The Atlantic Supramax dry bulk market concluded the second quarter on a contemplative note. It had anticipated several substantial surges across all routes, resulting in higher spot rates. However, during this period the market faced persistent challenges due to problematic demand and encountered significant volatility in the shipping trading environment.
The East Coast South America shipping market saw mixed trends. Initially, grain runs gained bullish momentum, resulting in higher spot rates as strong demand for Agribulk from the first quarter led to robust Supramax shipments in the beginning of the second quarter.
Time charter rates basis bunker fuel 0.5%S for the 40,000 mt grains Recalada Argentina-Bejaia Algeria route reached the highest level at $22,488/day on May 3, up more than 9% from the first quarter’s highest rate on March 15 of $20,676/d, according to S&P Global Commodity Insights data.
Spot rates for fronthaul and trans-Atlantic runs declined as the second quarter progressed, affecting the Supramax market due to a preference for larger vessels as there was a slight decline in flows from East Coast South America. The market underwent a period of uncertainty, facing challenges driven by grain demand, tonnage dynamics, and the availability of fresh cargoes, while grain prices came under pressure from low demand from destinations.
Meanwhile, the region was searching for direction, with some firm activity in fronthaul runs, yet remaining burdened by an oversupply of tonnage.
Supply and demand imbalances persisted, with the spread between laden and ballasted Supramax ships at one vessel in the second quarter, with 61 laden and 60 ballast ships recorded in the region. In the first quarter there were 68 laden and 63 ballast ships in the region, according to data from S&P Global Commodities at Sea.
Trans-Atlantic spot freight for the 40,000 mt Recalada Argentina-Bejaia Algeria grains route hit its lowest rate on June 16 at $28/mt, while the 50,000 mt fronthaul Santos to Qingdao grain route saw its lowest price in the second quarter at $29/mt on June 16.
The Continent and Baltic Sea regions faced challenges in the scrap market, with spot rates paid at the beginning of the second quarter around the low-to-mid $10,000s/d, with owners seeking charter rates ranging from $15,000/d to $17,500/d. However, it remained uncertain whether these rates would materialize amid a lack of activity and slow momentum. The bearish market conditions persisted for the second quarter, leading to concerns about imbalances in fundamentals.
Spot time charter rates for Supramax vessels carrying scrap cargoes to the East Mediterranean received a significant boost near the end of the second quarter, reaching between $10,000/d and $11,000/d due to limited availability of non-SDARI vessels, but quickly corrected lower again to between $8,000/d and $9,000/d.
The 40,000 mt Rotterdam to Aliaga scrap route reached the highest level of the second quarter on April 26 at $16,275/day, a tick above the highest time charter rate of the first quarter of $16,144/d on March 24, according to S&P Global Commodity Insights data.
The Continent and Baltic regions experienced fluctuating market conditions in the scrap sector, with uncertainties around charter rates and the influence of factors such as vessel availability and cargo demand. These challenges highlighted the need for non-SDARI vessels and the impact they had on rates. The market remained slow, and concerns grew about the limited activity and imbalances in fundamentals.
During the first half of the second quarter, the US Gulf Coast region experienced strong fundamentals and an increase in spot activity, resulting in consecutive days of surging spot fronthaul grain and petcoke runs, with time-charter rates reaching the mid-$20,000s/d.
However, the global economic rebound, steel demand in China, and overall industrial activity fell short of expectations. This led to minimal fixing activity in the Atlantic region, with no signs of improvement in the US Gulf Coast market.
Grain spot fronthaul time charter rates remained in the $13,000s/d range, indicating a bearish outlook, while petcoke time charter rates closed slightly higher at the $14,000s/d level.
Spot Freight rates witnessed significant losses in the second quarter, with the Houston to Qingdao 50,000 mt fronthaul petcoke route hitting the lowest level of the quarter at $32.50/mt on June 30.
In the Black Sea region, the grain market faced challenges, with the Handysize segment struggling with minimal activity and low demand. Ukrainian charterers expressed frustration over the poor market conditions and low prices at destinations. The uncertainty surrounding the Black Sea Grain Initiative further dampened spot activity, while spot time-charter rates for Handysize vessels closed the second quarter stable in a range of $5,000/d and $6,000/d.
The 25,000 mt Northwest Black Sea to Alexandria grains route hit the highest level of the quarter on May 26 at $28.25/mt as the grain corridor was extended, but closed the quarter softer at $24.25/mt on June 30.
However, larger ships were active in the area, with Handysize vessels facing a lack of fixing and limited business prospects. The downward trend in the market showed signs of ending due to a recent tender in Algeria that introduced new shipments from Russian ports. However, overall market conditions remained challenging, with owners hesitant to fix vessels at low rates. Despite sporadic bullish developments, the Black Sea grain market struggled with limited activity and subdued freight rates.
Focusing on China’s recovery
China’s service sector and industrial production are expected to recover faster than the market anticipated.
While it may take some time for business and consumer confidence to recover fully, there is a strong belief in the steady growth of demand in China.
This bullish outlook is likely to support an increase in ton-mile demand in the near future.
Grains trade sees mixed trends
The agriculture sector is expected to see several trends in the upcoming year. However, there are challenges in store for soybean exports from the US and Argentina, with projected declines in 2023 of 6.2% and 34.8%, respectively, according to S&P Global Commodities at Sea.
However, Brazilian soybean exports in 2023 are expected to rise 18.8% year on year.
The corn market is likely to face weaker exports due to limited supply from the US, Canada and Argentina, resulting in a projected decline of 7.1% in 2022-23, according to CAS. Conversely, Brazilian corn exports in 2023 are forecast to rise by 15.8%, driven by changes in Chinese GMO policies.
It is worth noting the potential for adverse weather conditions that could affect corn production in Argentina.
The wheat export market is expected to recover in 2023, supported by stronger volumes from Russia and Canada, according to market sources.
However, challenges such as low Ukrainian wheat prices leading to import bans in certain Eastern European countries should be taken into consideration.
Source: Platts
