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.
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.