On the previous week Azov’s area has been highlighted by appearance of spot tonnage in quite substantial amount. Main reason for it is recent fulfilment of Kavkaz lighterage contracts by several regional Owners. The fact that fleet supply strengthens mislead Traders into attempts to pull the rates downwards, wherein freight growth has been only slowed, as tonnage demand still has the upper hand.
FOB Russian ports grain prices have continued to decline, to which market participants have already accustomed. Deep Sea ports suffer more, as prices drop faster there (approximately 5 usd per week, compared to shallow ports). Nevertheless, Shippers hope for soonest recovery in the light of new tenders by Tunisia, Algeria and Bangladesh, who traditionally buy Russian grains via bigger tonnage. Sea-river fleet Owners are also positive regarding short-term market conditions, considering the latest Turkish tender, which largely won by Charterers, working ex Azov’s ports.
According to market participants, current low grain trading activity caused by low carryover stocks of wheat. Officially, they’ve hit 5-years low numbers, therefore a lot of producers are holding their remaining volumes, troubled by uncertainty of quality and quantity of forthcoming crop.
Caspian trade activity has lowered, owing to Nowruz. Due to lack of cargo orders ex Astrakhan, Owners consider fixing voyages from River ports, which are not in abundance either. Pre-carriage to River elevators is being complicated by usual for this time of the year road drying, so it is expected that leaders in terms of fleet demand upon the beginning of navigation shall be Charterers who failed to ship their full volumes within previous navigation. We expect Dubovka, Volgograd elevator and new elevator in Tatyanka to perform the most river shipments as navigation starts.
During the 9-th week an ongoing sharp decline of Azov’s freight market has stopped. Many vessels have suffered severe delays on passing Bosporus due to unfavorable weather conditions. So, in some cases time lost summed up to 5 days. Major part of this fleet had faced Charterers’ refuse to grant extension, in favor of spot and thus cheaper tonnage. Owners of cancelled vessels do not exercise any hurried attempts to fix new voyages, as FOB prices are dropping followed by seemingly increased variety of cargo orders, which in turn holds market at previous week level. Shall the region settle in today’s balance or not, the next week will tell: Traders consider commodities prices to be far from the bottom and expect fall to continue.
Ice campaign has been officially cancelled on 28 of February on the Azov Sea. Theoretically this should pull the freight market down, owing to inflow of vessels employed ex Black Sea ports during the wintering. But considering the current freight-wise rivalry of both basins, there is no point expecting any notable fleet supply increase on the Azov. With the abolishment of ice restrictions ADSC shall again become the waiting place for idle tonnage instead of Kerch. Therefore, Charterers working ex Temryuk are compelled to be thorough in their search of spot vessels, as upon north-bound Kerch passing Owners are reluctant to return to Temryuk for loading.
Mild weather gives ground to expect earlier than usual start of navigation. River may become accessible even in mid-late March, which shall make positive impact on current market owing to following main reasons:
1. A new season for river ports shall begin. With ingress of additional volumes into both lichterage program and direct voyages to Azov and Caspian destinations will grow in terms of fleet demand.
2. Transit cargoflow will return to the market. As we see, demand on general cargo shipments ex Black Sea to Caspian area increases year-by-year and even now Charterers are actively planning their programmes. Those Owners who are interested have already adjusted trade of their fleet in order to provide openings at most convenient places to pick up well-paid project cargoes.
New nitrogen fertilizers-producing plant is expected to reach full power in Turkmenistan during this year, which shall dramatically increase throughput of transit cargo ex Caspian region. Ship Owners consider this new cargoflow to achieve likewise potency as ‘common’ grain voyages ex Volga ports to NIP or to Turkey, all the more so as substantial part of local Owners have decided to completely avoid calling Iran out of fear of potential sanctions from USA.
