Russian wheat coasters prices surge as supply dries up, freight sinks

18.01.2019

Russian wheat prices at shallow water ports are rocketing as sellers struggle to originate supply.

The shortage of wheat parcels is also driving coaster vessel owners to slash their freight rates as shipowners hunt for cargoes to load.

S&P Global Platts assessed FOB-Azov 12.5% protein wheat prompt loading at $218.50/mt Thursday, a surge of $9.50/mt since January 2. CIF-Marmara 13.5% protein wheat jumped $7/mt over the same period to $253.75/mt.

The knock on effect is a growing supply of coaster vessels to load at Azov or nearby ports.

Freight between Azov and Marmara is now fixable at $27/mt, representing a drop of $4/mt since January 2 with market participants now forecasting a fall to $24/mt or lower in the coming weeks.

Many shallow water exporters have struggled in recent weeks to originate due to the higher premiums paid for origination by exporters at deep water port Novorossiisk, sources said.

Origination to Novorossiisk is fixable at $245-$250/mt, particularly, as much of the wheat is coming from logistically cumbersome regions, according to sources.

Some of this is due to farmers, especially those based near ports, holding onto their wheat in anticipation of higher prices, sources said. Part of this is on account of "unofficial" or "guideline" quotas set by the Russian ministry of agriculture about much wheat can be exported, sources said.

Given that Russia is only 10 million mt away from reaching its forecast total export figure of around 35 million mt by the end of the marketing year (July 2018-June 2019), sources are expecting more price strength on the horizon.


S&P Global Platts
 

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