Owners of vessels which were berthed or steamed to loading port, have suffered time lost and delays. Thus, tonnage, planned for last short haul followed by long voyage (East Med or Adriatic) during holidays, is now endangered to miss laycan and idle for whole holydays or to open in spot right before the day offs.
During the previous week Authorities of Azov’s basin have introduced ice restrictions, which caused severe misunderstanding among Ship Owners. Though requirements for vessels are clearly stated: age less than 30 years and ice class confirmed by RMRS, the document does not provide effective dates of coming in force. So, to be on the safe side, part of local Ship Owners has declined to call Azov’s ports, leading to notable decrease of spot tonnage.
Caspian market continues to decrease slowly. Better part of Charterers has already finished their spot shipments and now is waiting for freight drop in order to resume. The main reason which prevents market downfall currently is high demand for tonnage ex Makhachkala and Aktau.
During the previous week Azov’s market has become stable. Even though not long ago it was clearly the ‘Owner’s market’, currently the balance of power has achieved definite parity. Main reason for it is ongoing situation on the commodity market: amount of willing buyers for grains of Russian origin is decreasing, owing to price growth on inner market and emerging competitive offers from other exporting states. These days workable freight level for voyage with wheat from Azov to Samsun is about 30 usd pmt, while few Ship Owners are ready to consider even lower rates in case they prefer short-leg haul.
After prolonged weather-caused delays, most Owners are yet to see opening dates of their fleet, which leaves no other option but to postpone firm work till next week. Charterers, on the other hand, are trying to avoid fixing with laycans on last week of December, therefore are concentrating on finding (few and rare now) spot tonnage, while holding the main program in hope of fixing cheap vessels after holidays.
As expected, ice restrictions at Azov/Rostov shall be introduced after 20 of December, while fleet w/o ice class continues to work ex Azov’s ports. Still, there is a risk that in case of delays or sudden weather conditions change vessel may become idle at load port till the end of ice campaign. Due to the latest, a number of Ship Owners are now reluctant to perform voyages from Azov and they are willing to improve their offers freight-wise for cargo orders ex Black Sea ports or from Temryuk.
Due to seasonal price hop on Russian wheat, Ukrainian Traders have become more active. Mostly those, who ship from Azov’s ports of Ukraine, where after recent incident involving war ships, it is sufficiently harder to find Owners, willing to pass Kerch strait. As a result, local goods are declining in terms of price, following by increasing attention of Traders.
Deep-sea ports of Black Sea have seen no change in comparison with previous week. Fleet supply and demand are more or less equal and rates are still higher than it was before high grain season (May-June). Last done Kherson-Marmara with 3-5kt of soy or bran was 22 usd pmt.
Grain shipments ex Danube ports have become more frequent recently. Such business looks more attractive for those Ship Owners who usual perform hauls from Temryuk, as freight for the moment is higher and fumigation requirements are not as strict as it is in Temryuk.
Unfavorable weather conditions in Caspian area have fortified the market against an outlined decline. Astrakhan has been affected by heavy rainfall while Caspian Sea suffered stormy weather. More than 10 vessels have gathered on the roads of Aktau awaiting their turn for loading operations. As it seems, local fleet is mostly occupied on long-term contract jobs, therefore it’s hard to expect that sufficient amount of tonnage shall open after holidays. Most likely rates will decrease smoothly, followed by one-by-one vessel’s return to voyage-basis employment.
The freight market continues to go up slowly in the Azov region. First of all, it is connected with the New Year holidays are coming. Exporters try to send as much cargo as possible before the New Year in order to avoid dealing with problems for weekend. According to information of the Azov Charterers, customs offices and ports in the Azov Sea will not work from December 31 to January 2. At the same time, taking into account the experience of previous years, until 8th January, as a rule, new contracts are not concluded. During new-year time due to the low demand for tonnage, the rates are decreasing, and lots of tonnage will accumulate in the Azov basin by the beginning of the first working week in the new year (8 January).
The expectations of the Charterers, who were going to work from Temryuk with the Owners of fleet without ice class at low rates, are not yet materialized. Officially, ice restrictions have not been introduced, so the rates from Temryuk keep the same level. The requirements of local phytosanitary services for ships made additional problems to Exporters. There are a lot of refuses for full fumigation in Temryuk even if ships have technical features to carry out this procedure. As a result of this, the rates in Temryuk port do not increase.
