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Firming South American grain market boosts Atlantic dry bulk freight rates

Brazil’s front-haul dry bulk freight market has been firming for the past two weeks, pushing up spot rates across the North Atlantic and affecting the period market, sources said.

Front-haul freight rates to take a 60,000 mt grain from Santos, Brazil, to Qingdao, China, rose $2.75/mt to $25.25/mt in the two weeks to Wednesday.

Shipping sources attributed the increase to a scarcity of vessels for loading dates from the second half June to mid-July, coupled with strong demand from Chinese soybean buyers.

That lack of tonnage has forced charterers to fix vessels from as far afield as UK Continent and the western Mediterranean, leading to a knock-on effect on trans-Atlantic freight rates, sources said.

“Everything is moving up rapidly in the Atlantic, but the main engine is still South America,” an operator said.

The firm Brazilian export market has led to significantly higher rates across the Atlantic, but the effect has been most pronounced in the Baltic and US east coast, because both areas derive their tonnage from UK Continent, sources said.

Last week, Panamax owners were achieving time charter levels of about $7,000/day, delivery Rotterdam. That has now pushed up to $9,500/d, delivery Rotterdam, for cargo with June dates from the Baltic Sea.

According to a shipbroker, there was a big difference between June and July dates as there were no vessels left for prompt June dates.

Voyage numbers have followed suit and the coal route from Ventspils, Latvia, to Rotterdam, basis 70,000 mt, was at $7/mt on Wednesday, up from $5.50/mt on June 3.

The trans-Atlantic coal route from the US east coast to UK Continent has been experiencing weak demand for most of this year because of high US thermal coal prices, which has led to charterers fixing cheaper Russian coal stems in the Baltic Sea, sources said.

However, with prompt tonnage scarce, the coal route from Hampton Roads, Virginia, to Rotterdam, basis 70,000 mt, has risen to $9.50/mt from $8/mt on June 3.

The period market has also come back into play in the past two weeks due to the firming sentiment in the spot market, which has also led to higher prices in the forward freight market, sources said.

Panamax owners are now achieving levels of $8,000/d for period charters of one year with delivery in the far east, which compared with levels of about $7,000/d last week, sources said.

According to Freight Investor Services, at the end of trading on June 3 average time-charter levels for 2016 in the paper market were trading at $6,575/d, compared with $7,100/d on Wednesday.

Charterers fixing period vessels will hedge their exposure to the spot market by taking a position in the paper market, sources said.

There is a gap between the paper market and the period market but, according to an operator, that was because owners ask for a premium with one-year period charters given the length of the deal.
Source: Platts