12 week: Russian River, Azov Sea, Caspian Sea; Coaster shipments

12 week: Russian River, Azov Sea, Caspian Sea; Coaster shipments

The trend for rates growth remained in the Azov region on the 12th week. Optimism on the market is explained by the increased demand for tonnage, and is further warmed up by the shortage of spot fleet in the region: the vessels fixed on long-distance voyages did not have time to return. The cargo offer on the market has grown, which has been driven by rising price of grain in the country. In the equivalent ruble amount, it neared the maximum for the past five years. Of course, the main driver of this price phenomenon was the devaluation of the ruble, which fell by more than 25% against the US dollar in a short time. At the same time, in the equivalent US dollar amount, the grain price continued to decline around the world, including Russia, reducing by about USD 4-5 per week. The value of wheat is strongly affected by the situation with falling oil prices, as well as by the decline in business activity in many importing countries, such as Italy and Egypt; due to coronavirus, there is expected a sharp decrease in cargo traffic.

On the growing market, Owners began to employ their vessels on short voyages, counting on the turnover of the fleet. In this situation, rates for long-distance voyages grew faster, not least because of the fact that many Mediterranean Sea ports are experiencing difficulties in vessels handling due to quarantine. There was observed an increased demand for such destinations as Samsun, Georgia and Romania during the reporting week. Owners are trying to reduce the possible number of passages through the Bosphorus and the Dardanelles straits in order to keep the high level of fleet turnover.

During the week, the vessels were delayed due to the weather. However, on the growing market, they were not cancelled; quite to the contrary, they were awaited for loading. Feeling that the market was playing into their hands at the end of March, Owners bid freight rates at the level of about USD 20 per ton on the basis of the voyage from Rostov to the Turkish Black Sea coast. At the same time, it was clear from their behavior that they were not ready to work firmly; they were only trying to raise the market. Of course, the number of cargo offer increased, but today’s market will not accept a sharp spike in rates by USD 4-5.

Administration of the Azov-Don Basin has officially announced that the maximum draft of vessels in the Azov-Don Sea Canal will be limited to 2.9 meters upon the navigation start. As long-time observations show, this is the minimum value of permissible draft over the past five years. This low water level is explained by the lack of snow in winter and poor precipitations amount in early spring. According to market insiders, this may make a significant contribution to the pricing of transportation from river elevators, as well as transit cargo from the Black Sea and Caspian Sea. The Omskiy-type vessels, which are able to take 3000 tons on 3.2 meters draft, remained the most convenient fleet for transportation on the river in recent years. However, the current water level won’t allow even these vessels to take cargo up to full draft; this means that the dead freight will be included in the rate. At the same time, cubic cargoes, such as sunflower seeds, safflower etc. are still in strong demand.

In the Caspian region, Charterers think that rates will fall upon the navigation start, as far as more Russian-flagged vessels from the Azov region will enter the market. Some Charterers preferred a wait-and-see approach and offer USD 5 below the current rate level in prompt. Owners, in their turn, expect the opposite situation; they explain this by the fact that most of the fleet will leave the Caspian market to work in transit, which, in their opinion, will jack up the rates even higher.