Due to the incident at the Kerch Strait, some Ship Owners, who work from the Ukrainian ports of the Azov Sea, lost much time passing through the canal (about 5-7 days) owing to reinforced control at the border. In this regard, the Ship Owners insist on the introduction of a “Kerch” clause in the terms of the contract. According to new mark all the time spent standing by the Strait should be counted as laytime. Despite the fact that many Traders agree to this practice, there are very few Owners who want to do voyages from Mariupol / Berdyansk.
After the imposition of military emergency in Ukraine (week 48), some large foreign companies and banks investing in the agroindustrial sector of Ukraine consider a temporary suspension of funding. This may adversely impact the credit opportunities of Ukrainian agrarians and the demand for Ukrainian grain all over the world. In this context Russian grain may look more rival and attractive on the world market. If the situation evolves for the worse scenario, Russia will lose a serious competitor in the field of grain exports.
Experts predict major changes in the Caspian freight market in the near future. After a period of strong growth during November, rates started back at week 49. Thus, freight on the basis of Astrakhan – Iran reached USD 50 per ton of barley. This is by reason of a large number of tonnage, which was accumulated in the basin, poor freight nomenclature and volume of trade are typical for Caspian region. The pace of shipments is reducing, the market has stopped in tracks.
In addition, nowadays Charterers are reluctant to dispatch grain shipments from Astrakhan, being confident that the freight market will begin to decline rapidly in near time. It is expected that by mid-December, freight will reach the level of 40 USD. Ship Owners, on the contrary, understand the advantages and try to conclude new contracts for 2-3 months at current rates.
Climatic and geopolitical factors continue to influence the dynamics of freight in the Azov basin. The deterioration of weather conditions – typical for this time of the year – led to the long-term closure of the Kerch Strait, resulting in lots of vessels were locked on approaches of the Strait. Such delays, as a rule, provoke an increase in rates. The Exporters tried to charter vessels at the current market as quickly as possible, until the further freight increase will not come. Ship Owners, on the contrary, postponed the conclusion of new contracts, as they predicted a future growth of freight on week 50. At the same time, it is hard to tell that this situation will lead to a speedy jump in rates in the region. After improving the weather conditions ships were stuck in Kerch will begin to make voyages almost simultaneously, and come back about even dates. A great numbers of spot tonnage can provoke a drop in freight.
In addition, offshore winds in the area of the Rostov port resulted in a freight increase. Due to the water-level decline in Rostov, only Omsky type vessels could approach the port which made them the much-in-demand on the market last week. Therefore, some Ship Owners realized this advantage and overstated the rates for some voyages.
After the incident with the Ukrainian war-ships in the Kerch Strait and the subsequent introduction of military emergency in Ukraine, many Ship Owners began to include additional risks in the cost of insurance, and in such a manner, raise the freight. Also, according to the information of the Azov traders, the Ship Owners, whose fleet was going for loading to the Ukrainian ports of the Azov Sea (Mariupol, Berdyansk), unilaterally canceled contracts, therefore the rates from these ports had grown significantly.
Despite the fact that the Master of the Azov port issued a decree on the entering into force of ice restrictions, many Owners of vessels without ice class continue to work from there. The matter is that nowadays the requirements for the compulsive ice class to the ships are not spelled out in the order, as well as there are no age restrictions of the vessels. This fact allows to restrain the freight from more rapid increase, which was predicted last week. Currently, the rate reached USD 31 pmt of wheat basis Rostov – Marmara.
The freight market has tailed away in the Caspian. This is largely due to the fact that a lot of Exporters have already contracted the necessary amount of vessels for the winter period and do not need to attract an additional fleet. Moreover, with the closure of navigation agiotage around the tonnage had fallen. Most of the Charterers have carried out urgent shipments earlier and come to the problems of vessel choice more rationally. At the same time, the market remains highly volatile in Caspian basin, and freight difference has reached USD 12 per ton of barley (from USD 40 to USD 52).
There was an official closing of navigation in the Volgodonsk water area this week. Some ships might have time to complete the voyage in transit from the Caspian Sea to the Azov Sea. However, owing to bad weather conditions, navigation was stopped earlier. It was used as a return reason of ships to the ports of loading and further wintering in the Caspian region.
