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

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

Freight rates in the Azov region continued their decline on the 4th week. The reason for that is extremely low activity on the grain market. Turkish Traders bought all the necessary amount of grain under current contracts at the end of last year out of concern that that freight rates may go up due to severe frosts and worsening weather conditions in the Azov region. As a result, demand on Buyers’ part is currently weak.

According to experts, there is expected no significant market growth in the first days of February, as far as producers and Shippers have not yet settled the price with Buyers. Sellers prefer to give their cargo to major Traders for shipments from deep-water ports in large parcels. However, major Charterers offer a rate of USD 2-3 lower, which is behind the cost price for many Owners of river-sea type vessels.

There continues accumulation of spot vessels in the Azov Sea and at the Kerch roads, which is caused by the lack of cargo, as well as by stormy winds that blew in the second half of the reporting week. Major players of the Azov market suspended transshipments on roads, which led to a decrease in freight rates.

The rush for shipping of seeds to Varna and Marmara has also decreased. Aside from the significantly increased price of sunflower, Buyers decided to suspend shipments amid the background of a large offer from sellers, to bring prices into balanced state.

The deplorable situation with cargo offer from the Azov ports forces Owners to look for alternative loading options. They favor long-distance voyages from the Black Sea ports, where the river-sea type fleet currently competes with deep-draft sea vessels. Non-grain cargoes such as coal, pig iron and scrap are also in demand, as well as backhaul cargo, which almost graded up at rates to direct voyages from the Azov region. The abundance of coasters is likely to reduce freight level in the Black Sea as well.

In the Caspian region, rates from Astrakhan to Iran continue to fall due to problems with cargo delivery by road to the port of Astrakhan. At the end of the 4th week, Owners were ready to offer vessels at the level of USD 30 per ton or lower, which is close to the rates from Makhachkala, where Charterers fixed vessels at the level of USD 24 on the reporting week. Aside from small cargo offer, this is also explained by congestion at the roads of the Aktau and Makhachkala ports. Owners lose up to a week in wait for loading at these ports, which negatively affects the voyage economy and forces Owners to look for cargo from Astrakhan, where shippers have started to drive up prices, considering the current situation.

Market insiders agree that the Makhachkala port is not yet ready to completely replace Astrakhan as the main grain hub in the Caspian Sea, because its infrastructure was not able to provide for an increased cargo flow. Charterers will continue trying to use railway transport to a greater extent, and they will gradually return to Astrakhan, but this will not happen until the 6th or even 7th week.