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

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

The Azov freight market continued a smooth decline in rates on the 44th week. The cargo offer lagged behind the fleet turnover rate, resulting in an increase in the spot tonnage amount, which pulled the market down. Owners accept the decreasing trend, but choose long-distance voyages, which is why rates for them fall faster than rates for short ones. Along with the demand for long-distance voyages, the demand for backhaul cargo is growing.

The main factor determining the low freight rates continues to be grain traders’ activity, which is weak for this time of year. The high purchase price in the domestic market makes Russian grain too expensive compared to the offers of Ukrainian competitors and kills its export prospects. Market insiders expect that in the near future producers will begin to reduce the price of grain because a lot of it has accumulated in storages, and no grain season has occurred.

Based on the quotes of the last major tenders (Egypt, Turkey and Algeria), the Russian origin grain may be among the winners. Experience has shown that such lots are more often shipped from deep water (Novorossiysk port). Many traders believe that the high purchase price of grain in Novorossiysk inhibits exports from the Azov Sea; it’s a lot more lucrative for shippers to ship grain on CPT terms to major players than to ship it on FOB terms from low water.

Azov-Don Basin Administration informed market insiders about the closure of locks No. 1-15 from November 27, 2019 on. There remains the possibility of commercial locking, the terms of which need to be negotiated in advance. Subject to favorable hydro-meteorological conditions, it is possible to extend the work of the locks until December 1.

For the Russian-flagged fleet, the freight market moves into a different segment near the end of navigation. Amid the background of decrease of rates from the Azov Sea ports, the demand for shipments from river elevators remains high, and the Russian-flagged fleet is still in short supply. Freight rates are joining the ranks of non-market.

In the Caspian region, rates have been growing steadily for a month. Seizing the moment, Owners dictate their terms not only for spot contracts, but also for long-term winter ones. Some believe that 2-3 of them are risky, but highly paid voyages in the Caspian Sea are comparable in profitability with 2 of 3 months of work in the Azov Sea in wintertime. This is the most important factor for the decision-making on a matter of wintering in the Caspian Sea.