15 week: Russian River, Azov Sea, Caspian Sea; Coaster shipments
The Azov freight market continued to grow in the 15th week, despite the measures introduced to restrict grain exports. Experts explain this by the actions of major players on the market, which have significantly scaled up their activities, following the promulgation of the export quota. Some of them have signed contracts through the remainder of the current grain season, so they are speeding up shipments in order to mitigate risks and fit into the quota volume. In the result of these actions, the demand for tonnage increased during the reporting week; this created a favorable environment for Owners to further rise in rates.
Traders are concerned about the increased price of wheat. Over the past few weeks, it has grown by almost USD 20 on the FOB basis from Russian ports. Sellers throw up their hands and refer to high demand, as well as falling US dollar exchange rate amid the news of the OPEC+ deal. At the same time, many Importers are already finishing their grain programs; combined with export quotas, this is suggestive of serious decline in market activity in May-June.
At the end of the week, the problem of issuing phytosanitary documents for sunflower seeds was finally resolved. Due to this situation, about 15 vessels were delayed in the Azov region for two weeks. In the end, all vessels that were loaded before April 10 received permission to export cargo, which has been temporarily suspended. In light of this, many experts predict that in two weeks, when the fleet will return, rates may start decreasing due to valid restrictions on export.
Some producers express concern about the fate of the future crop because of current weather conditions. In the southern regions of Russia, the precipitation deficits lead to a decrease in yield forecasts. For example, in the Rostov region, it has not rained for almost a month, and the temperature at night still falls below zero, which is fatal for some crops. If the weather does not improve, the quality of the new crop may be lower than predicted.
The news about the restriction on exports from Romania made its own adjustments to the actions of participants on the commodity and freight markets. On April 10, Romania announced a temporary suspension of oilseed and grain crops exports outwards the EU until May 15. For the Black Sea and Mediterranean regions, this means a decline in the number of shipments by 15-20%. Of course, both Receivers and Traders will look for new sources of supply, but there will be difficulties for some time. Negotiations on new shipments from Bulgaria have been suspended for the moment, insofar as similar restrictions are also expected to be imposed in this country. Currently, the market has not formed a clear understanding of the situation yet; and the question remains what tactics to choose. Amid the background of recent events, Moldova is also trying to ensure its food security, though the country has not yet made an official statement. However, difficulties with issuing of documents for export from there have already arisen.
In view of the above, Ukraine and Russia will be the main shippers for some time. In the face of low competition on the commodity market in the region, they will try to get the most favorable price for themselves.