In the Azov region, rates kept growing on the 14th week. Many experts agree that the increase in freight was on mere inertia of the previous weeks, at a time when the grain market is under strong pressure from a number of factors. Firstly, this is the ruble strengthening, even if it’s quite shaky, amid increased oil prices. Secondly, a sharp spike in the wheat price, which has gained about USD 10 over the past week; this coincided with organization problems of logistics in exporting countries. At the last, thirdly, the Russian Government has restricted grain exports by introducing a quota for wheat exports until the end of June this year. Since April 10, it has additionally banned the export of sunflower, rice, soy beans and a number of other crops. Logic dictates that the freight market is likely to collapse in the near future. In anticipation of this, many Owners are ready to fix their fleet for far dates.
Commonly Owners see performing voyages to Italy or Spain as an opportunity to profit off of a higher rate. However, as it stands now in the regions of Receivers, they are not allowed to pay above the market. Thus, if Owners ready to perform a voyage to Italy offer the rate over USD 40 per ton on the basis of the voyage from Rostov to Adriatic, then Charterers are ready to pay only a little more than USD 30.
Many Exporters who have signed contracts for sunflower seeds shipments have faced problems with issuing phytosanitary certificates. A few weeks ago, there were rumors that the quarantine services received an unspoken order from the RF Ministry of Agriculture to restrict the export of a number of crops, including sunflower. However, these restrictions could not affect products that have already passed quarantine tests: in the presence of a quarantine certificate, the regulatory authorities have to issue a phytosanitary certificate required for export. Nevertheless, on the 14th week, the FSVPS (Federal Service for Veterinary and Phytosanitary Surveillance) refused to issue the necessary documents until further clarification from the Ministry of Agriculture. As a result, on March 31, the EEC decided to ban the export of sunflower in the period from April 10 to June 30 this year in order to sustain the domestic market. On the one hand, this led to a sharp demand for seeds with shipments before April 10. However, amidst the lack of spot tonnage and phytosanitary certificates, which were no longer issued for a week, the adopted measure actually stopped exports instantly.
The weather actively interferes in the fleet positioning of the fleet on 14-15 weeks. Strong winds in the Black Sea slow down the vessels movement, which creates congestion in the Bosphorus and the Kerch Straits. If the rate level decreases in the near future, the market may expect a large amount of cancellations and, as a result, an increase in the number of open spot tonnage. Despite the fact that the river navigation opened a week earlier this year thanks to favorable weather conditions, there are not much shipments from river ports to the Black and Mediterranean seas. The low water level in the Don River has limited the draft of vessels to 2.9 meters when passing the Kochetovskiy lock. Significant improvements are not expected for April. As a result, grain will be transported by inland waterways to Rostov or Azov; there it will be transshipped for further shipment to the Black Sea.
The situation with rates in the Caspian region in whole is the same as in the Azov region. In the past few weeks, they have been growing due to increased demand for the fleet, which was caused by upcoming restrictions on the export of soybeans. The latter, along with corn and barley, are among the three most popular export from Russia positions in Iran. The introduction of a ban on the export of certain types of food products from the EEU countries, including corn, barley, and soy, had a negative impact on the freight market. Some Owners have already begun to complain about contracts cancellation, and the lack of cargo offer is dragging the market down.