During the reporting week, rates in the Azov-Black Sea region began to grow. Freight level for a 3k parcel of wheat from Rostov to Marmara reached USD 33 per ton. A sufficient number of goods offered on the market allows Owners to make optimistic forecasts for the next few weeks. However, there are several factors that may cause difficulties with shipments. Firstly, it is bad weather and hurricanes in the southern regions of Russia, which seriously damaged the grain harvest. And secondly, many producers have just started harvesting, and the formation of parcels will become possible only nearer mid-August. Therefore, by the end of the month, a gap between Owners’ ideas and rate level that Charterers are ready to pay may occur.
Despite last week expectations that the Black Sea will drop a little before the new grain crop season, market continued to grow steadily. Having lowered their rate anticipation, Charterers were unpleasantly surprised that Owners had raised their rates in return. So now, Charterers who were checking some ‘sub sale’ possibilities, witness sky-high twenty dollars gap making it impossible to work on such levels. Market excitement is also supported by very active shipments of steel products: new export duty will apply on August 1, and Russian exporters hurry up to ship maximum possible volumes before the introduction. In general, it is safe to say that tonnage demand in the Black Sea will be high, and fight for the vessels will be furious for upcoming months. Owners are rubbing their hands in anticipation.
The demand for such commodities as iron ore, coal, aggregates and clinker increases the freight levels and time charter rates accordingly. There has not been observed a sharp increase, but the systematic upward movement of the freight market in the Atlantic was revealed.
Voyage with agriproducts for 32k dwt from Damietta to Jorf Lasfar was fixed at USD 38 pmt.
Voyage with grains for 31k dwt from Russian Black Sea region to Egypt Mediterranean was fixed at USD 35 pmt.
Coaster tonnage of about 8-10k dwt on same direction from the Black Sea to East Mediterranean was seen for USD 40’s.
Continent market is still on the low side, thus from ARAG to Algeria, the vessel of 30k dwt was fixed with grains at level of USD 34 pmt.
Israel ports congestion is still there. According to local agents, the waiting time is about 2-3 weeks for the coasters/Handy tonnage. The steel parcels from the Black Sea to Israel for 20k dwt vessel was seen at high USD 50’s pmt.
In EU, analytics show very positive expectations of wheat in France, Romania and Baltic countries. This season probably will show some changes in supplies.
The main routes of grains seem not changed, but some differences can be considered. China already purchased about 1 million tons of wheat from France, and according to some rumors, it will be transported with 300k dwt ladies. Therefore, it seems like option for Germany and Baltic countries to have more activity with exports to Algeria; Iran is also expected to remain a major outlet for German wheat. Besides, tenders for wheat were held in Jordan and Saudi Arabia, where on Monday SAGO purchased around 505k tons of wheat, and origins offered were the European Union, Black Sea region, North America, South America and Australia with the seller having the option of selecting the origin supplied. Regarding Ukrainian crop, this year total grain exports almost double up compared last year and already stand more than 500k tons, plus Ukrainian producers have now harvested more than 1 million tons of new crop barley. China will put out 23.488 KMT of imported corn from Ukraine to tender on 16 July.
Few words about freight levels: The Handies for Inter Med have increased up to USD 27k/d basis Canakkale, and the voyage to the Continent is at USD 28k/d. The Transatlantic voyages are now approaching USD 30k i.e. 26-27k to USG, and USD 25-25,5k to the ECSA. The voyage to the Far East is priced in the mid USD 30k/d.
Supramax rates remain roughly the same as last week. A voyage with scrap by a 56k dwt vessel from Baltic to East Med was fixed at USD 35k/d DOP Riga, and at USD 36k/d by a 58k dwt vessel open lower Baltic.
On the eve of the new grain season, which will start in the second half of June, Charterers who can afford to keep their parcels in order to get better freight rates from Owners find themselves in an advantageous position and often play the angles. A new crop of barley begins to appear on the market of the Black Sea and Baltic, but there is not enough of it for all.
For many Owners who usually had to ballast from East and West Mediterranean due to absence of cargoes in that area, the situation has even worsened. Now they consider a long ballast legs to Upper Baltic and traditionally at Black Sea. Owners understand that competition for grain cargoes for these two weeks becomes tough and some of them could propose freight slightly below the market level in order to be sure that their fleet employed.
