Turkish wheat mills turn to larger cargoes amid soaring coaster freight costs

Turkish wheat mills have been turning to Handysize cargoes in the face of soaring freight rates for smaller vessels in the CIF Marmara 12.5% wheat protein coaster market amid high seller stocks at Black Sea ports, combined with seasonal changes.

"Coaster is not workable anymore, since there is an overstock at Black Sea ports," said one Turkish mill owner, adding that sellers in Russia's deep-water ports offer larger cargoes more cheaply. "It's better to buy [Handysize] nowadays, since coaster freights are very high, but I'm expecting offers for coasters to decrease in the near future."

It is currently more common to see Handysize deep-sea cargo offers on the CIF Marmara 12.5% market. This type of sale would often mean that Handysize cargoes are transshipped at Kavkaz then traverse south to the Sea of Marmara, where it would be offloaded at Tekirdag, Bandirma, Ambarli or Marmaraereglisi.

Freight costs for deep-sea vessels have historically been cheaper than coaster vessels, but the premium of coaster freight from Azov to Marmara over Panamax freight from Russia to Iskenderun or Mersin has been heard at around $60/mt.

Coaster freight from the Sea of Azov to the Marmara region is now in the high $50s/mt and shipowners are said to be offering at more than $60/mt for a 3,000-5,000 mt cargo of wheat, according to market participants, up from $46/mt on Oct. 25, and around $44/mt in November 2021. Platts, paert of S&P Global Commodity Insights, assessed CIF Marmara 12.5% coasters unchanged Nov. 15 at $246/mt. Handysize offers for the same basis were last heard at a $6/mt discount to this assessment.

Traders warned that there are risks attached to purchasing Handysize cargoes. Russian inspections of vessels in the Kerch Strait continue to hamper shipments, with delays reportedly between two days and two weeks.

"The idea to sell [Handysize] is logical because freight is volatile this year, from low $40s/mt to high $70s/mt, and back and forth," a Russia-based trader said. "It's quite prudent to do that but it might not be sustainable going forward."

"When you buy Handysize cargoes, any delay could be crucial and could be risky, so you will have shortages if you are only buying [Handysize] cargoes", the trader said. "It's safer to buy more frequently."