20 week: Russian River, Azov Sea, Caspian Sea; Coaster shipments

20 week: Russian River, Azov Sea, Caspian Sea; Coaster shipments

The coaster market still was down in the dumps and has not experienced any significant changes on the 20th week. Demand for vessels remained extremely weak; at the same time, a large amount of spot tonnage has congested in the Azov Sea, which pulled rates down in neighboring regions as well. Observations suggest that part of the fleet is switching to the Continent due to current situation, which is also bearing additional pressure upon the market.

According to experts, business activity will continue to decline over the next two weeks, as far as Turkey, which is one of the main grain importers, goes for long holidays. On May 19, the country celebrates Ataturk Day, and on May 23, the end of Ramadan. Turkish companies will work only three days on the 21st week due to holidays; they will almost completely miss the 22nd week.

Some Owners preferred to leave their fleet at berths and not fix it in the face of the negative voyage economics. Other Owners try to reduce losses by agreeing to any rates, which leads to chaos on the Black and Mediterranean seas markets. Even large grain Exporters who have their own fleet are now looking for cargo on the market, as far as their vessels were left without work after fulfillment of the quota. The current situation will continue at least until the appearance of the new grain crop in July.

Market analysts provide a mixed assessment of the results of introduced quota. According to some of them, the main beneficiary of this situation was VTB group and its grain holding. By introducing this quota, the state supported “its” trader, since the real efficiency indicators of the new holding were far from the planned ones. In a point of fact, after the quota introduction, domestic wheat prices increased dramatically, and the number of possible exporters decreased just as sharply; this created favorable conditions for large traders to dictate their terms. During the reporting week, there were widespread rumors among market insiders that the quota could be extended until the end of the summer; this again will play into the hands of major players.

While the most part of the fleet in the Azov region continues to stay idle without work, the Russian-flagged vessels are actively involved in transit voyages from the Black Sea to the Caspian Sea and in the backhaul direction. In total, rates for such voyages have decreased slightly since navigation start, but still remain at a level that allows Owners to keep profitability of their business.

The main reason for this situation is considered to be high competition for vessels among Charterers due to difficulties in crossing land borders, which is reinforced by high demand for Turkmen fertilizers on foreign markets. According to key market players, even if the freight levels for transit voyages are further reduced, they can still remain profitable for Owners for a rather long time due to the fact that there is no ballast passage, as well as no dividing of voyages into “main” and “backhaul”.