15 week: Russian River, Azov Sea, Caspian Sea; Coaster shipments
Freight market in the Azov region remains low.
According to figures provided by the Federal Service for Veterinary and Phytosanitary Surveillance, the total quantity of transshipped grain in the ports of Azov Sea decreased by about 36 percent in the first quarter of 2019 in comparison with the same period of 2018. In absolute terms, this is 5,33 million tons in 2019 against 8,33 million in 2018.
It is noteworthy that according to our statistics, freight rates also dropped in direct proportion and lost about 30 percent. If on the 15th week of 2018 freight rates were on average USD 26 per ton of wheat on the voyages Rostov – Marmara, then on the 15th week of 2019 rates are being kept at USD 18.
From the perspective of Traders, up to date there is a high demand for grain in the domestic market, especially in the Central Federal region, which significantly holds back export sales and makes domestic grain uncompetitive in the world markets due to its high price. Many Exporters admit that they have already closed the current grain season, and plan to return to activity only in July. Yet the closer to the new crop, the faster will become cheaper grain harvest of 2018. The falling grain market will force producers to sell cheaper products, which can allow Traders to make new deals. In its turn, this should assert positive influence over freight rates, owing to the emerging of new volumes on the market.
Despite the opening of navigation on inland water-ways on the Volga and on the Don, now rates are aiming for two-year minimum. Many Charterers admit that it is extremely difficult to sell wheat to Marmara from Rostov in light of rates above USD 17 per ton. Moreover, Turkish buyers began to refuse purchases more often due to the high volatility of their national currency.
Currently the flow of general transit cargo to the Caspian Sea and to the Volga is on the rise. Today the tonnage supply significantly exceeds the amount of cargo orders, which allows Charterers to employ vessels at favorable rates for them with the ability to take the appropriate tonnage and on wide dates. Owners working in transit and having the need to return their fleet to the Caspian Sea, have to be more flexible in negotiations to avoid ballast passages.
Most of the requested indications in the Caspian region fall on summer dates. This means that the peak of demand in Russian vessels for general cargo may be coincident with the peak of the grain season, which this year is expected to be higher than last year, as judged by the planned harvest. This abundance of offers will give a nudge Owners to even more inflated expectations and rates respectively.
Unlike the Azov market, the Caspian market is still holding its position. The reasons for this are the high demand for grain from Iran after the local holidays, as well as the high demand for tonnage from Charterers planning to send fertilizers from Turkmenistan to the Black Sea. Freight in the Caspian region attracts more and more tonnage from the Azov Sea, which in the near future may lead to overabundance and subsequent reduction of rates.
Many market insiders are wary of the news about the inclusion by the US of Islamic revolutionary guard corps, which is actually the Iranian regular army, as terrorist organizations. Traders are afraid of further possible complications in settlement payments with Iranian importers, whose payments have been delayed lately as it is.