In general, we could say that for these two weeks, now there is most pleasant time for the Charterers to get a tentative freight at Black Sea market. After new harvest will drop on the market, freight will grow speedily and the market will be on the Owners’ side again.
The level of the Azov Sea freight market has frozen at USD 30 per ton of grain, and it has been holding for several weeks on the brink of the grain season beginning. The first parcels of the new crop have already arrived at some ports. This is caused by three factors: the beginning of harvesting, the coming increase in the yield of the new season and high grain prices on the global market. Based on this, it can be expected that freight rates for grain will not even fall below USD 30, but will only go up most likely. Rates for coal are quoted at USD 28, which is lower than for grain; though, there are also no prerequisites for a fall, since coal exports through the ports of the Azov and Black seas grew to 5.1 million tons amid the increased supplies to the OTEKO coal terminal in Taman. Even with the uncertainties on the scrap metal market due to the introduction of export duties from August 1, freight rates for scrap will be supported by a high rates level for grains and coal.
A couple of biggest grain traders told that the most interesting prices were in Argentina for last 3 weeks. They caught this opportunity to make real profit with shipments from Up-River to Libya, even though freight level was shock for Charterers: about USD 80 per ton for Handysize vessels. As usual, the grain flow continues to actively go to Algeria, Egypt and Yemen as well, and rates to the Red Sea are also pretty strong. With grain season almost started from Black Sea, more Owners will sure prefer to open their fleet in the Mediterranean Sea in order to get better position for ballast passage to Constanta/Nikolaev/Novorossiysk, and we can consider rocket high level about USD 90 per ton. Now, as grain season is already starting, we saw the Supramax vessel just loaded at Kavkaz with wheat intended to East Africa at the level of USD mid 50s pmt. One Owner of Ultramax tonnage has rejected offer with barley from Constanta to the Red Sea with TC rate USD 41k, preferring to load wheat from the Black Sea to Indonesia with USD 40k hire.
Slight correction of the Pacific market is observed due the frequent COVID-19 cases detection at the CJK and Indian regions, which resulted in congestion and long waiting at the main ports of the Pacific region. 29k vessel was fixed for TCE USD 30k for the voyage from PG to Singapore, and the backhaul for 33k vessel was fixed at the rate of TCE USD 26k.
According to Arabian officials, ships passing through the Red Sea might be at risk from Yemen rebels again. Due to specifics of the region, Owners whose fleet opens at the Red Sea area look for the TCE around USD 38k to the CJK and ECI directions.
The Atlantic still remains positive; the voyage from Continent to ECI for Supramax rated for USD 56 pmt with grains.
The grain harvest season starts at the Black Sea, but due to abundance of Handymax/Supramax tonnage in the region, the freight level has corrected. Voyage from the Black Sea to West Mediterranean was fixed for TCE USD 23k with option for Egypt discharging for TCE USD 21k.
Steel scrap from Continent/Baltic becomes even more popular: the voyage to East Med direction for Supramax was at the rate of USD 47 pmt, which remains one of the lowest level seen. In general, there are minor fluctuations in freight levels worldwide, and the market still remains positively stable.
The activity of raw materials importers continues to stimulate the wind-up of freight. Rates from Rostov to the Black Sea have grown up to USD 30 per ton of grain, which is significantly higher than the usual level for this period of time. This strong demand for tonnage is caused by several factors. Firstly, coals exports have started to grow dramatically again after a 34% drop in April. Secondly, grain is exported on an incredible scale. Besides, shipments of the new crop will begin in a few weeks, so the volume of grain exports will not decrease in the near future. And the third factor is an increase in the export duty on ferrous steel scrap to the level of 5% for 180 days. Therefore there is a large amount of cargo that needs to be shipped during June, which overheats the Azov market.
Charterers of non-grain raw materials are quite active. Significant amounts of scrap metal are shipped from Ukraine in small parcels, including river ports. The voyage of the vessel with a cargo capacity of 3000 tons from Kherson to Marmara is now being fixed at the level of USD 100k lumpsum. Most likely, processors are trying to catch up before the new grain appearance on the market, since it is expected that the freight rates will be even higher.
