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Panamax freight rates low despite high Brazilian soybean export expectations

Brazilian soybean and soybean meal exports are projected to exceed last year’s by almost 5 million mt this year and Chinese import demand is up, but Panamax freight rates are still significantly lower than last year due to lower bunkers and excess tonnage.

According to the latest USDA world agricultural supply and demand estimates released on Wednesday, projected soybean and soybean meal exports are expected to reach 64.53 million mt for the 2015-16 season. This is 4.68 million mt higher than last year’s estimated exports of 59.85 million mt.

China, the world’s largest importer of soybeans is projected to import 77.5 million mt of soybeans this year, 4 million mt more than in 2014-15 season, according to USDA data. In spite of this increase in demand and higher overall exports, freight rates have been quite low compared with last year.

The Panamax rate averaged $22.82/mt in the first 10 days of June for the grain route from Santos, Brazil, to Qingdao, China, basis 60,000 mt, compared with an average of $31.10/mt for the whole of June 2014. This 26% drop is largely down to the difference in bunker prices, which went through a dramatic fall in recent months, sources said.

The average June price of IFO 380 CST bunkers in Santos in the first 10 days of June was $352.10/mt compared with an average of $614.20/mt in June 2014 according to Platts data, a drop of nearly 43%. With bunker prices making up roughly 70% of voyage costs, lower fuel expenses have a major bearing on freight rates, sources said.

The freight rates to take a 60,000 mt grain stem from Santos, Brazil, to Qingdao, North China, has risen in the last two weeks to $23.75/mt on June 10 from $21.75/mt on May 28. However, as industry sources said that this rise is likely to be temporary and simply a result of a short-term tonnage supply squeeze for end-June dates.

“The Pacific is quiet in terms of activity and volume, so with ECSA [East Coast South America] booming you will see more owners repositioning to the area,” a shipbroker said.
Source: Platts