It is expected that the Poti port will be the most popular as a transiter for vessels are bounded for Azerbaijan, Turkmenistan, Kazakhstan and back during the winter period. First of all, it concerns shipments of nitrogen fertilizers from Turkmenistan, where a new urea factory should start to work in December. Market participants are confident that the Poti port cannot yet provide competition to the largest ports of the Black Sea, but majority experts agree that the freight nomenclature will expand in the region. This circumstance will affect the growth of rates in the Black Sea region.
Expecting the introduction of ice restrictions (at week 48) in the Azov basin, the decline of freight market has stopped. Moreover, rates had risen by USD 2 for all destinations of Black and Mediterranean Sea. Market participants attribute this factor to a small amount of ships working from the Azov Basin during the period of ice restrictions. As practice shows, the number of such tonnage decreases every year, as a result, the rates for the “rare” tonnage with the ice class has grown. In addition, the freight is increasing due to Turkish Importers. According to the Grain Traders, the Turkish side had bought fewer than half of the volume of last year during current grain season. Therefore, the increase of rates is possible due to the large number of contracts with Turkish Traders in the near future.
Charterers from ice free ports took a “wait-and-see” position. As soon as the restrictions come into force on week 48 the rates for voyages from ice-free ports of the Black Sea region will fall, as the number of vessels fitting for work from there will increase significantly. Resolution about ice restrictions was issued by the captain of the Rostov-on-Don port at the beginning of week 47. Owing to the lowering air temperature and the prospect of ice cover in the water area of ports, the period of icebreaker support of vessels in the port will start on November 26. However nowadays there is no necessity for the help of icebreakers. At the same time, only those vessels that have reserves of fuel, food and water for not less than 14 days are allowed to put into port water area.
Azov Ship Owners are already beginning to plan their positions on New Year’s holidays in order to avoid calling Russian ports during continuous weekend. Therefore, long-distance haul will be in great demand in mid-December and rates for these voyages decline due to an increased tonnage supply.
Experts predict that the available fleet in the Caspian Sea this year will be about 15% more in comparison with last year. And taking into account the small volume of new harvest, Charterers are confident that freight market can collapse in the region in near months. Thus, Traders are reluctant to conclude new contracts on the current high rates. The freight added USD 3 and reached USD 51 pmt of barley basis Astrakhan – Iran on week 47. Charterers see the main reason of such dynamic in fleet shortage on the Caspian basin. By the end of navigation, a lot of Ship Owners tried to take voyages from the river, during that time there was enough cargo in the Astrakhan port, which is now actively exported to Iran.
Due to the lack of tonnage approved for performing of complex fumigation, many Caspian Traders look for other ways to deliver cargo to Iran. Thus, for example, some Exporters charter only those vessels where prophylactic fumigation of grain is possible. Therefore, the first disinfection is carried out at the port of loading, and the subsequent – after discharging in Iran at customs warehouse. Frequently such voyages are more profitable for Charterers, since the Ship Owners of non-grain vessels agree with freight level are lower than average market rates.
During the previous week the slowing of freight decline on Azov’s Sea has reached such condition so that it can be considered a full stop. Main reason for it is a growing USD to RUR ratio, which is getting more attractive for Exporters due to increasing (in rubles) price on goods.
Many market participants have already been accustomed to tendency of when USD/RUR ratio grows, freight increase follows proportionally. This time, we have not seen any positive signs other than stop of decline. According to expectations of several Ship Owners, actual market improvement shall commence as soon as ice restriction are introduced and supply of available tonnage is greatly diminished.
Week 46 will be remembered mostly for its utterly unfavorable weather conditions which severely impacted on tonnage positioning in both Azov and Caspian areas.
Strong eastern wind has dramatically reduced water level at ADMK, which led to accumulation of vessels at channel and also of laden ships on inner roads of ports Azov and Rostov. Railway bridge raising at Rostov has also been temporally cancelled. This spoiled voyage plans for fleet which aimed to perform ‘last haul’ ex river ports. All in all such delays are adding to freight market increase, as when tonnage, awaiting permissible water level to sail, shall almost simultaneously depart, a sharp deficit of fleet supply may appear.
In Caspian region stormy wind has spoiled the game for most Ship Owners, who consider repositioning of their tonnage to Azov area. Substantial number of vessels is still being delayed, awaiting completion of discharge of transit cargoes. Kazakh ports suffer the most from congestion caused by weather. Such situation will lead to unexpectedly notable amount of vessels remaining in Caspian area for wintering, therefore, as soon as river navigation will be closed, rates may drop more decisively than it was previously considered.
