Nowadays there is a period of freight rise in the Caspian Sea. First of all, this is caused by the shortage of Russian-flagged tonnage in the region for shipments of new corn harvest from Volga ports. The demand for such a fleet is increasing, as a large amount of grain is stored in river elevators, where the Owners of vessels with the Russian flag work from. A part of Charterers has already signed contracts for the winter period at a growing market in the hope that these deals will turn out the most profitable. The other part considers that the freight market will grow in the nearest future, and contracts would be concluded at more advantageous rates. In the context of fleet deficit, some Traders consider other options for grain transportation. Last week the demand for hauls by cabotage voyages from Samara, Tolyatti and Kazan to the Astrakhan port increased; from there the corn is carried out to Iran by non-Russian-flagged vessels. Therefore, in lights of the higher demand for shipments from the river, rates reached USD 58 pmt of barley basis Samara – Iran. This is 2 USD more than 40 weeks.
In the Azov region, on the contrary, freight has dropped over the past period. Market participants connect it with the time of uncertainty. As expected earlier, the export pace of wheat to Turkey continues to decline. Due to the fact that a lot of Turkish millers forfeited credit support of banks requests from the Turkish partners for buying Russian grain significantly decreased. The requirement for wheat in the domestic market is satisfied with purchases of the Turkish Grain Agency (TMO). Thus, the reduction in cargo traffic to Turkey led to freight rates in Azov basin started to go down.
Now a bacteriological analysis of grain is still up-to-date. At the same time, Charterers note that if tests were conducted in 7 days last week and led to substantial delays in shipments, now situation has changed. Today phytosanitary researches takes less time, and the dispatching of vessels is much faster. Despite this, many Charterers prefer to wait for the total cancellation of inspections in order to protect themselves from possible losses due to bureaucratic delays. As a result freight reached USD 31 pmt of wheat basis Rostov – Marmara. This is 1 USD less than previous period.
There were small changes on freight markets of the Azov and Caspian regions week 40. The rates in Azov Sea kept the level of last week, but increased in the Caspian. Nowadays workable freight rate for voyage ex Rostov to Marmara reached USD 32 pmt of wheat, and amounted USD 56 pmt of barley basis Samara – Iran. This is 1 USD more, than previous week.
First of all, market participants connect the stable state of Azov region with introduction of additional tests for excluding infected grain and procedure of complete (not prophylactic) fumigation due to complaints about unsatisfactory grain quality on the part of top importing countries. The analysis of wheat takes about 7 days. Vessels won’t be allowed dispatching the grain from ports without such documents. In this context many Exporters had taken wait-and-see attitude, and didn’t transport new parcels. As there is no conversations about the abolition of these researches, Ship Owners have already noted that the amount of cargo is decreasing in the region, which means that rates may begin to fall in the near future. Moreover, for the same reason, voyages from the ports of Azov basin to countries where bacteriological analysis of grain is not necessary, become more popular among Ship Owners, as well as long-distance hauls to the Adriatic, which take more time. Ship Owners suggest by the time that they will return to the Azov Sea, phytosanitary certification of grain cargoes can be canceled.
Traders noted a slowdown of export pace to the Turkey. Firstly, they find the reason of this in difficult economic situation Republic. Accordingly, a lot of Turkish millers forfeited credit support of banks. American sanctions, outflow of investors and inflation have led to the fact that Turkish buyers are planning extremely-cautious new contracts, as the economic future of the country is too unpredictable. The reduction in number of shipments to the Republic also conduces to the conservation and later decreasing of the freight market in the Azov Sea.
There was a Russian-flagged tonnage deficit in the Caspian region on week 40. As soon as parcels of new corn harvest started to form at the river elevators, the demand for such fleet has increased owing to grain cargo is stored there. Many top Exporters, who are also have own fleet, had chartered most of ships to their needs. Thus, other Traders are forced to agree on higher rates in order to carry out contractual obligations. As a result the freight in the Caspian basin after a long stable period began to grow.
The Azov region is experiencing a period of freight increasing. Over the past week, rates from the Azov basin and Russian river had risen by USD 2 for all destinations of Black and Mediterranean Sea. Nowadays workable freight rate for voyage ex Rostov to Marmara reached USD 32 pmt of wheat on week 39.
