17 week: Russian River, Azov Sea, Caspian Sea; Coaster shipments
In the Azov region, low business activity again had a decisive impact on freight rates on the 17th week. Amid the background of a declining export quota for wheat, corn and barley, the price of these crops rose, especially the price of wheat; this prevented Traders from concluding new deals. Many Owners began to realize the complexity of current situation, so the demand for long-distance voyages has increased. At the same time, freight rates in prompt began to decrease.
Market insiders claim that in two days, from 24 to 26 April, major players unexpectedly declared for export more than 2 million tons of grain. Thus, the whole export quota was fulfilled. Many deals being negotiated were suspended until further comments on the quota change from the Ministry of Agriculture. The suspension of grain exports will be of key importance to the freight market in the southern region within the next two months. Experts expect rates to fall beyond the edge of profitability for Owners of coasters. At the same time, the demand for non-grain cargo will grow significantly.
Observations over the three weeks revealed that after opening of the river navigation, there has been a trend towards a high demand for transit tonnage to the Caspian Sea. This is primarily caused by the difficulty of crossing the land border between countries due to quarantine measures against COVID-19. Many goods commonly transported by rail or road are now reoriented to sea transport. First of all, these are goods produced in Turkey and exported to the countries of the Caspian region. Considering the fall in demand from the side of grain Charterers, experts are inclined to believe that transit rates can also be seriously reduced.
The prospects for the Caspian region look much more pessimistic than for the Azov region. After soy left the market, corn and barley were the only commodity nomenclature for bulk transportation. In case of ban on their export, Owners will have to reorient their fleet to other cargoes, which have always been in short supply in the Caspian Sea. Many of them will try to relocate their fleet to the Black Sea in the coming months, where there is more variation in the search for voyages.