Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: The freight market Bulls still have their hand on the throttle. Global Dry-Bulk ocean freight markets have put in an impressive rally over the past six weeks. Most of this upturn in prices has been attributed to increased purchases of coal and iron ore from China. Note that China has embarked on a program to reduce domestic coal mining by up to 25 percent, which has contributed to an increase in imports of raw materials. But – as everyone should know – pinning your hopes on China continuing any particular policy for an extended period of time is risky.
If you look back to February 2016, Dry-Bulk rates from the U.S. Gulf to Japan were at a low of $22.50/MT. Thus, in the last 19 months these rates have doubled to just over $42.00/MT. It pretty much goes without saying that we have hit bottom and will not return to the low levels of 2016, but it will also be curious to see how long the market can sustain rates at these higher levels – especially after we get past fall grain harvest.
Shipping rates on containerized grain to Asia (and the shipping GRIs) seem to be coming under pressure. This will make containerized grain sales look more attractive versus the higher Dry-Bulk markets cost. We will have to see how much switchover occurs in Asian markets. I see four-five corn vessels in the Northern Brazil port lineup with destination Mexico. Ocean freight from N. Brazil (Itaqui) to East Coast Mexico is about $20-21/MT for a 30,000 MT cargo Santos port would run closer to $22-23.00/MT.
The Texas Gulf hurricanes have passed and U.S. exports out of the Gulf have generally returned to normal volumes. Again, my hat is off in tribute to the elevator employees and railroad workers who worked amazingly hard and fast to get everything back up and running.
Below is a recent history of freight values for Capesize vessels of iron ore from Western Australia to China:
The charts below represent YTD 2017 versus 2016 annual totals for container shipments to the Philippines.
