Steel market players, both sellers and buyers, have recently been worried by another sizeable increase in freight rates, which has been weighing on ongoing business and shipments and putting pressure on prices. Specifically, the significant freight price rise is seen for ex-CIS materials to Turkey, although a number of sources report that freight rates to and from Asia have also increased a lot.
According to market information, the freight rates specifically for billet from the Black Sea/Azov Sea area to Turkey’s Bartin and Marmara regions have increased from $17-19/mt two weeks ago to $27-28/mt and $28-32/mt, respectively. Another source has reported that the freight price for a sizeable billet vessel was in the range of $31-37/mt to the Iskenderun region.
The limited vessel availability, especially for small and medium lots to be shipped, is said to be the key reason for higher freight rates, specifically in terms of Turkish business. “Owners say there is too much demand and they are increasing prices day by day. Sure it is a kind of a bubble at the moment, but we have what we have and shipments need to move,” a trader told SteelOrbis. Most sources agree that the limited vessel availability in the Black Sea/Azov Sea region results from a lot of companies hurrying to ship their materials before Russia imposes the €70/mt export duty on scrap, which is expected shortly. Moreover, the grain season has reportedly started to affect the freight market and this influence is only going to strengthen in the coming months. In addition, most market players expect the oil market trend to be positive, which means there could be a price increase on the fuel side of shipping costs.
It is worth mentioning that the uptrend in freight rates within the past two weeks is seen not only in terms of shipments from the CIS to Turkey, but also concerns other destinations. A source shipping a 50,000 mt cargo from North Africa to China has commented that $70/mt freight is hard to find these days. North African buyers themselves have faced a higher freight rate situation. "The freight is high, which is the big issue as it has increased not by $2-3/mt but by up to $20/mt" "Freight from the Black Sea to North Africa is now not less than $35/mt," a trader told SteelOrbis on June 9. In addition, a 30,000-40,000 mt flats cargo shipper from Asia to Turkey has reported that rates of $88-90/mt exist in the market.
While some market players consider the current freight situation to be due to speculation and expect it to cool off soon, a lot of sources do not foresee any considerable decline in the rates in the coming weeks. The first reason is the grain season, which is foreseen to pick up speed from the end of July and to be an influential factor for several months. Another reason is the firm oil pricing, which means fuel costs will not drop. “One should also bear in mind that, since countries have been opening up, the overall volume of trade will be increased and shipments will rise, not only for steel and raw materials, but for other commodities too,” a source told SteelOrbis.