The demand for steel products is outpacing supply this year as overall output is also low compared to previous years due to mining lockdown. Chinese steel export tax possibly being announced in mid-June in this regard ferrous scrap prices continued to increase worldwide. Governments of other of main steel producing countries try to regulate the prices at this field. Other raw commodities which shows positive dynamics also are being pump up thus all this developments increase the volume of trading operations. The Owners react respectively. The Spot market level increase in average USD 2-4 pmt within Atlantic. TCE for round Europe handy size trip reported to be USD 28k-30k. Supramax rates amounted to USD 27k-28k, expecting USD 30k on 24th week. Cross Atlantic big coasters TCE revealed on USD 15k-17k and intra-med rates on USD 26k. Owners expecting the freight level increasing up to 10-20% till end of June.
From various Owners, who are involved in sugar business from both EC and WC India to Red Sea we hear about lack of cargoes in that area. Most of the offers you can get in Red Sea are fertilizers going to WAFR, MED and South East Asia directions and small amount of agriculture cargoes like beet pulp. Owners are fighting for every cargo in order to reposition their vessels back to Indian ports. In addition, some of the Owners determine phosphates or potash as dirty cargo and exclude it from their work list. Some consider ferts as dirty cargo and prefer to ballast to WCI for their habitual and highly paid sugar business; others fix voyages with fertilizers or agriproducts to South East Asia and ballast to India from there.
Will the grain regain its status as a formative factor on the freight market? Most likely, it will. According to the results of the past state tenders for the purchase of grain for shipment in August, it is safe to say that exporting countries see themselves quite active in the new season. The victory of the Romanian grain suggests that a significant part of cargo from Russia will be shipped on market terms in smaller parcels to the Mediterranean Sea region, and in large parcels to long-distance destinations.
Many players expect that the Azov market will be high in the new season. Despite the fact that Traders are now keeping an eye on how the new mechanism will work in deed, the forecast of the commodity market seems optimistic. In the context of high-intensity dynamics of factors fluctuations, which affect the pricing for shippers and receivers, it becomes quite convenient to work with small volumes; this means that the demand for coasters from the Azov Sea and river ports will be strong.
The tonnage demand for transportation of non-grain cargo does not decrease. Besides, some Owners are negotiating for work on roads transshipment under large programs. Based on this, it is safe to say that the rates for transit voyages through the Volga-Don Canal, for general cargo and export of Caspian fertilizers will increase significantly.
In the wake of the ongoing market growth all-round, there is observed renewed interest in time-charter stories, especially for periods. Those Owners, who prefer not to hire out their fleet, now work in spot. This results a certain illusion of tonnage availability on the market: offered vessels are quickly fixed, which is particularly noticeable via example of the Mediterranean and Black seas. Charterers, who usually fix vessels a month before laycan, now have understandable difficulties in searching for tonnage: on a rapidly growing market, Owners either do not consider such offers, or make their imagination go wild in rates.
Spot tonnage on the Azov market is in demand among Charterers. New rules for calculating export duties have led to concerns of grain shippers, and many companies are in a hurry to ship crops fitted under the duty in May. At the beginning of the week, the rate on the basis of the voyage from Rostov to Marmara exceeded USD 20 per ton of wheat/corn. At the end of the week, the rate for long-distance voyages hit the average 40s. Market participants are still trying not to enter into new contracts for crops that fit under the duty/quota for June in small parcels from the Azov Sea ports. Only large players with more opportunities for price formation are working on shipments from deep-water ports and roads transshipment. This affects the freight market by the fact that only spot/prompts are considered for firm work.
An interesting situation has developed on the freight market from the deep-water ports of the Black Sea. At the moment, the market is very high, and grain traders are in a difficult position: they are not currently a forming factor in rates, and amid falling prices, they have to accept high freight. If this situation continues, the grain will be shipped in large parcels, and the rates for coasters will be reduced. Amid crop indicative prices 21/22, it makes no sense for shippers to hold back the goods.