Market participants find the reason of such a dynamic in expansion of demand for Russian grain on the Turkish market. The Turkish Grain Board had bought 252 thousands of tons of Russian wheat last week as a result of the tender. Requirements for tonnage, which will transport the declared volumes of grain, are standardized. Thus, according to the tender, the carrying capacity of dry-cargo ships should be 6 000 tons, and the grain should be exported in the same extent. The Owners of tonnage, which has different specifications, began to raise the freight in the hope that during the grain transportation to Turkey (wheat must be carried out before the end of October) the deficit of vessels will develop in the region and the Charterers will have to agree on the conditions of the Shipowners.
Moreover market participants note a slowdown of export pace. First of all, Traders connect it with the growth of the ruble and the drop in grain prices on week 39. For a short time, the Russian currency has risen against the dollar by 5%. In the context of the strengthening of ruble and the growing freight in the region, many Charterers avoid new contracts. Therefore, nowadays it is quite difficult to seek the high quality grain with sharp price on the market due to substantial reduction in supply of cargo in the Azov region.
There is a period of stability in the Caspian basin. Traders are expecting the corn of new harvest. Although the corn parcels has already arrived at elevators, this volume is not enough to make the difference. Thus, the balance of the freight market is supported by a small supply of fleet and cargo in the region. The rates kept the level of previous week and amounted USD 55 pmt of barley basis Samara – Iran.
It is expected that the freight rates for transit hauls from the Black Sea to the Caspian Sea will grow at close of river navigation (end of November). This is largely due to the increased demand for Russian-flagged fleet, which is occupied in shipments from the river to the roads of Kavkaz port, and will also be contracted for the realizing of Turkish grain program. In this connection, Charterers of general cargoes are trying to conclude the contracts with Ship Owners in order to guarantee the vessels for work at the end of October – the beginning of November.
The Azov region is experiencing a period of freight increasing. Over the past week, rates from the Azov basin and Russian river had risen by USD 3 for all destinations of Black and Mediterranean Sea. Nowadays workable freight rate for voyage ex Rostov to Marmara reached USD 30 pmt of wheat on week 38. This is 3 USD more than level of previous time.
Market participants find the reason of such a dynamic in fleet deficit as nowadays essential number of vessels is not able to carry grain cargo from ports of the Azov Sea. In the context of frequent complaints about unsatisfactory grain quality on the part of top importing countries (Egypt, Indonesia, Sudan and Israel), the Federal Service for Veterinary and Phytosanitary Surveillance tightened requirements for wheat exported from Russia. The additional researches for excluding infected grain and procedure of complete (not prophylactic) fumigation were introduced last week. The analysis of wheat take from 5 to 14 days, and the vessels will not be dispatched without such documents.
The complex fumigation, in contrast with prophylactic, involves the processing of the whole ship, not only a hold with grain. Not all ships have relevant technical features for complex fumigation of grain with crew aboard. And members of crew have to leave the ship for several days, resulting in extra costs. Therefore, the number of suitable tonnage that can export the grain according new rules has significantly reduced. This procedure led to increasing rates on voyages with convenient vessels. And, on the contrary, the freight has considerably fallen on hauls by vessels which are not adapted for full fumigation.
Owners of the tonnage, who are unable to transport grain due to new requirements, focused on coal and scrap shipments. The Charterers consider that a growth in fleet supply can provoke a fall in rates for transportation of these commodities in the near future.
There is a period of stability in the Caspian basin. The corn of new harvest has not yet arrived at elevators, and the Traders keep the barley in anticipation of rising export prices, which is forecasted due to a poor yield. Thus, the balance of the freight market is supported by a small supply of fleet and cargo in the region. Therefore, the rates amounted USD 55 pmt of barley basis Samara – Iran, which is equivalent of level week 37.
There was an increase in demand for grain shipments from the Azov region on week 36, the Charterers has been realizing their export program ambitiously. Over the past week, rates from the Azov basin and Russian river risen by USD 2-6 for all destinations of Black and Mediterranean Sea. Nowadays workable freight level for voyage ex Rostov to Marmara reached USD 25 pmt on week 35. This is 3 USD more than level of previous week. Ship Owners rely on the market will provide great opportunities for next few weeks, for this reason most of the contracts are concluded on spot dates. The rates on remote destinations are rising faster than short-distance hauls, as Ship Owners try to work on a short leg within the Black Sea. Thus, they will be able to catch the moment at the market’s peak.
