Rostov steel shipment costs climb as grain harvest dominates Russian logistics

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Deliveries of steel products from the Russian river port of Rostov-on-Don to the Black Sea port of Novorossiysk, the country’s key grain export terminal, have become problematic because of “a large number of grain shipments” going through the seaport, one trader said.

Under these circumstances, freight rates for steel billet shipments from Rostov have risen, market sources said.

The freight cost from Rostov to Turkey’s ports on the Black Sea and the Sea of Marmara was about $30 per tonne on Friday July 25, up from $18-20 per tonne earlier this year. This level is not currently viable, according to a second trader.

The delivery cost from Rostov to Aliaga in Turkey’s Izmir region, on the Mediterranean Sea, is $6 per tonne higher than to the Black and Marmara sea ports, according to a third market participant.

Russia’s Rostov Metallurgical Plant (REMZ) and Frolovskiy Electric Steel Works (Volga-Fest) were exporting steel billet from the river port.

The July-September period is usually problematic for steel exports from Rostov, but the degree of difficulty “depends on the harvest”, the second trader said.

Russia began harvesting its grain on June 23 and was expected to export 26 million tonnes of grain in the 2014-15 marketing year, which started on July 1, amid “better prospects for the harvest”, the Bloomberg news agency reported on July 15.

This compared with 25.4 million tonnes of grain exported in the 2013-14 marketing year, according to a report in the Russian daily Vedomosti on July 8.

Another problem with the grain season is that the biggest and newest ships are used for grain shipments, according to the third source.

Turkish clients must therefore pay an extra $1 per tonne for the more expensive insurance needed for deliveries using older vessels, the trader said.

Meanwhile, Russian billet producers that export from Rostov currently prefer to re-roll billet into rebar themselves, amid a favourable pricing environment in the domestic long steel market.

As a result, REMZ offered about 20,000 tonnes of August-production billet for export, and re-rolled a similar tonnage itself, the third trader said.

Volga-Fest sold “significant volumes” of August-made billet to a local re-roller, according to the same source.