The Azov freight market continued its decline on the 6th week. The fall in freight rates is still dictated by the increase in the number of spot vessels and the lack of cargo in the region. Requirements of Receivers have been covered till March; therefore they enter into negotiations reluctantly and behave aggressively in a bid to knock the price down. Development of the situation will depend heavily on domestic prices for Russian grains. While wheat is falling by USD 2-5 on global markets, its price is far from decreasing in Russia, and it’s even growing in some regions.
Buyers closely monitor the economic situation in Russia, and even fluctuations in the ruble exchange rate are included in the offer, which leaves no wiggle room for sellers. It is expected that the grain price will continue to decline: producers still remain with substantial volumes of grain, while the fleet will work on the verge of profitability. Demand for tonnage may return after determination of the average market price for Russian wheat. Commonly, this happens when past tenders data reach the market; the closest tenders are Turkish. The situation on the market of coasters will largely depend on how grain Exporters will build their work: either through shipments from deep-water ports of the Black Sea or from the ports of the Azov region.
Experts note that now there are mostly traded niche positions: pulp, seeds, sfs meal, peas, bran, safflower. At the end of February, parcels of these goods are ready for shipment. For now, however, Owners show no interest in fixing their vessels for this cargo on such distant dates; they concentrate on fixing their spot positions. Market activity is expected to increase nearer the end of February, when there will be cargoes with delivery dates for March.
Navigation on the Volga-Don canal opens in April. Against the background of minimum rates in the Azov region, it is expected that the Russian-flagged fleet will eagerly look for either transit general cargo or cargo from the river to the Caspian Sea. Such voyages already are in great demand, and transit rates will expectedly decrease with the approach of the navigation period. This can be useful for Charterers who did not have time to take out their cargo during the previous navigation; they will now have the possibility to fix the vessel much cheaper.
Probably, this year we will observe year-round availability of the Volgograd port. With the approach of spring, it’s is becoming clear that weather conditions will not prevent its work. Owners review the possibility to take cargo from there, but still they try to include an extra pay for entering the river. Exporters also increase the number of requests for shipment of grain from Volgograd and Tatyanka. Unlike the Astrakhan region, these terminals do not require paying for overload on vehicles and extra costs for the delivery of goods. It is noted that Owners are keen to sign contracts for several consecutive voyages at an agreed rate, so as they may be on a safe side in case market’s fall.
However, the Caspian market continues its decline due to lack of cargo. There still remains a problem of the delivery of grain to Astrakhan, with a steady demand for it from Iranian importers’ side. Amid the background of changes in wheat prices in other regions, Receivers would definitely like to review the delivery terms; though, by the time new contracts are signed, the issue of cargo availability at the port of Astrakhan should be closed. Traders are counting on transportation by rail from the Northern regions. It is expected that at the end of February, the first wagons with grain will arrive; this may improve the situation on the freight market and stop its decline.