A prolonged severe storm in the Azov basin last week led to the accumulation of ships in the Kerch Strait and on the approaches to the Azov-Don Sea channel. Tonnage is forced to stand idle due to hazardous weather conditions and lowering of the water level in the channel (up to 3.1 meters) owing to offshore winds. As a result of this, charging of ships and a corrective of the fleet schedule in the region are starting. In these conditions, the Charterers incur additional expenses for storage of cargo in elevators. Considering that the drafts of majority vessels in full load more than 3 meters, the ships are waiting for optimum level water recovery (3.8 meters) in order to leave Azov.
In mid-September, market participants predict an increase in rates immediately after the tonnage almost simultaneously leave the Azov Sea. The number of vessels in the region will be significantly reduced, and Owners of free tonnage will raise the freight rates.
The main business activity on the river moved from the Volgograd region to the Balakovo, where one of the top Russian Exporters is currently currying out substantial volumes of grains, for this reason rates from there grow faster. There are more shipments to the Black Sea directions than to the Caspian. Market participants explain this by the fact that the corn harvesting is at a slow pace, and parcels of new yield is poor. Therefore, there are no other goods except barley for shipments to Iran. In this context the demand for Russian-flagged tonnage is going up, the rates reached USD 54 pmt of barley basis Samara – Iran, while the freight in Astrakhan remained at the level of last week – 28 USD due to poor supply of cargo. It is expected that the corn parcels of a new yield, which slowly come to the port of Astrakhan and river terminals, may change current situation. At the same time, Caspian Traders consider that economic sanctions against Iran hamper international trade and also keep the growth of freight down.
There was a fleet deficit in the Azov region on week 37. During prolonged period of rate reduction over the past few weeks Ship Owners preferred to conclude contracts on remote destinations due to these conventions are more profitable for them. For that reason a significant part of the tonnage hasn’t yet returned to the Azov basin. Thus, owing to high demand for shipments to Turkey and the lack of spot vessels, rates for voyages to the Turkish Black Sea cost began to grow. Nowadays workable freight level for voyage ex Rostov to Marmara reached USD 27 pmt on week 36. This is 2 USD more than previous week.
On September 13, the Captain of the Yeisk port released a directive on changing the depths and drafts on the approach channel and the water area of the seaport. Now the maximum allowable ships draft for passing in the channel shouldn’t exceed 4 meters (earlier 4.8 m). Charterers, who dispatch the grain from this port, have already noticed a growth of rates due to a declining number of vessels. The reason is that Owners of sea-going tonnage, working from Yeisk under incomplete loading, will not be able to put into the Yeisk water area as a new depth is small for them. Thus, actual adjustments led to an increase in freight level.
In the context of frequent complaints about unsatisfactory grain quality on the part of Importers, the Federal Service for Veterinary and Phytosanitary Surveillance tightened requirements for wheat exported from Russia. Today it’s necessary to provide additional quality certificates confirming the inspections were passed for countries such as Egypt, Indonesia, Sudan and Israel. The researches of wheat take from 5 to 14 days, and the vessels will not be dispatched without such documents. Due to prolonged phytosanitary inspections, the deadlines of contracts will be missed resulting in extra costs. A jump in rates is expected for hauls to the road of the Kavkaz port in the near future. A sharp increase of fleet supply in the segment of direct shipments from the Azov Sea and the Volga river ports will push freight on such hauls downward, and to the Kavkaz port from the river, conversely, upward. The toughening requirements will become a serious problem for both top Russian Traders, cooperating with difficult countries, and for other market participants.
Despite the fact that the farmers have already started harvesting corn in the Krasnodar territory, the Saratov region and Tatarstan, the parcels of new yield don’t yet carry to the warehouses. The barley is still dominating commodity in the Caspian region. All elevators beside Volgograd have already discharged the grain of last year and now are waiting for the new corn. In this regard, the Charterers from Middle Volga region such as Samara, Kazan, Ulyanovsk and Chistopol were the most active last week. Therefore, the expansion of demand for shipments from the river, the rates reached USD 55 pmt of barley basis Samara – Iran.
