18 week: Russian River, Azov Sea, Caspian Sea; Coaster shipments
On the 18th week, the freight market in the Azov region has collapsed completely. For most of the grain market players, the 2019-2020 season ended ahead of schedule on April 26, when it became known that introduced from April 1 to June 30 quota for grain exports of 7 million tons was fulfilled. After the entire declared volume was formally exported, the Federal Customs Service suspended issuance of new export declarations. As a result, a large number of the fleet ended up in spot positions without cargo, and freight rates have dropped to a minimum. At the same time, the actual shipments from April 1 to April 26 amounted to 3.2-3.3 million tons, and the remaining volume has only been declared and is planned for shipment in May-June.
According to some experts, despite the fact that the quota was fulfilled, it is unlikely that Exporters will be able to export the entire declared volume in the current grain season, i.e. until the end of June. It is believed that major players declared large shipments to their trading companies in a bid to be on the safe side. There is a chance that closer to June, they will appear on the market at a knock-down price in anticipation of the new crop. Most market insiders are hoping for an increase in the quota by the Ministry of Agriculture; according to rumors, about a million more tons may be allowed for export. The Agmin itself, however, claims that its plans don’t involve this.
Some Charterers who have fixed the fleet but did not have time to make shipments, have got into a tough situation. It got to a point that on Friday, April 24, people received permission to transport grain to the export terminal and executed a railway subsidy, and on Sunday, April 26, it turned out that the subsidy was no longer needed, because the quota was fulfilled. According to rumors, the Ministry of Agriculture can make an exception for such cases and introduce targeted quotas for particular shipments upon presenting of bills of lading.
Traders are trying to draw up new supply chains in circumvention of imposed restrictions. Basically, all of them are revolve around the formal conclusion of contracts for the grain export to the EEU countries with further re-export to third companies. Thus, there occurred offers on the market for shipments to Armenia “in transit through Georgia”; in the Caspian direction, grain exports to Kazakhstan are increasing, with further reissuance of documents to Iran. The latter scheme looks quite difficult, as the authorities of the neighboring Republic also imposed restrictions on grain exports.
A reduction in the offer of wheat on global markets led to a rapid spike in its price it at the end of the current season. One of the main beneficiaries in the current situation may be “VTB Group”, whose affiliated companies are rumored to have declared the main part of the limited by quota wheat. If the current market situation persists, they will have great opportunities to sell large parcels at overestimated prices.