On the week 46 an annual grain conference was held at Geneva, which gathered major part of Traders and understandably reduced market activity almost to zero. It is highly possible, that in the light of USD growth, conference ending and lack of fleet supply – all this in next week – freight market may expect soonest improvement.
Forthcoming closure of river navigation highlights the question of ice campaign introduction in Azov’s sea for many Ship Owners. According to local port agents, Authorities of Volgo-Don basin are yet to announce the exact dates of campaign. Nevertheless, Owners of fleet w/o RMRS permission to work under ice conditions have already been advised not to complete with ‘back’ cargoes to Azov ports after second half of November. We expect soonest rates growth for such voyages.
Market decline in Azov area has provoked freight decrease for back hauls ex Adriatic and West Med. Few weeks ago Owners of sea-river tonnage were not willing to start negotiating cargo orders without prior confirmation of their desirable freight level, as it was more preferable to revert rapidly to Azov ports for main cargo. Currently the situation has changed so that back hauls are getting more sought-after to such extent that Owners are readily idle their vessels for couple of days only to meet the laycan.
Direct participants of Kavkaz roads’ lighterage consider that with good chances cargo throughput may shrink dramatically even from the start of December. A number of Ship Owners have already decided to work their tonnage on the market as their contract employment is at the end. This gives ground to expect conservation or even decrease of freight rates during December despite the introduction of ice restrictions and reduction of tonnage supply.
The ongoing rates decline on Azov’s sea is a result of weak demand for Russian wheat, which is not positive for some time now. Wheat prices FOB Azov ports have started to drop, following the inner market, where during the previous week prices shown gradual reduction with RUR 200-300 pmt steps. Still, freight decline is not so sharp, owing to several factors. Major part of tonnage shall open in mid-November and, in case till those dates, there will remain a substantial number of spot positions, market will go down. Otherwise, if fleet shall be fixed prior to spot dates, rates downfall is unlikely to happen.
Amount of sales contracts concluding on Black Sea commodity market has reduced notably, mirrored by according change of firm cargo orders. Turkish direction, in the absence of decent wheat flow, mainly retained by feedstuff. Lira continues to weaken and Exporters are looking towards further directions, such as Lebanon, Egypt, Greece, and Italy. Those who are able to execute sale to Turkey are now embracing ‘wait-and-see’ approach, as they expect rates to decline so that not the best sale may be compensated by winning of better freight.
Noted by several Traders, tonnage demand reduction in Azov’s region has been impacted by receivers, based in east Europe, which traditionally transship goods on river barges to further deliver it inland via Danube River. Latest sharp decrease of water level in Danube prevents normal work on such route. Currently warehouses at Constanta port are full which leaves no other option to the buyers but to decline any new shipments.
As it has been announced earlier by Authorities of Azov-Don basin, the Kochetovskiy waterworks shall be locked starting from 28 of November due to repair jobs. Therefore in order to pass Kochetovka, vessels must enter 1-st water lock from Volgograd side not later than 24 of November. Owners are planning their fleet positions accordingly. Another meeting of Authorities shall be held on 15 of November, where they decide final dates of navigation closure.
A grain forum in France, a severe storm in the Black Sea and a low business activity of Turkish buyers resulted in the freight market in the Azov region continuing to decline, as expected week 42. Thus, workable rates maintain USD 29 per ton basis voyage ex Rostov to Marmara with wheat.
The leading grain Traders met at the EUROPEAN COMMODITY EXCHANGE 2018 conference in Strasbourg on October 24-26. During the symposium, a lot of Exporters suspended their commercial activity until the end of the 43ed week. Thus, forum participants had no opportunities to negotiate firmly and refused to accept the proposed contracts at the last moment. Being in an uncertain position, some Ship Owners were ready to discuss voyages at rates below the market by USD 1-2, provided that the contract is signed immediately.
Owing to the prolonged storm in the Black Sea (wind speed reached 20 m/s), which was ongoing until week 43, there formed a queue of ships on the approach and exit from the Kerch Strait. Due to imposition of the state of emergency in the coastal zone, the ships were forced to wait for the end of the foul weather and could not start or end their voyage. In this context, some Charterers canceled the ships. But by the time when a large amount of tonnage had been opened in the Azov Basin, Traders had the opportunity to conclude new contracts at rates lower than last time. This factor also contributed to the reduction of freight in the region.
