European short sea trades did not see much of a rally last year. Especially the Mediterranean and Black Sea[ds_preview] market has been suffering as political turmoil and civil wars in the region continue to disrupt trading. HANSA asked Engin Koçak, head of research at ISTFIX, about the prospects in the region. The Turkish consultancy publishes the weekly Istanbul Freight Index (Istifx) which tracks shortsea vessel earnings.
HANSA: The shortsea market has been quite subdued. What’s the situation in the Mediterranean/Black Sea trades, what’s the outlook?
Koçak: The ISTFIX ended 2015 at 611 points but after the New Year, it posted two serious declines to 584 points, only 12 points away from its historical low of June 2012. This represents a year-on-year drop of more than 18%. Adding the 44-48% decline in bunker prices, which account for a certain percentage of voyage costs, freight levels appear to have nominally fallen by at least 33% in year. Mediterranean/Black Sea vessels hardly operate at breakeven levels and market conditions for river/sea going vessels are miserable, too, as ice restrictions cut off a lot of tonnage from the Azov region.
HANSA: Where do you see opportunities and risks?
Koçak: There are somewhat positive developments in Libya and Egypt which might elevate the sentiment but probably only towards spring. Ukraine is no longer a coal exporter, while tension in the east causes its steel output to drop significantly as well. Russian steels are filling the market but due to Chinese competition and the obvious stance towards Russian products nowadays, their market share is not promising either.
HANSA: How do you see Russian sansctions and political turmoil in North Africa/Middle East impacting the market in 2016?
Koçak: Russian sanctions are weighing down the medium-/long range coaster market and might lead to greater regional tonnage imbalances. Turkish owners may try to avoid Russian ports as cases of abusive approach have been reported. Their vessels will most like shift to Mediterranean routes or only call Ukrainian ports. This may result in tonnage shortages in the Black Sea and high availability in the eastern Med. This could lead to a rise in Black Sea rates and a decline in the Mediterranean.
