28 week: Russian River, Azov Sea, Caspian Sea; Coaster shipments
During the reporting week the number of cargo offers from suppliers of the new crop grain increased significantly. This led to the export prices lowering (on basis of FOB Rostov reduced by an average of USD 5) and to an increase in Charterers’ demand for tonnage. Rates grew, adding another USD 3-4 and reaching a level of USD 27 on the basis of the voyage from Rostov to Marmara, and Owners preferred short voyages. This circumstance can provoke the abundance of tonnage in the Turkish Black Sea ports on the 29th week. For example, there were about 20 vessels waiting for discharge on the roads of the port of Samsun at the end of 26th week, and July the 15th is the National Holiday in Turkey, therefore cargo operations were not being performed.
The demand for grain transshipment at the roads of port of Kavkaz increased markedly, which is explained by more favorable grain prices on basis of FOB Kavkaz. The sticking point for the further growth of shipments is the lack of the Russian-flagged tonnage supply. The average rate on basis of Rostov-Kavkaz at the end of the week was about USD 14 per ton.
The activity of shipments from the Volga River Basin remains weak. The accumulation of grain parcels at the river elevators has actually just begun, so Charterers are still busy with preliminary calculation of the transportations cost. The major freight market from river ports will be formed at the end of July. The main factor of influence on the market will be the heat and drought, which have settled in over the South of Russia in the second half of June and influenced the decline in the forecast of current year’s harvest in the Volga region.
Generally speaking, market sentiment is determined by the dynamics of the harvesting campaign, which has begun earlier than usual. 29.3 million tons of grain was harvested on the 28th week (5.2 million tons more compared to a year earlier). And while the harvesting rate still exceeds the level of 2018, the total crop yield is reducing and has already equaled last year’s figures: 37.8 cwt of grain per hectare. Reasoning from this fact, inference should be drawn that the 2019 harvest will not break the records of 2017.
When if the quality of grain and yield in Russia was affected by heat and drought, in Ukraine the harvest is threatened by heavy rains and high humidity. Such weather conditions are especially unfavorable for barley, making it difficult to harvest. As the result, there is a similar situation: the harvesting rate is growing, and the total grain yield is reduced. It is expected that freight rates from the Ukrainian ports of the Black Sea will grow the quickest at the end of July, and the increase will gradually slow down in the future.
The Caspian region shows an improvement in demand for the fleet from Astrakhan and Volgograd. Rates are growing, and another factor influencing this was the sharp reduction in the available Iranian-flagged fleet, most of which switched to contract work.
When if the freight rate on basis of Astrakhan-Northern Iran was USD 26-27 per ton of barley at the beginning of the week, it reached USD 29-30 at the end of the reporting week. Also, the comparably low density of the new crop barley (stowage factor) makes its contribution, so that vessels can intake it substantially less. Owners compensate this shortage by means of dead freight, which is included in the rate.