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Glogos Freight Report Week 43

Region: Russian River, Azov / Black Sea, Caspian

Trade: Coaster shipments

A grain forum in France, a severe storm in the Black Sea and a low business activity of Turkish buyers resulted in the freight market in the Azov region continuing to decline, as expected week 42. Thus, workable rates maintain USD 29 per ton basis voyage ex Rostov to Marmara with wheat.

The leading grain Traders met at the EUROPEAN COMMODITY EXCHANGE 2018 conference in Strasbourg on October 24-26. During the symposium, a lot of Exporters suspended their commercial activity until the end of the 43ed week. Thus, forum participants had no opportunities to negotiate firmly and refused to accept the proposed contracts at the last moment. Being in an uncertain position, some Ship Owners were ready to discuss voyages at rates below the market by USD 1-2, provided that the contract is signed immediately.

Owing to the prolonged storm in the Black Sea (wind speed reached 20 m/s), which was ongoing until week 43, there formed a queue of ships on the approach and exit from the Kerch Strait. Due to imposition of the state of emergency in the coastal zone, the ships were forced to wait for the end of the foul weather and could not start or end their voyage. In this context, some Charterers canceled the ships. But by the time when a large amount of tonnage had been opened in the Azov Basin, Traders had the opportunity to conclude new contracts at rates lower than last time. This factor also contributed to the reduction of freight in the region.

This situation demonstrated that the market almost completely swung to the side of the Charterers. Ship Owners understand that future growth of freight is unlikely, as a result they try to make deals as soon as their vessels discharge previous cargo. Also in the light of a falling market the demand for long-distance hauls has increased among Ship Owners, in this way, they can get maximum profit from voyages at yet high freight. Ship Owners, who work ex Azov Sea ports, have recently shown an increased interest for the back-haul voyages.

During the high freight market season it was not profitable to lose time on additional port call and loading operations, fleet tried to return as quickly as possible for the main cargo – the grains. Today the intensity of shipments is reducing; therefore Ship Owners are more enthusiastic to consider the back-haul, trying to provide their fleet with any work.

Long-distance routes are growing in popularity due to the poor financial situation of Turkish buyers. In recent weeks, the number of requests for shipments of grain from Greece and Italy has significantly increased, more contracts for medium and long-term destinations are being signed. The rates for such hauls are declining, but at much slower pace.

The freight from the river has grown significantly at week 43. This is due to the approaching end of the navigation period and a high demand for tonnage in this segment of shipments. Currently, considering the schedule for closing the locks, lots of Ship Owners are already refusing to work in mid-November from the ports of the Middle Volga. According to the forecasts, temperatures are expected to fall below zero at week 46 (November 12-18) there. Exporters who don’t have time to carry out the cargo from river elevators are ready to raise the rate just to find suitable vessels. Nowadays the average rate basis voyage of the Samara – Iran amounts USD 63 pmt, which is USD 3 more than the last week. Market participants predict that freight rates for shipments from the river will decrease as the closing dates of the Volga locks are coming.

Today there is a conception of the deployment of the fleet during the winter. Apparently, the number of fleet in the Caspian region for the next few months will be fewer compared with last year, but a quantity of cargo is expected to be less. Taking into account the current state of the market, Traders rely on the stability of freight during the winter or even a small increase. At the same time, market environment will depend on the imposition of US sanctions against Iran and their consequences for regional Ship Owners and Exporters.