Caspian market has seen improved fleet demand during the previous week. Charterers are actively trying to close the deals for each of their open positions before the coming of Novruz, in order to avoid additional storage costs and also to lower the risks of prices drop after the Iranian New Year. Therefore, freight rates are basically keeping the same level. It is expected, that in the light of holidays any Traders activity will be kept at minimum and in the mid of March, right before the start of navigation, tonnage demand along with rates may decline, albeit not for long, to current years’ all time low numbers.
Freight rates decline continues on the Azov Sea, while the main driver is still unfavorable situation on the commodities market. Turkish buyers are cutting the prices, following the declining lira. Concluding of new contracts becomes trickier as spread between buying and selling prices narrows. In the light of outstanding price on goods of Russian origin several buyers were compelled to develop other sources. Traders say, technically they are comfortable working with Russia, furthermore quality of goods is out of question, but current price level renders other aspects irrelevant as commercial part fails. So, nowadays major part of grains destined to Turkey is sourced ex West Black Sea: Ukraine, Romania, and Hungary, wherein Ukrainian producers shown most notable flexibility price-wise.
Aside from grave stillness of Russian inner grain market, export paces were halted by increased tariffs on pre-carriage of goods. Therefore most of the shipments performed now are ‘odds and ends’ of previously concluded contracts. Positive news regarding FOB-Azov grains price decline (about 7$ during 8-th week) surprisingly had no beneficial impact on the market. Importers are waiting for continuation of decrease and are not in a hurry to purchase. Considering the recent price surge, market participants expect this started decline shall proceed with similar haste.
Ice conditions in the Azov region are quite favorable for this calendar period. Almost no problems were reported in connection with berthing or with delays awaiting ice-breaker support. Nevertheless only a few Ship Owners are willing to employ their fleet on voyages ex Rostov ‘after the bridge’ terminals, except those bound for discharge there. So, the Charterers who decided to save on transshipment (‘after the bridge’ terminals generally charge less) may face difficulties finding suitable tonnage even on current oversupplied market.
Rates decline goes on within Black Sea as much as in the Azov area. According to local Traders, freight for Handy-size segment had already hit the bottom, leaving only improvement as an option, which is anticipated. Main reason for it is greater mobility of bigger tonnage, allowing them to change regions more easily, compared to coasters and especially to sea-river vessels. Therefore, deflux of unwanted fleet may alone improve the rates level.
Azov’s area has yet to find bottom freight-wise after week 6. 20 USD mark has been breached for voyages ex Rostov to Black Sea, following the still-weakening demand for local tonnage. Wheat prices FOB-Rostov, obviously the trendsetter, are growing, supported by, aside from other reasons, increasing costs of pre-carriage to port. Truckers have succeeded in their recent strike against low tariffs on grains transportation, which outpoured in improving prices on goods.
Spot tonnage’ situation becomes dramatic with more ‘newcomers’ adding every day. According to rules of caravan forming, vessel is not allowed to proceed with ice-breaker support until port or loading terminal provide their confirmation, therefore idle tonnage is gathering near Kerch. This makes easier for Ship Owners to consider cargo orders also ex Black Sea ports, despite the fact, that freight on such voyages has also been severely reduced during the last week. Lack of demand for grains on behalf of key importer states of Mediterranean market has impacted not Russia alone.
Caspian freight market looks well-balanced, as rates for voyages from Astrakhan are keeping mid-high 30-s USD. Grievous ice conditions at Volgo-Caspian Channel continue to narrow the available fleet, thus supporting the rates from falling. Freight ex Aktau or Makhachkala declines faster, the more Owners decide to avoid calling Astrakhan in favor of ice-free ports. Thereby, roads of these ports have become congested by 5-8 vessels, awaiting (and willing to) their turn for loading, despite approximately 10 USD higher rate for voyage ex Astrakhan.
Domestic agrarians are already preparing to next grain season. Owing to lack of strong frosts during this winter and also to abundant autumn rainfalls, winter wheat crops are found in favorable condition. According to different forecasts, total yield of wheat may sum up to 67-72 000 kmts, which is roughly equal to previous year’ crop.
