Thanks to the continuous support of our clients, AESA Chartering has once again concluded a successful year in 2014 with over 600.000 tons of cargoes shipped. We are also proud of having finalized our web site where you can find a copy of this report and the previous issues. Just in case you have not seen it yet, you can simply click on: www.aesachartering.fr
The bullish end of 2013, not seen in several years, had given hopes to many that the freight rates in short-sea trade will continue to pick up during 2014 but apart from a very firm 1st quarter all other predictions proved only to be illusions.
As from April, freight rates came back to the same levels as we have seen during 2nd & 3rd quarters of 2013 and never really returned to the higher levels despite the ‘usual end of year activity’ of freight markets.
Nevertheless Owners enjoyed during the last quarter a slight increase of freight rates and falling bunker prices (over 30% decrease during the last 12 months). With such low bunker prices it is hard to imagine that ‘low Sulphur requirements’ in force as from 1st January 2015 shall have any immediate effect on the freight rates.
The most disturbing news are from Russia; with the falling rubble, falling oil prices and recent restrictions for grain exports. On 18th December Russian Railway stopped loading grain cargoes for Russian Sea and river ports and grain exporters announcing a temporary stoppage in grain exports. The grain cargo traffic represents generally about 70/80% of the Black Sea market. During the last quarter of 2014 also other cargo offers remained limited such as fertilizers, pig iron and steel. Shipping of coal cargoes were also minimal. Romania has been the only surprise of the year with grain exports increasing by 20%. The freight rates remained flattened on a mid-range path partly due to the balance between the cargo offer and the number of vessels available.
The chaotic nature of Russian market makes it very difficult to predict what the situation will be in January but taking everything into consideration we can assume that the January will be the pivotal period and how the market performs over the next couple of weeks will have an impact on the first quarter of 2015. Freight rates may slightly go up for a few months if and only if offers of grain shipments grow both in Black Sea & Baltic.
Personally, I expect Owners facing a weaker market than they are expecting as there are plenty of available vessels in both basins to ensure the current cargo traffic and Owners will have difficulties raising the freight rates. Slumping demand for tonnage may force Owners to seek their fortune in other markets such as Mediterranean thus also increase the available tonnage supply in this area and bring falling freight rates unless we observe an increasing demand from Algerian importers for cement, steel and other construction materials. Construction materials are mainly shipped from Spain and Italy and less often from Turkey. Shortsea market will generally remain fragile till to the end of the summer 2015 and Charterers shall manage to keep freight rates at reasonable levels.
We still observe extremely low interest rates applied across Europe and exchange rate between Euro and USD never been so favorable for EU countries. Falling down to 1.20 levels compared to 1.37 in January 2013. EU companies did not had such a good occasion to increase up their production which can be transformed directly to an increase of trade volumes in short-sea trade, decrease unemployment, bring to balance economies of EU countries and thus let all Europeans breathe a little more comfortably.
If I cannot guarantee all these will come true, I can still hope! Let’s don’t give up as our salute will not come from our politicians but only from us. I wish you all the very best in this New Year.
Eren BEKTAS