Charterers of non-grain cargo are forced to find new algorithms for working under the influence of high freight rates. For example, some large companies try to take vessels for contract work or for time charters. The usual expectations that the market will go down, are not justified since January: market fluctuations occur, but significant ones only upwards.
River Plate grains looks preferable to the Owners and Operators again. Now the TCE requirements are about USD 24000 to MED direction. This caused by an increased productivity in the region. This turns the situation upside down when the backhaul becomes more welcome than the front haul. Thus we see the TCE from ARAG to NCSA for USD 17000.
One of the main events of the last week was the introduction by Turkey of strict restrictions related to the pandemic until May 17. Judging by the past year’s experience, enterprises are in a state of uncertainty and cannot confidently plan their work in such an environment. Currently, shipment dates of some of the export goods are already being changed to later ones due to difficulties with the delivery organization. Also, the amount of the usual non-food cargo from the Central Mediterranean to Turkey for further processing has noticeable decreased. Because of this, many Owners are either consider voyages from the Azov Sea ports to the Adriatic Sea reluctantly, since the return ballast passage kills the voyage economy, or offer a freight rate that allows not bothering about it.
The cancellation of the Egyptian state tender for the purchase of wheat by reason of too high prices will lead to the fact that supplies to Egypt will proceed within the market. There is quite a big difference between the FOB indicative prices for the 21/22 harvest from the Black Sea, especially considering that the payment was to be made against the cargo documents, without any delay. Further development will depend on how quickly the shippers will continue to “get rid” of old stocks: Russian Traders have few volumes left, while Ukraine and Romania are quite active in exporting.
Scrap market continues to grow. Due to official removal of China’s steel export VAT tax rebate from 1 May, lack of significant scrap commodity stocks of the major exporters and increased demand worldwide shows USD 10 increase and current sales prices even higher than they were in December 2020. Presently due to increased demand from the consumers we do not see the freight market pullback for the following month. In addition to the above, due to the Easter holidays from 1th to 5th of May coincided with the Turkish lockdown till May 17, we see that on 20-21 weeks will be a peak of activity in the industry. Thus, based on our close Owners information, we expecting the freight levels at Med/Cont should pull up.
The freight market went on a long Easter and Ramadan related vacation. Most European countries start work on May 5, but the 19th week for Europe will also be working by half. Muslim countries will celebrate Ramadan on May 11-15. Many market participants tried to close deals before the beginning of May, foreknowing the impossibility of stable work in the first half of the month. Despite this, the freight market continues to grow, even though there are not much fixtures during the holidays. The market will be fully formed by mid-May, and how it will behave is not yet clear.
Most Charterers from the Middle East prefer to reschedule their shipments to June dates or do FOB sales. Due to various religious and national holidays, the market situation in the Persian Gulf remains unchanged. Charterers hope that the market will dip in June, and Owners will be able to provide competitive rates.
In the light of new trends on the commodity market, many Owners are trying to relocate their fleet to work in other regions not to stay in the Azov basin. In general, the number of cargo offers on the market is still not decreasing. Despite the decline in the usual grain volumes, there is work for vessels in the Black and the Mediterranean seas, including quite active exports from Turkey in various directions.
Owners of modern fleet have found unusual opportunity for employment of their vessels: long-distance voyages around Europe. Despite the fact that such vessels of “river-sea” type were initially designed to operate from river ports, currently a voyage from Turkey to the Continent is more lucrative than the struggle for the Azov load on the low market.
Russian-flagged fleet remains in demand even amid the overall calm. Those who avoid calls to European ports have switched to work to the river or to the Caspian Sea. Considering the fact that large shipments of the residues of the old grain harvest from the roads transshipment are planned starting from the second half of May, the Russian-flagged vessels will be involved in the work anyway. However, in the Black Sea, cargo volumes are expected to decrease in the second half of May.
The freight market of the Pacific Basin has grown significantly in recent times, and many Owners prefer to keep their fleet mostly there. Despite the continued growth of regional cargo flow and, as a result, freight rates, the availability of tonnage supply still exceeds the demand for it: a sufficient number of Owners are actively searching for cargo; one of the priorities is coal from Russian ports to China.
