Strong oil prices, high vessel demand boost bulk freight rates

A sustained rally in oil prices has contributed to a recent spike in freight rates for bulk shipments of steel products, sources told Fastmarkets on Tuesday February 23.

Brent crude oil prices have risen by 74.5% since late October 2020 and even surpassed $65 per barrel on February 22, making the fueling of a vessel an increasingly expensive task.

Waning bulk vessel availability is exacerbating the situation, with a South Asian steel scrap trader saying this was due to a sharp rise in demand for ships across the global economy and particularly in China.

Vessel availability is also being reduced due to port congestion, one Beijing-based steel trader said, who highlighted heavy blockages at the Bayuquan and Tianjin ports in northeast China as prime examples of the issue.

Rates jump across markets
Freight in bulk for the India-China route has risen to $30-35 per tonne for shipments of steel billet, sources said on Tuesday, up from $22-28 per tonne earlier in the year.

The higher freight rates contributed to a rise in the China steel billet import price, with a deal on Monday done at $575 per tonne cfr for 3sp material produced at an Indian blast furnace (BF) steelmaker.

Freight costs for bulk steel scrap shipments to Turkey from the US East Coast have ballooned to $32 per tonne for a 30,000-tonne cargo, up from $23 per tonne at the start of the year. Rates from Rotterdam to Turkey are up to $25-29 per tonne as of Monday for bulk, up from $19 per tonne a fortnight ago.

Key routes for capesize vessels, which transport huge quantities of bulk raw materials, have also grown massively in recent weeks.

A capesize vessel was fixed on the iron ore route from South Africa’s Saldanha Bay to China at $13.40 per tonne last week, a report from shipbrokers Banchero Costa said, up from rates of around $10-11 per tonne the week before.

At least one vessel was fixed at $7 per tonne for the West Australia-China iron ore route for March shipment late last week, which was up from fixtures at around $5.50 per tonne the week before, the shipbroker said.

“It’s getting expensive to book a vessel to carry iron ore pellets from India into China now. Chinese buyers will have to think twice about paying a high price for the cargo along with the higher freight rate now,” a Hong Kong trader said.

The East Coast India-China panamax route recorded by Simpson Spence Young (SSY) hit $16.15 per tonne on February 23, up 4.9% week on week.

One Shanghai-based trader told Fastmarkets that he now needs to pay $52-55 per tonne for cargoes to deliver steel to South America from China, “while previously I only needed to pay $35 per tonne,” he said.

A second Shanghai-based trader also complained about cargo cost gains, saying that the freight cost from China to Vietnam is now $12 per tonne, up from $10 per tonne before the Chinese New Year (February 11-17).

“The cargo cost from China to South Korea is also $12 per tonne, up by $2 per tonne from $10 per tonne in the past few months,” she said.

A Zhejiang-based trader said that the recent spike in bulk freight rates was because of the rise in crude oil prices, with all commodity prices going up amid inflation fears in the global market.

Chinese market sources are worried over the continuous inflation across the globe in the next few months, following the depreciation of the US dollar in the past few months after governments worldwide injected money into the financial market.

Container issues
High freight rates and ongoing container shortages continue to affect global commodity markets, which is limiting aluminium supply arriving in Europe and supporting higher vanadium prices.

Container freight problems also continue to plague the steel scrap markets, Fastmarkets understands.

One Asian scrap trader told Fastmarkets that he has been turned away from three freight forwarders in his attempt to make a shipment of scrap in containers from Australia amid a lack of available space. The same trader also has material due to be shipped to South Asia held up at the heavily-blocked Singapore port.

Fastmarkets understands that shipping scrap from Australia to Bangladesh is still possible via the trans-shipment port of Colombo, Sri Lanka, but availability on such sailings is minimal.

Freight costs were heard at $1,250-1,500 per 20 foot container to ship from Australia to Bangladesh on February 23, up sharply from $800 per container in early December – equivalent to $65-75 per tonne. Container freight from the US East Coast to the West Coast of India was $37-38 per tonne on Tuesday, up from $35 per tonne earlier in February.

HMS 1&2 (80:20) from Australia in containers was sold at $435 per tonne cfr Bangladesh on Monday, but an Australia-based trader said that the high freight rates are “taking the cream off the top of the cake.”

The Australia-based trader said he has finally been given space to ship out material in mid-April on Tuesday after waiting several months for container availability but he must pay $1,500 per box for the privilege to do so.

The Shanghai Containerized Freight Index moved up to 2,875.93 points on February 19, up 50.18 points week on week.

Amy Hinton and Carrie Bone in London and Cem Turken in Mugla contributed to this article.