The slowdown in world economic activity influenced the trend of freight rates over recent months. Activity in the dry bulk sector remained quiet due to subdued demand for iron ore, coal and grains. This, together with the high volume of newly built deliveries has led to greater sales for breaking since May 2001. India accounts for the greater part of demolition activity, and it is also expanding in Bangladesh, China and Pakistan. A two-tier market is emerging with new or recently built vessels obtaining more favourable rates.
Logistical problems affected various grain supply routes. In the United States, stretches of the Mississippi River were closed at different times between April and June because of flooding, hampering movement of grain to some US Gulf ports. India's major port of Kandla was closed temporarily following forecasts of a severe cyclone. Heavy rains and a two-week strike by stevedores delayed movement of most cargoes at major ports in Brazil, including Santos, creating congestion.
The terrorist attack on the United States in September caused freight rates to rise across most sectors of the market, because of firmer fuel prices and a possible increase in insurance costs.
The outlook for world grain trade suggests somewhat lower volumes of seaborne transportation of coarse grains to Near East and Far East Asia. Better crops in eastern and central European countries and the CIS will result in larger exports, and an increase in shipping activity on some less frequented routes. The first shipments of the new crop barley have been reported from the Black Sea to Near East Asia. Exports of maize from China could be larger than previously expected. Increased shipments of soyabeans and meal from Brazil to Western Europe are expected to replace meat and bone meal (MBM) in animal feeds.
A steady pace of fixtures for new crop grains and oilseeds from South America lent firm support to freight rates from April. Handysize vessels captured most of this business, with transactions reported to a wide range of destinations. After their big crops, shipments of maize and soyabeans from Argentina and Brazil were running at record levels. Argentina's sales of wheat are also likely to be well up on last season. Owners both of Handysize and Panamax vessels were able to secure profitable long-term business, since much was fixed on timecharter arrangements. Competition for spot cargoes from South America was heightened by the large number of Handysize vessels, which had ballasted to the region in June. In contrast to South America, enquiry from other major exporting regions was relatively modest.
Grain rates in the Panamax market continued to slide both in the Atlantic and Pacific, reflecting the seasonal dip in the dry cargo trade in April/May. However, contrary to most expectations, demand for Panamax tonnage appeared to be firm during much of June. Activity was most pronounced in the Pacific sector, with several fixtures for grains and oilseeds from North America to Far East Asia.
Despite occasional flurries for spot tonnage, prospects for Panamax carriers in both the Atlantic and the Pacific sectors remained bearish during the summer months. The large number of new vessels on order continued to limit any recovery in rates. Shipowners looked to the grain market to provide employment for a growing surplus of tonnage in prompt positions. A brief period of recovery in Panamax timecharter rates was recorded in the middle of August, when earnings increased from US$6 500 to US$7 000/ day, as ships for nearby positions were in short supply. The rate on the major US Gulf to Japan route declined from US$19.50 at the end of July to US$17.75 in mid-
August, then recovered to US$18.90 and dropped again to US$17.60 by mid-September.
The Baltic Dry Index (BDI), which measures the movement of representative rates in the dry cargo sector, dropped from 1 430 at the beginning of April to 908 in the first decade of September. After the terrorist attacks on the United States the index rose to 974 as at 19 September, reflecting higher fuel and insurance costs.
1/ Contributed by the International Grains Council.