Market participants agree that current, utterly disappointing situation with dull commodity market and Traders unable to make deals, shall in mid-term run (March-April) change for the better. Producers will be compelled to sell the remained goods prior to new crop if only to bolster sowing campaign. Demand for over-priced grains on the inner market shall not hold.
Azov’s market yet retains its declining trend. During the previous week workable level has been reduced on another 1-2 usd pmt. At any given time there is a substantial number of spot vessels idle at ADSC. Owners are ready to consider all cargo orders without preferences, albeit firm offers are few, as Charterers have completed their 2018’s programmes.
Nowadays it is hard to find any firm cargo bids. Aside from utter dullness of ‘traditional’ Turkish destination, also volumes’ throughput of Kavkaz lighterage have been reduced, which connected to introduction of new requirements of Russian Federal Service for Veterinary and Phytosanitary Surveillance. As a result, more and more ships find themselves free from contract jobs and add to oversupply of tonnage looking for direct voyages.
Despite the Charterers current ability to impose their desirable freight level, actual amount of contracts concluded do not grow. There is a vast gap between buying and selling prices on grains, which cannot be leveled via cheaper freight alone. The nearest perspective is bleak, continuous rates decline and even less shipments is expected.
Considering the utterly low Azov’s market, Owners are trying to reposition their tonnage elsewhere. Sea-types vessels with low draft, which traditionally performed voyages ex Temryuk, are now escaping from dropping rates to jobs w/I Med Sea. Sea-river fleet, on the other hand, has few options for alternative employment other than hauls from Black Sea ports of Ukraine. Even though in 2018 same to be considered as last resort and only by vessels w/o ice class, nowadays rates ex Azov are almost on par with Black Sea ports. In general, withdrawal of superfluous tonnage should support the freight level in the area, but this time fleet excess could hardly be neutralized, therefore overall picture shall not change.
Business activity in both Azov-Black Sea and Caspian regions has been heavily impacted by prolonged decline of USD/RUR ratio, which coupled with high inner market prices on grains, leads to lack of contracts signed. Several companies, which were contracted for grains delivery to Iran during whole winter period with fixed rate, are facing difficulties now due to currency fluctuations. Nevertheless, Traders expect market stabilizing, if not recovery, soon, owing to Iranian grains stock depletion, therefore Iranian buyers may reconsider their offers price-wise.
Azov freight market shows a significant decline. Rates for voyage from Russian ports continue its fall. The operating level on the route Yeisk-Samsun is at the level of the low 20s per ton of wheat / corn.
The price of wheat basis fob Azov ports still growths in the reporting week and reached its maximum values in the season. This led to a decrease in the number of export contracts concluded. As explained by market participants, the price is rising with the increased demand within the country. Many Charterers, in order to avoid signing contract, which potentially may occur unprofitable, they try to fix the vessels beforehand. But often, after failing on subs, the ship is cancelled due to absence of purchase.
As usual, long voyages are mostly demanded on the low market. In addition, back hauls from the Adriatic and the East Mediterranean have become much sought after. At such freight level, the fleet doesn’t hurry to return to the home region and may wait few days to meet laycan of back cargo.
Some terminals, located in Rostov after the bridge, arrange the commercial passage that reduces voyage costs for Shipowners and increases the attractiveness of loading after the bridge. Meanwhile, the long delays associated with the repair are not seen. The costs of the commercial passage is around 80 000 rubles and when divided among several ships, does not effect on the economy of the voyage.
The severe ice situation continues in Astrakhan and Volga-Caspian Channel. Normally, ships pass the channel within 1.5-2 days, while Shipowners try to avoid the most distant terminals, where the costs of tugs services and the risks of long waiting increase significantly. Due to this reason, the reduction of rates stopped, and even increased for loading on berths in the “deep rear”.
According to information from market participants, the Ministry of Agriculture plans to introduce regulation of the domestic grain market in the nearest future by resumption of state grain interventions. Previously, the transportation subsidy program of grain from remote regions of Russia was not as large-scale as expected, and had a little impact on the market.
