The Dry Bulk Weekly Review in Shipfix Data
Shipfix’s forward-looking data have in the past week highlighted changes to the global seaborne trade in agricultural commodities. A new supply agreement with China has seen Brazil dethroning the US as the world’s leading exporter of corn, with order volumes trending higher amid rising tensions in the Black Sea. Also, the data set has signalled the arrival of the US harvest season, with an increased demand for vessels loading agricultural commodities in the country for the coming months. Finally, despite complaints that its exports are facing headwinds, cargo order volumes for grains loading in Russia remain robust, providing support for freight rates in the smaller segments.
Rebound in Demand for Seaborne Transportation of South American Corn
The US has long been the world’s leading exporter of corn. However, the country has lost the crown to Brazil, as exports from the South American country have benefited from a new supply agreement with China. In addition, Mexico is looking to impose restrictions on imports of genetically modified corn, delivering an additional blow to US exports.
Corn prices have displayed considerable volatility in the past two months as uncertainty over Ukrainian supplies has mounted. The expiry of the Black Sea Grain Initiative has contributed to a sharp rebound during the past week, as corn accounted for a large portion of the cargoes shipped through the safe corridor to the Bosporus.
However, rising demand for seaborne transportation of corn from the ports on South America’s East Coast has softened the price impact of the potential loss of a significant part of Ukrainian corn exports. Cargo order volumes for corn loading in Brazil and the ECSA have been trending higher for much of the year. While the weekly volumes have retreated somewhat in the past month, the current week could match the recent high following robust demand during the past few days. Should the week remain on its current path, the weekly demand for Brazilian export shipments of corn should approach 1.4 million tonnes.
Demand for shipments to China and the Far East has also contributed to the rising volumes. However, should past years’ seasonal patterns continue, order volumes could face significant headwinds in the near term.
The average cargo sizes for corn loading in Brazil have seen some downward pressure during the past month, with the typical cargo declining from 55,000 to 47,000 tonnes. However, apart from a recent spike, the weekly average for the cargoes from the rest of ECSA has remained relatively stable at around 36,000 tonnes.
A Seasonal Rebound in Demand for Shipments of US Agricultural Commodities?
The past week has seen grain and oilseed futures continuing to recover as the supply outlook is looking increasingly tight. Concerns over the upcoming US harvest amid dry weather and the end of the Black Sea Grain Initiative amid the Russian refusal to extend the deal have contributed to mounting fears that global food prices will rise yet again. The development could weigh on the long-term demand for seaborne transportation and freight rates in the small to mid-sized vessel segments. However, more inefficient trade flows amid supply disruptions could offset some of the negative effects of lower volumes.
Still, after trending lower since the beginning of the year, recent weeks have seen a pick up in ordering activities for agricultural commodities loading in the US as the year’s harvest approaches. During the previous week total volumes topped two million tonnes. The increase in demand for vessels loading in the US Gulf ports accounts for a large portion of the aggregate volumes. However, since the middle of June, the increase in ordering activities for cargoes loading on the US West Coast has seen the most significant relative increase.
The increase in demand for oilseed and grain shipments from the US has also coincided with a recovery in average cargo sizes. The typical cargo loading in the US Gulf port approached 40,000 last week, while shipments due to depart the US West Coast topped 45,000 tonnes.
Cargo Order Volumes for Russian Agricultural Commodities Remain Robust
The week before last saw grain prices recovering from recent lows as concerns over the future of the Black Sea Grain Initiative kept rising. The fears proved to be well founded, as Russia announced that it is terminating its participation in the agreement. The confirmation of the end to the UN-monitored arrangement will likely see grain prices recovering more of recent losses during the coming days as traders reassess the global supply situation.
Among the grievances that Russian leaders have aired over the BSGI in the past months is that its own exports of grains and fertilisers have faced challenges, although they are not part of any sanctions. Still, cargo order volumes for agricultural commodities loading in Russian ports have remained well above the norm following last year’s bumper crop. The current year’s harvest is also widely expected to be sizeable, and demand for seaborne transportation can therefore be expected to remain firm.
The past two weeks have seen a recovery in cargo ordering activities, with weekly volumes just shy of 1.5 million tonnes. A majority of the cargo orders are for loading in Russia’s Black Sea ports, with only a small portion of the demand linked to ports on other coastlines. Average cargo sizes have remained relatively stable, around 30,0000 tonnes, since the beginning of the year. Hence, should volumes stay healthy or recover further, the Handysizes and Supramaxes will likely be the main beneficiaries.
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