The Dry Bulk Weekly Review in Shipfix Data
Recent developments show that demand for seaborne transportation of Russian exports of many commodities remains robust. Shipfix’s forward-looking cargo order data set has highlighted that the flow of coal and fertilisers from the Baltic Sea will remain firm in the near term and dominated by long-haul voyages. Additionally, continued robust demand for shipments of Russian grains will support freight rates in the mid and small-sized segments.
Long-haul Exports Have Fuelled a Recovery in Demand for Seaborne Transportation of Russian Coal from the Baltic Sea
After taking a nosedive during the first few weeks of August, demand for seaborne transportation of Russian coal from the terminals in the Baltic Sea has recovered. While weekly cargo order volumes during the past two months have been somewhat volatile, activities have been well above what has been recorded during much of the year. Still, the weekly volumes in excess of one million tonnes observed during July have yet to be matched.
Sanctions have limited the access to the European market for Russia’s coal miners, and, as a result, their output has to be shipped to more distant shores. During the past two months, much of the demand for seaborne transportation has been centred on discharge in China, India and the Middle East, boosting the trade’s tonne-mile demand.
The increasing focus on longer distances in the trade has seen the smaller vessel segments losing out in favour of their larger siblings. While the development accelerated following the Russian invasion of Ukraine, the trend towards using larger vessels for Russian coal exports from the Baltic Sea commenced some three years ago. Over the past eight weeks, the average cargo sizes have remained relatively stable, around 50,000 tonnes, as fortunes have shifted between the Supramaxes and the Panamaxes. However, the past week saw the average take a jump upwards, with the measure approaching 60,000 tonnes. The continued demand for long-distance transportation of Russian coal will provide some support for freight rates in the mid-sized vessel segments.
Cargo Order Volumes for Russian Fertilisers Loading in the Baltic Sea Facing Pressure Amid a New Export Duty
Fertiliser prices had been trending higher even before the Russian invasion of Ukraine, as many countries restricted exports to safeguard domestic supplies. However, the commencement of direct hostilities accelerated the development as markets worried about global supplies. Even if Russian fertilisers have not been the target of sanctions, prices rose sharply throughout the months following the invasion as disruptions put further pressure on global supplies. However, prices peaked during the second quarter of last year and have since returned to the levels seen in 2021.
As mentioned above, Russian exports of fertilisers are not the subject of sanctions, but reduced access to the global payment systems and other informal barriers put pressure on the demand for seaborne transportation of the commodity. However, cargo order volumes have seen a steady recovery since the lows in April last year. Monthly volumes for cargoes loading in the country’s Baltic Sea ports, which account for a majority of the trade, topped 4.5 million tonnes in August. Demand fell back somewhat in September as a new export duty came into effect, and the current month looks to be on track for a further decline.
The recovery in demand for seaborne transportation of Russian fertilisers from the Baltic Sea has been fuelled by ordering activities for cargoes heading for Brazil, China, India and the US. The four destinations have accounted for around two-thirds of the trade over the past eighteen months.
The average cargo size for Russian fertilisers shipped from the Baltic Sea has been trending higher as aggregate volumes have recovered. While the Handysizes have maintained their dominance in the trade, the growth in volumes has translated chiefly into higher demand for Handymaxes and Supramaxes. However, the new export duties and falling demand may see a reversal of the recent developments.
Recent Recovery in Ordering Activities Signals Continued Robust Russian Exports of Agricultural Commodities
While grain prices have been trending higher over the past month, they remain well below the levels recorded during July when supply concerns erupted as the Black Sea Grain Initiative ended. At the end of last week, the December wheat contracts traded nearly 25 per cent below what was observed during the last week of July. Another large harvest in Russia has contributed to the downward pressure on global grain prices.
Recent weeks have seen cargo order volumes for agricultural commodities loading in Russian ports trending lower. Despite the recent development, weekly ordering activities still remain robust. In addition, last week saw volumes recovering to 1.8 million tonnes after dipping below 1.5 million tonnes during the preceding seven days. Still, should the previous year's pattern repeat itself, demand for seaborne transportation of Russian grains could stage a further recovery, which would extend into next month.
The robust volumes of the past three months initially saw much of the rising demand directed towards the Handysizes, but the Supramaxes also benefitted. However, as demand has been trending lower, the midsized segment has maintained its volumes and expanded its market share at the expense of the Handysizes. However, a rebound in line with last year could see higher demand for the Handysizes in the Russian grains trade.
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