(Contributed by the International Grains Council)
The dry bulk freight market remained rather weak in the six months to April 2002, due to the continuing subdued economic activity and the large number of newly built ships becoming available. The Baltic Dry Index (BDI), the main market indicator, advanced only by 53 points from 974 in late September to 1027 by the end of April.
War risk premiums pushed rates higher in the Indian Ocean in the light of military action in Afghanistan, but these were removed by January 2002 and no major delays were reported in cargo movements. The UN World Food Programme (WFP) chartered ships to send food to Afghanistan through 12 designated brokers around the world. Food aid to northern parts of the country was routed via Uzbekistan, as barges delivered wheat flour from Termez to Hairaton up the Amu Darya River. Iran agreed to provide transit facilities for shipments of Indian wheat, supplied as aid through the WFP, after Pakistan refused to do so, fearing contamination with “Karnal Bunt” disease.
Kazakhstan continued to develop grain-loading facilities in the port of Aktau on the Caspian Sea. This will eventually increase the capacity to ship grain directly to Iran and Azerbaijan to 500 000-700 000 tonnes per year.
Panamax rates in the Atlantic remained weak in the fourth quarter of 2001, due to a large number of new vessels entering the market and weak demand. While even some of the newest ships were struggling to find employment, fixtures for older vessels in some cases fell below running costs.
However, from mid-February the situation significantly improved, mainly due to new business from Japan, China, China Province of Taiwan and the Republic of Korea, and a shortage of tonnage in prompt positions in the US Gulf. From then onwards, the Panamax market continued to strengthen, supported by firmer bunker fuel prices and the start of the South American grain export season.
Rates on the major grain route from US Gulf to Japan advanced from US$16.00 in October 2001 to US$21.50 in April 2002, an 11-month high. Rates from US Gulf to the Republic of Korea and China Province of Taiwan were US$0.50-1.00 lower than those to Japan, reflecting higher charges at Japanese ports. The rate from US Gulf to Egypt (Mediterranean) fluctuated between US$9.40 in February to US$14.50 in mid-April.
Better 2001 crops in central and eastern European countries and the CIS resulted in larger exports, and an increase in shipping activity from the Black Sea, mainly to the Near East, North Africa and the EC. The latter could be one of the largest buyers of Ukrainian and Russian milling wheat. Ukrainian grain exports alone could be over 8 million tonnes in 2001/02, close to the country’s maximum port capacity. Rates from Ukraine to continental Europe were reported between US$6.90 and US$7.50. Barley rates to Saudi Arabia have been fairly stable at US$14.60‑14.75.
In the Pacific, exports of maize (corn) from China have continued to be larger than previously expected. However, due to the growing number of available ships, the Pacific rates continued to slip despite the start of the new crop exports from Australia to the Middle East.
China has tightened its quarantine regulations for imported grains, and introduced controls on GM products, which slowed down its imports of soyabeans. Chartering restarted in April after an agreement was reached with the United States on imports of GM maize and soyabeans.
The Atlantic Handysize market continued to show strength, largely because of shipments from the Black Sea. Wheat rates from Ukraine to the EC (Spanish Mediterranean) were fixed at the US$13‑14.00 level, while barley shipments to North Africa settled at around US$21.00. Rates were also supported by shipments from the EC and the United States to North Africa.
A steady pace of fixtures for new crop grains and oilseeds from South America also supported freight rates, transactions being reported to a wide range of destinations. Fixtures included a maize cargo from the River Plate to Cyprus at US$18.50 and a pellets shipment from Brazil to the EC at US$13.75. However, there were interruptions in Argentina’s shipping programme in March and April due to the devaluation of local currency and various measures taken by the government to deal with the country’s economic crisis.
Short-period time-charter rates have increased in most areas, ranging from US$7 000-7 500 a day for a round trip in the Pacific to US$8 000-9 000 in the Atlantic.