Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: Ocean freight markets did not move much this week. For or the most part, we seem to be in a sideways market.
The big news was, and is, about the very difficult logistical situation with rail deliveries and vessel loading out of the U.S. PNW. Just when you think everything is going smoothly, Mother Nature throws a curve ball at you. Heavy winter rains and snow have caused rail track damage resulting in the re-routing of trains and a substantial slowdown in grain rail deliveries to West Coast ports. There are as many as 60 vessels waiting to load in the PNW and loading delays are running up to 20-30 days. Most elevators are still working, albeit at a slow pace; some have declared Force Majeure and/or NAEGA II clause 20 extensions on their sales contracts. If you are a grain buyer off the PNW you should examine your contract very closely.
The extreme logistical conditions on the U.S. West Coast have resulted in a lack of new offers of grains (corn, soybeans, wheat) until the situation is cleared up. It is therefore impossible, or just outright irrelevant, at the moment to determine an accurate grain market spread for February or March between the U.S. Gulf and PNW. There have been market rumors of China selling and shipping 25-50,000 MT of corn to Japan, and South Korea shipping 40-50,000 MT of corn to Taiwan to stave off their shortage. Additional container shipments have tried to assist in the international supply effort.
An estimated five cargoes of corn are being shifted from the PNW to the U.S. Gulf. This is obviously an ever-evolving situation and we will have to see how it continues to unfold. Winter is not over yet.
Below is a recent history of freight values for Capesize vessels of iron ore from Western Australia to China:
The charts below represent January-December 2016 annual totals versus January-December 2015 annual totals for container shipments to Thailand.