This situation demonstrated that the market almost completely swung to the side of the Charterers. Ship Owners understand that future growth of freight is unlikely, as a result they try to make deals as soon as their vessels discharge previous cargo. Also in the light of a falling market the demand for long-distance hauls has increased among Ship Owners, in this way, they can get maximum profit from voyages at yet high freight. Ship Owners, who work ex Azov Sea ports, have recently shown an increased interest for the back-haul voyages.
During the high freight market season it was not profitable to lose time on additional port call and loading operations, fleet tried to return as quickly as possible for the main cargo – the grains. Today the intensity of shipments is reducing; therefore Ship Owners are more enthusiastic to consider the back-haul, trying to provide their fleet with any work.
Long-distance routes are growing in popularity due to the poor financial situation of Turkish buyers. In recent weeks, the number of requests for shipments of grain from Greece and Italy has significantly increased, more contracts for medium and long-term destinations are being signed. The rates for such hauls are declining, but at much slower pace.
The freight from the river has grown significantly at week 43. This is due to the approaching end of the navigation period and a high demand for tonnage in this segment of shipments. Currently, considering the schedule for closing the locks, lots of Ship Owners are already refusing to work in mid-November from the ports of the Middle Volga. According to the forecasts, temperatures are expected to fall below zero at week 46 (November 12-18) there. Exporters who don’t have time to carry out the cargo from river elevators are ready to raise the rate just to find suitable vessels. Nowadays the average rate basis voyage of the Samara – Iran amounts USD 63 pmt, which is USD 3 more than the last week. Market participants predict that freight rates for shipments from the river will decrease as the closing dates of the Volga locks are coming.
Today there is a conception of the deployment of the fleet during the winter. Apparently, the number of fleet in the Caspian region for the next few months will be fewer compared with last year, but a quantity of cargo is expected to be less. Taking into account the current state of the market, Traders rely on the stability of freight during the winter or even a small increase. At the same time, market environment will depend on the imposition of US sanctions against Iran and their consequences for regional Ship Owners and Exporters.
Despite the tendency to decreasing, market participants predict a revival of freight growth in the near future. According to information from the Charterers, there is a high demand for feed stuff in Turkey. A large amount of shipments with such sort of grain can result in to increase the volume of exports to Republic, in spite of the tough economic situation in the country.
Another reason that may lead to increase of freight is the appearance of grain on the market from the intervention fund of the Russian Federation. The Government released for sale 1.5 million of wheat for further export. Thereby the authorities intend to reduce wheat prices in order to step up pace of exports through injection of grain into the domestic market. The demand for Russian-flagged tonnage is rising even more as Traders need to carry out the grain before river navigation will be closed.
For the same reason, nowadays the Owners of vessels without ice class are the most active on the market. As soon as ice restrictions come into force in the Azov basin (the end of November), the water area will become closed, which means that the number of available routes for voyages will be unapproachable for them. Thus, now they are trying to make more short-hauls and avoid long-distance voyages in order to ensure fleet turnover at current rates.
In consequence of water level fluctuation in the Azov basin (ports Azov, Rostov, Yeisk), some vessels weren’t able to depart the port owing to offshore water. Tonnage was forced to stand idle before water-level recovery (up to 3.8 – 4 meters), considering that the drafts of majority laden vessels more than 3 meters. As a result of this, delays of shipments and change of fleet schedule in the region were starting.
However offshore winds in the area of the Volga-Caspian Sea channel led to an increase in rates. Due to the water-level decline, the approach of ships to the port of Astrakhan was problematic. And moreover, the dry-cargo vessel with Iranian flag took the ground. Thus, tonnage couldn’t operate with full load, and a substantial part of the Owners reoriented to the deep-water ports of Caspian Sea (Aktau, Baku, Turkmenbashi). Even in spite of the fact that Astrakhan Charterers were willing to pay above the market in order to keep the contracts. This situation exacerbated a problem of the fleet shortage in the region, and pushed the freight up. Therefore, rates reached USD 60 pmt of barley basis Samara – Iran. This is 2 USD more than week 41.
In addition, Shipowners continue to move their tonnage from the Caspian basin. Also, strain on the market is created by USA sanctions against Iran, which will come into force on 5 November and will be directed to the shipping industry. Anticipating the difficulties on the freight market in the near future, caused by sanctions, many Charterers are trying to contract available fleet on consecutive voyages from Aktau and Astrakhan for a long time before restrictions begin to take effect.