The Azov–Black Sea coaster segment almost came to a halt in the third week of September.

Shipowners and charterers are taking a wait-and-see approach, and the number of shipments is falling. Freight rates dropped from the high 70s USD to the mid-60s (basis – Marmara). Under these conditions, shipowners are unwilling to fix contracts: vessel delays in the Kerch Strait reach 11–15 days, and in some cases up to a month. Charterers, in turn, avoid spot fixtures in a high market and reject rates that include demurrage costs. Trader activity is also affected by higher export duties on barley and corn. Meanwhile, wheat export duties decreased by 1.2 rubles, and some charterers are negotiating favorable agreements with shipowners to reduce idle time. Most likely, if permission is granted to transport fertilizers in big bags through the Kerch Strait, the region will face another freight rate spike.

In mid-September, freight rates for handy, supra, and panamax segments increased, reflecting shipments from Russia’s Black Sea deep-sea ports.

Currently, the market can still be described as stable at high levels. In our view, this will not last long due to several factors. First, there are monopolistic restrictions on transshipment in Novorossiysk. With record-high harvest volumes, available capacity will not be enough for all players. Second, we see fewer loading points at the Caucasus roadstead, as new ones are not being approved while existing ones are controlled by only two or three major charterers. Third, Russian Black Sea ports remain a zone of military risk. Many shipowners refuse to enter them, or increase their rates due to insurance premiums. As a result, there is growing concern that trade will slow significantly while freight rates decline. Consequently, ballast traffic from the Mediterranean to the Black Sea will negatively impact voyage economics, and shipowners may stop considering Russian Black Sea ports as a viable cargo base.

High rates are also holding in the Baltic (supra segment): exports of fertilizers and aluminum from Russian Baltic ports show growth since the start of the season.

Despite lower export duties, wheat is still not in demand. On the other hand, shipments of peas and flax (in small parcels) are rising. Most likely, the Baltic situation will change rapidly in the coming months: grain exports remain supported by reduced global supplies from Argentina (a record-low harvest in 2023) and Canada. Fertilizer freight rates are expected to fall as export duties rose from 7% to 10%, adding financial pressure on charterers. Old contracts will be revised under the new economic conditions. On the supply side, Chinese fertilizers are rejected by Brazil due to poor quality, while large volumes are being shipped to Africa. This creates opportunities for Russian traders to maintain steady export flows to Latin America.

Bunker costs in Russia’s Black Sea, Baltic, and Far Eastern ports are rising sharply.

The ban on exporting certain fuels came into force on September 21, 2023, and will be lifted once the domestic market is sufficiently supplied with gasoline and diesel. We will continue to monitor developments, but under current conditions, shipowners are forced to raise freight rates to maintain voyage profitability. In addition, the global key rate hike also supports high freight costs, with shipowners aiming to keep the market elevated.

Sincerely, Konstantin Grinevich and Glogos Project