Tel.: 0043.732.7804.0 | Fax: 0043.732.7804.355 | E-Mail: vait@vait.com

Freight rates have recovered in 2017, a steady and stable upward trend in the freight market is emerging. The increase in global trading volumes and bulk material transports is an indication of this development.

Transport
Freight rates for ocean-going vessels, mainly expressed by the Baltic Dry Index, increased significantly in 2017. After a long dry spell for shipowners since the financial crisis in 2008 and an all-time low of freight rates in 2016, in 2017 we observed a stable and steady upward trend, distributed throughout the year, especially in the second half in all segments (Capesize, Panamax, Supramax and Handysize vessels). While IMF estimates that the world GDP grew by 3.6% in 2017, the trade volume is expected to have risen by 4.2% and the share of bulk transports, surprisingly even more, by about 5%. This is an indication that the increase is based on sound economic data and it can be assumed that this is not just a straw fire, but that a solid, sustainable recovery of the freight market is in sight. The world fleet of bulk carriers grew by just over 3%. However, it is positive to note that the „excessive“ ordering of new buildings seems to be a thing of the past.

The big question now is whether this upward trend will continue in 2018. Speaking to shipowners, operators and brokers it can be seen that the sentiment is significantly better than last year. Combining this with the solid economic data that underlies the recovery, we expect freight rates to remain at least at current levels in 2018 – if not to increase even further; of course always adjusted for seasonal fluctuations.

NOVOLOG
2017 was a year of stable earnings at our stevedoring joint venture Novolog in Odessa. This is remarkable, when taking into account that our main customer Donetsksteel broke away in the first quarter. This was due to escalation of the conflict in Eastern Ukraine, which for us resulted in the loss of 500-600,000 tonnes of pig iron.

Notwithstanding, the loss has been partially offset by an increase in transit volumes by other customers and producers. As a result, the annual volume turnover decreased by just around 10% compared to 2016. Good profits were generated and the position of Novolog as one of the leading terminals for steel and raw materials in the port of Odessa was strengthened.

Due to an increasing competition in the Ukrainian market the turnover rates for the key goods flows (grain, steel, raw materials, etcetera …) were under slight pressure throughout the whole of last year. In this difficult environment Novolog managed to avoid lowering tariffs. This was possible mainly due to the good reputation, the tailor-made customer-oriented solutions and the stable long-standing customer relationships.
Due to the currently satisfactory income situation a repair and investment program was started, aiming at improvement and renewal of the handling equipment (lift trucks, tractors, etcetera …), in order to maintain the current high standard/service for the next years as well.

For 2018 the traditional flow of goods is planned to continue: steel and pig iron from Arcelor Mittal, steel from BMZ, clay in bulk and general cargos from smaller producers. In addition, a trial shipment of sugar took place in the fourth quarter of 2017. If it turns out possible to handle this business on a regular basis, this would be yet another promising earnings contribution for 2018.

NOVOLOG Services
At the beginning of the year, all signs seemed to be green and a year with a similar success as in 2016 was expected. Unfortunately, in February, with escalation of the conflict in Eastern Ukraine and the accompanying transport blockage, the main customer “PJSC Donetsksteel“ broke away. Therefore, the rest of the year focused on the remaining flows of goods. Due to a lack of railway wagons and seasonal fluctuations of this special commodity a turnover of 200.000 metric tons could be handled.

Danube Grain
The grain silo Danube Grain Services in Gostinu had yet another satisfactory year with a turnover volume of around 70,000 tonnes, most of which was handled by VAIT itself.

The region of Giurgiu County is one of the most important grain farming areas in the country. The agricultural land amounts to approximately 258,965 hectares and, similar to other areas of Romania, the volume of grain increases annually.

The main advantage of the region and of the silo is the direct connection to the Danube, which means that one can enjoy the logistical advantage of Danube shipping, which, compared with land or rail transport, results in essentially lower freight costs at high transport volumes.
The prerequisite for this is a stable water level on the Danube, which was given throughout the previous year, but is not the case every year.
Naturally, the Giurgiu region also faces strong competition with other grain farming areas in and outside Romania. The European Commission has developed a Danube strategy to further increase the attractiveness of the Danube regions, which could also benefit Danube Grain.

VADECO
First of all, a few comments on the general situation in Romania, which also had a direct impact on Vadeco‘s business: an increase in oil-, and therefore fuel-prices on the international market, an increase in inflation – especially in the last quarter, and a higher than expected exchange rate Ron/EUR. All these factors meant an increase in costs, which also led to higher prices:

Port turnover and petroleum shipments by rail:
Due to our experience and stable long-standing customer relations, we were able to extend the existing contract with OMV until 2019, with the option of a renewed extension of 2 years. Prices have been adjusted and a slight increase in volumes has been observed towards the end of the year. It is important to see if this trend will continue in 2018.

Port turnover and grain transportation:
Despite the increasing pressure of competition and the reorientation of some „big players“ in the market, Vadeco was successful in essentially keeping the „traditional“ customers. Almost 300.000 metric tons were transported for them, which shows their trust in Vadeco and its expertise.

“Bunkering” and related thereto port services:
The business, which has existed for 3 years, has been successful expanded and it was possible to handle 85 ships in Constanta, Braila and Galatz.

Back to Top