Update on Persian Gulf situation: the market is growing in the wake of the Atlantic, and there are plenty of offers and sub sales for Handy-size and Supra tonnage. The Owners of small Handys (abt 18-25k dwt) which open at PG, are facing the situation that their tonnage goes unnoticed. Charterers ship cargoes in favor of classic parcels of 30-32k mts and 50-52k mts as common on the high market. Moreover, numerous Charterers require free use of vessel gears so if you are Ship Owner of a spot small Handy without cranes, it is a sentence for you.
The decline in the freight market has so far stopped in the Azov and Black seas region. There are very few open spot vessels. This situation is explained by the fact that shippers are eager to “pawn off” the remaining goods due to a decrease in the price of raw materials: with the occurrence of the new grain harvest on the market, the price level is unlikely to meet expectations for USD 250 + FOB Black Sea for 12.5% wheat. Shippers of goods not fitting under quota and duty are quite active. Therefore there are expected no rates below USD 15 per ton for voyages from Rostov to the Black Sea in the near future.
Voyages to uncommon destinations are gaining popularity. The fact is that producers and Traders are finding other markets as an alternative to exporting to Turkey in a bid to get rid of expensive old stocks. From the Azov Sea ports, grain parcels are shipped to Ghent, Libya and Tunisia; this makes the tonnage, which is capable of performing such voyages, quite valuable. The rates for these destinations are currently noticeably higher than for comparable, but familiar routes.
Will the freight rate level be the same as before? Today, the Black Sea coasters market is still high. Owners offer rates of around average 10s for backhaul cargo from Turkey to Georgia/Ukraine. Though shippers, who have been forced to pay high freight for quite a long time, are now negotiating more discreetly in a bid to get very low 10s. The current level has not yet been determined, and the pace of shipments has decreased. Nevertheless, the position of Owners looks stronger, as far as there is enough alternative work in the region now.
Continuous congestion at Israel ports is aggravated by lack of the actual berths for different commodities and lack of the manpower to facilitate timely loading/discharging operations, which followed the March’s notable increase of cargo flow. In attempts to mitigate the situation disbursement discount for the extra waiting time was provided by the port authorities. Even so Owners have no willing to call Israel ports without extra freight premium, which in some cases amounted to 20%. The waiting time varies from 13 to 21 days and still a substantial number of vessels awaiting at anchorage. The situation may improve by the end of the May.
According to Middle East Charterers who ship steel products, a dire need for spot Handy-size vessels at Arabian Gulf persists. High demand started at the beginning of the April. Charterers complains that spot vessels supply is very low at the moment and most of the vessel that sailing towards Arabian Gulf already fixed for the next voyages. This situation arises from the fact that Owners prefer to position their fleet in Pacific basin for employment on Far East – ECI route and vice versa, as currently this region offers appealing rates and stable amount of cargo orders. Therefore, Persian Gulf is out of the picture and Charterers face a choice between securing a spot vessel on Owners’ terms and pay extra freight or moving laycan significantly.
It is safe to say that the decline of the Azov freight market has stopped. Almost the entire Russian-flagged fleet has switched to work in transit. Despite this, the rates for the transportation of goods from the Caspian region are growing: during the closed navigation, large volumes of grain for export were formed. Transit voyages with fertilizers from Turkmenistan to the Marmara Sea are offered at the level of the average 60s per ton. “Backhaul cargo” to the Caspian Sea is quoted much lower: the rate for a voyage from the Marmara Sea to Kazakhstan for a 3k river-sea type vessel is kept at the level of USD 110-120k. Sometimes, due to the lack of direct voyages to the Caspian Sea, Owners work with backhaul cargo to Rostov and, if possible, take grain to Iran.
Charterers’ expectations for falling rates are not met. There has become less grain, but due to the rotation of the fleet and unshipped parcels for April, the market of the Black and the Mediterranean seas is kept from falling. Until mid-April, there are expected no significant changes.
The situation with voyages to Israel is not easy. For more than a month, vessels have been standing there for a long time in waiting for discharging. The situation is not expected to improve in the near future. This has led to the fact that most non-grain cargo is offered on Liner Out basis. Neither the receivers nor traders want to undertake risks and responsibility for the long idleness of vessels.