The Dry Bulk Weekly Review in Shipfix Data
The first few weeks of the new year have seen a rebound in cargo ordering activities for many agricultural commodities. According to Shipfix’s data sets, rising demand for seaborne transportation of rice and sugar could weigh on market prices as the global supply situation looks set to improve somewhat. The approaching harvest season in South America has supported an increase in cargo order volumes for agricultural commodities loading on the continent’s east coast, with the smaller segments benefitting from the development.
Recovery in Demand for Seaborne Transportation of Sugar Suggests Recent Price Rally May Lose Momentum
Sugar prices ended last year with a significant drop that spanned the best part of six weeks. Between the second half of November and the end of the year, the March #11 sugar futures declined by more than 25 per cent. The futures ended December around the lowest levels since the end of March last year. Still, prices have since recovered some of the losses amid gains of nearly ten per cent since the beginning of the month.
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For much of the past year, concerns over global supplies supported prices for the sweetener while demand remained robust. The supply situation was affected by adverse weather conditions in some key growing areas and Indian export restrictions to safeguard domestic needs. As a result of the latter, cargo order volumes for sugar loading in India shrunk to virtually zero during the past year’s last three quarters.
The disappearance of Indian exporters from the world market led to Brazil increasing its market dominance. The increasing dependence on exports from one major supplier made weekly cargo order volumes increasingly volatile during the past year.
After peaking at the end of August, demand for seaborne transportation of sugar trended lower for the rest of the year. Still, aggregate cargo order volumes remained elevated and contributed to a better-supplied global market and the price drop during the final stages of last year. While weekly order volumes for Brazilian exports dropped below one million tonnes before Christmas, the new year has seen a rebound in demand. During the past two weeks, the demand for seaborne transportation of Brazilian sugar exceeded 1.7 million tonnes. Hence, the recent recovery in sugar prices may lose some of its momentum in the near future.
Recent Weekly Cargo Order Volumes Indicate Stabilising Rice Prices
Rice prices trended higher throughout the second half of last year under volatile conditions. After recording a nearly ten per cent gain in November, the March rough rice futures listed on the CBOT endured a volatile end to the year. After recording some price swings around the New Year, the contracts have stabilised around the levels seen at the end of November.
Amid India's producers' near-complete withdrawal from the global rice market, rice prices remain close to the highest levels since 2008. The downward pressure on global supplies, combined with an upward trend for worldwide demand, has led to a situation where the shortage of the commodity has been at the highest level for two decades.
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The weekly global cargo order volumes during the second and third quarters last year were among the lowest recorded by Shipfix. While volumes recovered during the year’s final months, they still paled in comparison with what was observed during 2021 and 2022. The sizeable time lag between cargo ordering and actual discharge in the export port contributed to the price surge during the second half of last year, as the global supply situation became increasingly tight.
The last few weeks have seen significant volatility in aggregate cargo order volumes for rice. The weekly swings have been fuelled by shifting demand for seaborne transportation of rice from ports in Thailand and Pakistan. Still, a strong rebound for cargo order volumes during the year’s first few weeks suggests that rice prices could stabilise as the global supply situation improves somewhat.
The Early Stages of the Seasonal Rebound for Agricultural Exports from ECSA Have Benefitted the Smaller Vessels
As the harvest season in South America is approaching, analysts and various official bodies continue to debate the likely outcome amid adverse weather conditions in parts of Brazil. The estimate for the Brazilian soybean harvest varies considerably across the different forecasters, with some expecting a new record while others are somewhat less optimistic. While it is looking increasingly unlikely that the Brazilian soybean harvest will top last year’s production, a sizeable Argentinian output could nevertheless see seaborne exports from South America increase compared to a year ago.
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After the traditional dip in activities during the Christmas and New Year period, cargo order volumes for agricultural commodities loading on South America’s east coast have recovered sharply over the past three weeks. While last week saw aggregate cargo order volumes retreat from the levels recorded a week earlier, demand remained robust compared to what has been observed over the past year.
The increasing volumes have, to a great extent, benefitted the smaller vessel segments. The spot cargo order volumes for the handysizes and handymaxes during the past week were more than 60 per cent higher than last year’s weekly average. For the supramaxes and ultramaxes, last week’s volumes also topped the past year’s weekly average but at a more modest twelve per cent. Still, the increasing order volumes were not sufficient to offset weakness elsewhere. However, the early start to the seasonal rebound will likely support freight rates in the coming weeks, with the pick-up also extending to the panamaxes.
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