Freight rates in the Azov region remained at the same level as in the previous week. The decline in business activity due to the spread of coronavirus is the major obstacle to the market growth. COVID19 has taken over market participants’ minds: as practice shows, panic affects all the economy sectors in most countries which are significant players on the commodity market.
The main trends of the past week in this regard include the following news:
• Quarantine measures at ports lead to an increase in time of vessels handling. According to port agents from various countries, many ports now are imposing an additional quarantine period for vessels arriving from the countries with high risk of infection, on average about 14 days. This period should be counted from the moment of leaving the port of a country with a complicated virus situation; this makes long-distance voyages more interesting for Owners in the current conditions.
• Some Charterers began to complain about cancelling of advance contracts with consignees located in the COVID19-ravaged countries, especially in Italy, as receivers in their turn have faced irreducible difficulties in inland logistics and sale of goods. This leads to an increase in the number of spot tonnage in the region.
The second factor affecting the market is remaining the price of oil, which the ruble exchange rate largely depends on. The US dollar rate has grown significantly, and the export capacity of domestic goods has also increased a lot. Russia has been playing a key role on the global grain market for the past few years, and, given the current situation, many importers began to undercut their offers in expectation of a corresponding reduction in prices from Russian suppliers. As a result, the number of deals decreased last week, and the rate growth stopped.
The high volatility of the ruble slowed down imports, which hit the market of backhaul cargo in the region, as their cost has increased sharply; Charterers now need time to agree on new prices with receivers. This situation may lead to a rise in freight for long-distance voyages from the Azov Sea: Owners will include the back ballast passage to the freight rate.
Many Owners of the Russian-flagged fleet respond with great interest to offers of transit cargo from the Black Sea to the Caspian Sea; this is caused by the desire to reposition the fleet for further fixing on lucrative voyages with fertilizers from Turkmenistan. Owners are ready to make significant discounts, and some of them even are ready to run in ballast to the Caspian Sea, should the current freight level be preserved.