The Azov region market was still facing post-holiday pressure on the 3rd week. Many Charterers have a hard time returning to work from holidays; trading is lukewarm, and the tonnage supply still exceeds the demand for it. There was a small abundance of spot tonnage in the region, which did not allow Owners to turn the tide. Freight rates were at the level of USD 20 per ton of wheat on the basis of the voyage from Rostov to Marmara; in December, Charterers were ready to pay USD 23 for spot tonnage. The fleet is working on the verge of profitability in view of current costs and risks related to ice dues. According to market insiders, a similar situation will continue in the coming weeks. In the present circumstances, Owners favor long-distance voyages with backhaul cargo. This combination looks much more profitable compared to short voyages to the Black Sea; it also allows gaining time and removing the fleet from spot positions.
Hopes for the market revival are associated with the expected supply of Turkish and Egyptian tenders, which can push the purchase price of grain up; this may increase freight rates by USD 1-2 until the end of January. At the tender on January 14, Turkish Grain Board (TMO) purchased 100 thousand tons of durum wheat for delivery on January 25 – February 25 and 550 thousand tons of soft milling wheat. At the tender on January 8, the state Agency of Egypt GASC purchased 300 thousand tons of soft milling wheat for delivery on February 18-29, 2020, and another 240 thousand tons for delivery on March 1-10, 2020. According to experts, however, there is expected no sharp increase on the market, since not all producers and Traders are ready to sell grain at low prices. The cargo will appear, but not as quickly as Owners would like it to be.
Shipments to Egypt will be made from Novorossiysk and from the Kavkaz roads. Shipments to Turkey will likely be made from the Azov Sea ports. The parcels for the Turkish tender will be small, in the amount of 10-15 thousand tons; it will make shipment from the Azov region more profitable than from the Novorossiysk port or from the Kavkaz roads. In this case the Turkish tender will be indicative; it will define a certain price level for many grain importing companies, which may be used as a basis for calculating for future transactions.
There was much excitement among Exporters amid rumors about a possible quota for grain export. The Russian government is considering imposing a limit of 20 million tons of certain types of grain for export from January 1 to June 30, 2020. This initiative aims to protect the domestic market, but it may also lead to a reduction in export shipments, which will eventually result in lower demand for tonnage in the second half of the grain year.
The new year in the Caspian region began with a fall in rates from Astrakhan. Due to restrictions on loading of vehicles, there are still problems with the delivery of grain; but at the same time, there occasionally open vessels that return from Iranian or Turkmenian ports with backhaul cargo. In order to avoid problems with contracts, shippers switch to ports that may accept railcars: Volgograd, Makhachkala, Aktau. This led to a shortage of wagons for grain and warmed up the railway transportation market. Currently, Volgograd is considered a risky port among Owners, despite the abnormal above-zero temperature. Not many Charterers work from the Makhachkala port. There is congestion in Aktau due to the large number of vessels on the roads and in the port, and it is difficult to berth a vessel for loading on time. As a result, shippers begin to suffer losses due to delays.