Due to poor economic situation in Turkey and small demand for Russian grain in the Republic, the grain shipments from Russia have been reoriented to other countries. So, according to the Ministry of Agriculture, since the beginning of the year Vietnam has displaced Turkey to the third place in the rating of import countries of Russian wheat.
Nowadays the shipments to the Turkey are irregular and, for this reason, Ship Owners avoid to conclude the contracts are connected with Turkish side. Market participants note, in recent time, voyages from river elevator to Kavkaz port has become the most-coveted among the Owners of the Russian-flagged tonnage. A large quantity of grain is transported from Kavkaz port to Egypt, Saudi Arabia, Europe and the countries of Asia (Vietnam, Bangladesh).
At the last meeting of the Ministry of Agriculture with the Russian lead Exporters, the Government brought to the table an initiative to sell 1.5 million of wheat for further export from the interventional fund. The authorities intend to reduce wheat prices in order to increase the pace and volumes of exports through injection of grain into the domestic market. It can be said with confidence that the top Russian Traders will outcompete the state auctions. Therefore, future trade routes are known. Grain parcels are carried out by ‘river-sea’ fleet from the river to the road of the Kavkaz port, and from there to the import countries. It is expected that with the beginning of the sales of announced volumes, more vessels will be required, and rates will rise. At the same time, it is paradoxical, but the freight for shipments from the river ports to Turkey also increases as to find an available fleet for such hauls is difficult. The rates ex Kamyshin to Marmara reached USD 45 pmt of wheat. This is USD 1 more than the level of week 34.
In addition, the crisis in Turkey has led to the fact that Charterers, who usually struggle with finding available vessels for shipments of niche goods (high cubic capacity, inability to provide full loading of ship, dangerous recipient country of the goods) and high transportation costs, nowadays charter the tonnage at favorable rates with no trouble.
The agrarians started corn harvesting in the Krasnodar territory, Saratov region and Tatarstan. Consequently, parcels with new crop will occur in the Caspian and Azov region soon. Ship Owners trust that as soon as the harvest arrives in the region, business activity will begin to grow and rates will rise.
After the holidays, the business activity of Turkish Importers is still at a low level. The number of concluded deals with the Turkish side has significantly decreased, and this situation probably will not change in the near future. Recently, the Turkish Grain Board announsed the grain intervention in the domestic market in order to stop the price inflation on food.
According to the resolution, 2 million tons of wheat should be sold from the goverment reserves, including 100 thousand tons of imported grain this year. It means that Turkish buyers are unneedful of Russian wheat, while declared volume of domestic wheat will not be realized.
Russian Traders have reoriented sales to Europe, North Africa, Lebanon and Israel due grain resolution of Turkish government. In addition, there is a decrease in demand for scrap on the Turkish market, consequently rates at such hauls are dropping. Thus, freight market in Azov showed a tendency to falling on week 34. The rates reached USD 23 pmt of wheat basis Rostov – Marmara. This is USD 2 less than the level of previous week.
There are a lot of requests from Charterers of sunflower seed meal and sweet beet pulp in the market of the Azov and Black Sea regions. Traders are looking for available tonnage for shipments of cargo to Morocco, Italy and Spain, Greece and Cyprus. Traditionally, the export season for these goods starts in the beginning of September.
The situation develops differently on the Caspian freight market. In the mid-August the United States has launched a program to limit Iran’s foreign economic relations, which should be completed before November 2018. The main impact was inflicted on the Central Bank of the Islamic Republic; as a result, money transactions involving the US dollars either are blocked or need more time due to additional checks. Market participants have already noted the faulty operations of bank and some troubles in making of payments. In this context, some Traders discontinued their activities in the region pending economic problems in the Republic. However, despite of this, freight rates stay at the same level on the Caspian basin. There is still a balance between the quantity of available fleet and the cargo supply on the market. Thus, the freight rates amounted USD 28 pmt of barley basis Astrakhan – Iran.
According to information of Agriculture Ministry, the farmers started corn harvesting in the Krasnodar territory, Saratov region and Tatarstan. The equilibrium of freight market may be disrupted when the parcels with new crop will occur in the region. This circumstance can lead to revival of the market and growth of freight rates in the Caspian area, where corn is the main exported grain.
