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

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

On the 40th week, the commodity market situation clearly demonstrated the volatility of demand. Many domestic Traders were unable to respond this in proper time: wheat parcels were accumulated at the Azov ports, which were purchased at a high price, but amid reduced demand from Turkish processing enterprises, these volumes cannot be sold with the desired marginality. The reasons for this are the Shippers’ specific view on pricing, as well as problems in the logistics part. For example, the shortage of the Russian-flagged fleet still does not allow performing a sufficient number of cabotage voyages to the Kavkaz roads transshipment. The recent strengthening of weight checking complicates the delivery of goods by road and increases the already high demand for the cabotage fleet. The usual for this time of year weather situation also hinders the fulfilment of Exporters’ programs. Offshore winds caused a drop in the water level in the Azov Sea; this, in turns, led to a decrease of the permissible draft in the river. Thus, at the Azov and Rostov ports, the current conditions resulted in idleness of vessels in waiting for a suitable water level, which doesn’t allow them to load the cargo up to full capacity.

Low water level also prevents passage through the shipping lock of the Kochetovsky hydraulic complex, where has already formed a congestion. As a result of difficulties caused by weather conditions, the planned volumes of wheat may not be exported in proper time from remote river elevators; this will lead to a shortage of goods at the Azov Sea ports. This is especially true in regard to shipments from the upper Volga, where harvesting of crops such as sunflower seeds is still ongoing.

With the exception of a moderate growth of rates on long-distance legs (from Chistopol and Kazan to Iran), the state of the freight market in the Caspian Sea has been kept at the same level for several weeks. It is worth noting that such stability is not typical for this region, where fluctuations of USD 3-5 per ton per week are usually the norm. The only event that may set the market in motion in the near future is the upcoming end of corn harvesting in the areas adjacent to the Volga River Basin: the formation of the new crop parcels should have a positive impact on the rates growth.

Participants of the grain and freight markets are anxiously discussing the possible introduction of the second export quota in the history of the new Russia. There is no official information about the volume and timing at the moment, but there is reason to fear a repeat of the scenario of last season, when 70% of the quota was fulfilled in just a day and a half, and a decisive role was played by declaring the volume, not export. This forced players to resort to various schemes to circumvent the existing restrictions, primarily related to transit and re-export, as well as to trading quotas, which for Exporters was associated with additional difficulties and costs.