Many Shipowners who did not hurry to fix their tonnage until the last moment, are forced to stand in Azov in the dead spot. The situation with “almost-firm” cargoes only worsen the owners’ distress. They are losing time to negotiate, getting failed on subs, and the vessel returns to the market. Some ships already idle for 5-7 days and the situation is not expected to be improved in the near future.
As practice shows, the waiting period for the passage of Kerch canal for ships proceeding for loading to Ukrainian ports of Azov sea does not exceed the standard waiting time for fleet, going to ports of Russian Federation. In spite of this, just to be sure, many Ship-owners continue to insist on incorporating “the Kerch clause” into fixture recap.
At the moment, ice restrictions have not been introduced in any of the sea ports of Ukraine. But, starting from 01.02.2019, disregarding the actual ice situation, ice dues will be introduced in Mariupol. This may slightly push up the freight rates for voyages from this port.
Freight level in the area is still decreasing, following the dramatic increase of prices on wheat basis FOB Azov ports. Major reasons are:
1) During December 2018 there has been held 3 tenders by GASC, within which about 470 000 mts of wheat of Russian origin have been contracted (part of these volumes’ price hit season-high record) with delivery dates end of January – beginning of February. Producers currently consider it to be more profitable to sell goods via Novo or Kavkaz to support this program to Egypt, therefore amount of coaster shipments have declined noticeably. Such a low demand for sea-river fleet has impacted directly on local freight rates.
2) Grain prices have also been affected by unofficial recommendations issued by Russian Ministry of Agriculture to major Traders to reduce the export pace in order to sustain balance on the inner market. According to official data, currently exported volumes overcame previously planned 40 000 000 mts of wheat, so the intention to limit the shipments within 42 000 000 mts till the end of 2018-2019 grain season has occurred. Such measures are aimed to avoid shortage within country and consequently to avoid unrestricted prices growth for domestic consumers.
The decline of wheat cargoflow in the area has already reached the level at which amount of open tonnage plays into the hands of Charterers with non-grain cargoes, such as coal and steel products. Few weeks ago grain clean vessels refused to even consider other cargo orders, now several Ship Owners have already changed their preferences.
Starting from 23 of January to 28 of February, railway bridge at Rostov is under repair jobs. During this period, vessel passage will only be possible when bridge girder is elevated. According to information from local port agents, waiting time my come up to several days, moreover passage will be only allowed in case of gathering of “substantial” number of vessels. Due to the above, very few Ship Owners are now willing to discuss loading after bridge, freight difference, compared to terminals before bridge, have grown up to 2-3 usd and during the negotiations Owners insist on counting time lost for bridge passage on Charterers’ account.
Despite the ongoing market decline, Ship Owners are not keen on fixing their tonnage ahead, especially vessels with opening dates on end January – beg February. They are hoping for market recovery and rates improvement, sometimes even till ship is in spot position. Most of them are no longer prioritize short or long voyages, as sole aim now is to avoid vessel idling.
Perhaps the most difficult times now are for 5000 dwcc sea-river fleet Owners. All in all Traders activity is weak in the Azov and the bigger the parcel the harder it is to conclude sales contract. Some time ago 5k-tonners held higher rates than 3k-tonners, nowadays freight for such fleet declining at highest pace.
Caspian freight downfall has slowed down during the previous week. Almost all market participants have returned to business after prolonged holidays and trade activity started to recover. Iranian demand for corn remains stable and, according to common expectations, shall strengthen within next few weeks. It is supported by Iranian government – recently, it introduced tender for purchasing of 300 000 mts of corn and 300 000 mts of feed barley with delivery dates of February – March, that is why more and more Traders consider the redirection of their cargo flows towards Caspian ports, where price on corn is quite attractive.
The stabilization of workable freight level in Caspian area is also dependent on unfavorable weather conditions, as almost whole week 3 there has been storm at sea and strong wind up to 25 m/s. Due to this, portcalls schedule was broken, shipments suffered delays and artificial fleet deficit has occurred in spite of actual weak vessel demand.
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.