As expected last time, freight market in Azov region showed a tendency to decreasing on week 33. The rates reached USD 25 pmt of wheat basis Rostov – Marmara. This is USD 1 less than the level of week 32.
The buying power of Turkish Traders is still weak due to the lira devaluation and the imposition a new set of economic sanctions from the USA. In these circumstances, Turkish businessmen examine the terms of contacts more closely in order to avoid making deals which may turn out to be potentially disadvantageous. This factor has slowed down the process of agreeing terms for a long time and leads to a reduction in grain shipments to Turkey.
After a continued increasing in grain prices in the domestic market Russian producers resumed sales at a reduced price. As nowadays, probably, there are the most favorable conditions on the market for disposal of goods. In addition, the business community made nervous all previous week by the rumors about potential introduction of export tax on wheat (canceled in 1th of July, 2019). Some Charterers suggest that particular news led to the fact that producers began to cut grain prices so as to export substantial part of the harvest before a decision to adopt a tax would be made.
The business activity with countries such as Turkey and Iran was low owing to prolonged weekend in Muslim countries in celebration of Kurban – bairam. Ship Owners expect that as soon as the holidays are over, shipments will resume and freight rates will go up. Charterers, on the other hand, are confident that, due to the difficult economic situation in Turkey and the deterioration in the forecast of the harvest – 2018 in Russia, the freight market will continue to stand still. According to the estimates, a large number of vessels which has completed fulfilling of the contract obligations after holiday in Islamic countries will return to the Azov basin next week.
In the context of falling prices for grain, Iranian Importers become more ambitious. As reported by Caspian Ship Owners, there is increased demand for Russian-flagged tonnage now. Probably, a considerable part of fleet from the Azov Sea will be redeployed for work to the Caspian Sea in the near future, and rates will begin to drop. Meanwhile, the freight decline in the region has stopped: there is a balance between the quantity of available fleet and the cargo supply on the market. Thus, the freight rates amounted USD 28 pmt of barley basis Astrakhan – Iran.
The unstable ruble and lira devaluation, the coming Kurban – bairam and imposition of U.S economic sanctions that are aimed at economic isolation of Turkey – all these factors caused the freight rates in the Azov and the Caspian regions to continue falling in the height of a grain season. The average workable level for voyage ex Rostov to Marmara reached USD 26 pmt of wheat and USD 28 for voyage ex Astrakhan – Iran.
Early last week in the context of tense political atmosphere between Turkey and the United States, the American President signed a decree on a significant increase of import duties for steel and aluminum. One of the main responses to these actions was the depreciation of the lira by 25% in just a few days, yet since the beginning of the year the national currency has fallen by 45% against the dollar. This had adverse effects over buying power of Turkish millers. Thus, market participants are not confident in the further development of current favorable business conditions in the country in the nearest future. To avoid concluding contracts which may turn out to be potentially disadvantageous most of Turkish Importers prefer to exercise ‘wait-and-see’ approach. Grain Traders suggest that the freight rates should decline until September, meanwhile Turkish businessmen may adapt to new market realities.
On the eve of Kurban – bairam the long-term hauls to Mediterranean Sea become the most popular on the market due to lengthy weekend within August 17 – 26 in Muslim countries. It means the Islamic grain partners will be out of touch. For this reason Ship Owners are planning their activities with Muslim countries (Turkey, Iran) in a way to avoid the holidays in ports of discharge in the countries where Kurban – bairam is celebrated. Today Mediterranean directions are in great request, consequently, freight rates have started to decrease.
Furthermore, last week a sharp drop in the price of the ruble against the dollar and the euro had an impact on the freight market. The prices for the main grains (wheat, barley, corn) on the Russian domestic market have skyrocketed. Also sharp cheapening of the ruble against the dollar and the euro last week had a significantly impact on the freight environment. The Charterers are reluctant to conclude new contracts as they prefer to wait for the most advantageous price for selling. Therefore, nowadays there are a lot of spot vessels in Astrakhan in expectation of new parcels of grain cargo on the Caspian market.
Despite the overall deteriorating situation on the freight scene, Russian-flagged fleet remains sough-after. High demand for such a tonnage is still trending for work on the roads of the Kavkaz port and for shipments from the Volga ports. This is explained by the fact that most of high-quality grain parcels are located in the river elevators.