Market Perspectives March 28, 2014

Ocean Freight Comments

Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: World ocean freight markets were starting to look a bit better early in the week but could not maintain support. By midweek the Capesize and Panamax markets turned south, and some say that “reality” set in. The spot Capesize market is “flooded” with prompt tonnage due to reduced Chinese imports of iron ore. The Panamax Dry-bulk market is suffering from a slowdown in Chinese grain imports and less-than-expected demand for South American soybeans. There continues to be a lot of chatter in the market regarding possible Chinese cancellations of Brazilian soybeans and the potential of those coming to the U.S. The spot and ten-day freight market for Capes and Panamax is very soft and biddable. The Supramax and Handymax vessel segments, however, were relatively stable this week.

The average daily earnings for a Capesize vessel has dropped to $19,853/day and Panamax to $8,210/day.
So a Panamax owner can now get more revenue out of demurrage payments than voyage hire. I guess that’s a good reason to steam to South America?

Though still substantial, you will notice that vessel wait times at the U.S. Gulf and PNW are declining slowly.

Any potential Brazilian soybeans wanting to work their way to the U.S. would have to come into the East Coast and or Texas Gulf. Handymax freight on the wheat cargoes going from the U.S. Gulf to Brazil is in the $20-$23/MT range. A Panamax cargo would be a couple of dollars cheaper. Coming back up from Brazil to the Gulf or East Coast with a Panamax of soybeans should cost close to $23-$25/MT. Keep in mind that Gulfports are designed for exporting, not importing. Any soybean imports would have to go through Houston or Corpus Christi USG Floating Rigs or the East Coast. I hear some (four-to-six) have been booked into the East Coast.

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 2013 and January-December 2012 annual totals versus January 2014 year-to-date container shipments for China.