39 week: Russian River, Azov Sea, Caspian Sea; Coaster shipments
Freight rates on the 39th week continued to grow in the Azov region, and by the end of the week the rate on the basis of the voyage from Rostov to Marmara reached a level of USD 20 per ton of wheat. This is USD 1 more than a week ago, but significantly lower than last year’s rates (USD 32 per ton of wheat on the similar basis on the 39th week of 2018). Experts attribute the increase in rates, firstly, with the fall of the ruble, which made Russian wheat more attractive in price on the world market, and secondly, with low spot tonnage supply in the region. Some vessels were delayed in the Black Sea because of the storm, and Charterers with contract deadlines were forced to raise offers amid a backdrop of the formed lack of tonnage. At the same time, Owners observing the growing cargo offer were in no hurry to fix their fleet and held on to it until the spot dates.
Despite the increased rates, there were very few open positions in spot/prompt by the end of the 39th week. Owners, in a bid to minimize losses from low rates of last weeks, switch to work from the Black Sea ports, where they get USD 18-20 per ton of wheat on the basis of the voyage to Marmara.
With the onset of autumn, non-weather goods such as coal, iron and timber are traditionally in great demand from Owners’ side. Handling and paperwork of such cargoes take much less time than the grain. With weather conditions worsening in the region, the difference in the speed of working the vessels is growing, which makes non-weather cargo more profitable from the point of view of the voyage economy.
Due to the lack of fleet for the grain export Producers are experiencing a deficiency of storage areas. Elevators are filled with grain from the southern regions, and they additionally receive crops from the Central and Northern regions of Russia. This led to a high demand for the river fleet, which is used for the barley and corn export from remote places to Astrakhan with following transshipment to Iranian vessels.
The bridge construction across the Strait continues in the Dardanelles. Owners expect that the construction works will intensify in the near future, which may lead to a decrease in Strait passage speed. This forces Owners to refuse from long-distance voyages and increases the difference in freight cost between the Marmara Sea ports and the Mediterranean Sea ports.
Although the closure of navigation from the river is expected in usual time this year, the shipping traffic will be limited due to low water level. According to data from the Ministry of Natural Resources, shipping companies were warned about this in advance. This is keeping freight rates for transit voyages from the Black Sea to the Caspian Sea at a high level. Owners of Russian-flagged vessels will have time to perform another 1-2 transit voyages, and they are raising the bar in negotiations as high as possible. As of yet, It is more profitable for Charterers to overpay than to assume the risks of additional cargo transshipment.
The Caspian freight market revived after weeks of stagnancy and showed an average growth of USD 1-2 on the 39th week. Experts associate this primarily with the market insiders’ expectations for the forthcoming simplification of the settlements procedure with Iranian partners. In addition, some Iranian Owners switched to contractual work from Aktau, which reduced the Iranian-flagged tonnage supply and also contributed to the growth of rates.
In the middle of the reporting week, the workshops at the Garabogaz Fertilizer Plant (Turkmenistan) began to start up gradually after prevention activity. The estimated capacity of 3500 tons of urea fertilizers per day should be reached on the 40th week, which will restore the flow of back-haul cargo from the Caspian Sea and increase competition between Charterers.