Freight rates rise sharply on strong demand, tightening tonnage

Strong export activities contribute to spike

Freight rates rose sharply in the week to November 22, as continued strong demand and tightening tonnage in the Atlantic supported spikes.

Rates rose to $44 per tonnes from $40.70 per tonne for the Brazil-Northeast Asia route, while USG-Northeast Asia rates rose to $59 per tonne from $56 per tonne.

Demand for shipping has remained strong in the Atlantic, driven by continued strong export activity from Brazil and the USA.

In Brazil, customs data showed 3 million tonnes of soybeans and 4.1 million tonnes of corn exported to date, with ANEC projecting 5 million tonnes of soybeans and 8 million tonnes of corn will be shipped in total this November.

Grain exports from the US have also been strong this week, with the country benefiting from a good harvest this year.

At the same time, “the supply of ships has tightened even further” in the Atlantic as Star Asia shipbrokers noted.

The natural consequence of a supply squeeze and rising demand has been to push rates higher.

South American rates saw a particular spike for two reasons.

Firstly, congestion has continued to be a burden at Brazilian ports and has contributed to higher rates.

Although one Brazilian source noted nominations were now “decreasing fast” at ports, which should reduce congestion in the coming weeks.

“I think that it will drop, it’s too high the level of congestion – but for now it affects rates,” another source said.

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Competition for securing ships also a factor

A second factor has been that such high rates in the North Atlantic have forced Brazilian charterers to bid up if they want to secure ships with supply so tight.

“So many ballasters are also pricing in for north cargoes now so it puts more pressure on the south cargoes to increase bids to compete with north cargoes,” one source noted.

Finally, a spike in Capesize rates may also have helped to support Panamax rates.

Capesizes have had some good weeks, with demand steady for coal and iron ore, as Australian and Brazilian miners seek to meet their annual export targets while winter has seen coal demand rise in the north.

“As Cape rates soared to double those of Panamaxes on most routes, some Cape cargoes shifted to Panamaxes, triggering a towing effect,” a report by Star Asia shipbrokers said.

Fastmarkets Agriculture could not verify this, although one source said, “as for the the split of cargoes [I] don’t have any proof so far but it could be, I mean it is a strategy that happens often.”

In Ukraine, Black Sea freight rates were seen slightly firmer for the week ending November 22, apparently because of high demand for the big fleet in general.

Thus, freight indications for Panamax cargoes from the Ukrainian Black Sea to China were said to be around $61-62 per tonne, although trade sources said owners were pushing for higher rates.

Supramax rates into the Spanish Mediterranean have also firmed slightly, with ideas seen in the $37-43 per tonne range.

In the shallow water markets, coaster rates continued to drop, with indications for the Danube to Turkish Marmara ports seen down at least $3 per tonne to $27 per tonne.

Trade sources said that in Ukraine there were still issues with releasing customs documentation, slowing down the activity.

The handy-size rate from Romania to the Spanish Mediterranean stayed at around 20 per tonne, while indications for supramax cargoes moving from Russian Novorossiysk to Egypt remained stable at around $21-22 per tonne.

The Russian shallow water market stayed firm for the week, with vessels into Marmara heard at around $60-62 per tonne, with bad weather affecting the pace of shipments.

Freight rates for vessels transporting palm oil to India and China from Southeast Asia were largely unchanged amid limited available tonnage and few changes to the prevailing dynamic.

Rates for 18,000-20,000 tonne vessels from Southeast Asia to West Coast India and Pakistan held steady at $45 per tonne Wednesday, November 22, from the previous week, while rates for 10,000-12,000 tonne vessels to East Coast India were unchanged at $37 per tonne.

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