Ocean Freight Rates

(Contributed by the International Grains Council)

General

The dry bulk freight market strengthened significantly during the past five months, with support from the start of South America’s grains and soyabeans export season and increased coal requirements, attributed to unusually cold weather in the northern hemisphere. The Capesize market remained strong due to continuing demand for minerals from Japan and China. Japan increased imports of coal to replace costly crude oil after the closure of several nuclear plants. China continued to import large volumes of iron ore to boost steel production.

War in Iraq temporarily pushed the bunker fuel prices higher, while insurance premiums rocketed in the conflict zone. In Asia, in efforts to prevent the spread of Severe Acute Respiratory Syndrome (SARS) crews on vessels calling at Singapore or Malayan ports were subject to medical checks, and suspect vessels quarantined. The Baltic Dry Index (BDI), the main market indicator, advanced by 848 points (up 57 percent) from 1 489 at the end of November 2002 to 2 337 as at 20 May 2003.

Grain

Atlantic Panamax rates increased strongly, with the benchmark grain voyage rate from US Gulf to Japan advancing from US$24.60 per tonne at the end of November 2002, to a 7-year high of US$35.00 in mid-May 2003. In recent months, active coarse grains and soyabeans trading from South America supported the market. Rainy weather and a truckers’ strike created congestion in several Brazilian ports, forcing some Asian importers to switch prompt vessels to the US Pacific Northwest. Recent business included HSS cargoes from Argentina (Up River/ Bahia Blanca) to the Islamic Republic of Iran at US$33.50 and to Egypt (Mediterranean) at US$24.25.

To minimize the risk of higher bunker fuel prices, owners gave preference to timecharter rather than voyage contracts. Daily timecharter rates from US Gulf to Europe rose to US$14 000 (US$10 000 in November 2002) for modern ships, while rates from South America to East Asia increased to US$20 000 (US$15 000) daily. Rates from US Gulf to Japan climbed to US$21 500 plus a ballast bonus of US$500 000.

Pacific Panamax rates were also firmer, though not as strong as those in the Atlantic, due to a larger supply of ships. Drought has significantly reduced grain shipments from Australia, leading to lower demand for freight services and closure of some grain storage facilities. But Chinese exports of maize to Asian destinations increased. Sea-borne trade in Asia was subdued in March - April on fears over the war in Iraq. Two vessels with Australian wheat en route to Iraq at the start of war were finally discharged in Kuwait and Jordan for milling.

In India, a truckers’ strike brought grain exports to a virtual standstill, before the situation was resolved by the end of April. Recent business in the Pacific included grain cargoes from the Pacific North West to Chinese Taipei at US$13.25, and to Japan at US$18.50. Period rates ranged from US$14 000 daily, based on one-year charter, to US$16 000 daily for shorter periods.

The Handysize market remained firm amid continued support from high bunker prices and active grain trading from South America, the US Gulf, the Black Sea area and within Europe. The Atlantic sector was weaker than the Pacific, mainly due to cold weather and bad icing conditions.

From South America, recent fixtures from Argentina’s Up River ports included a maize cargo to Cyprus at US$22.80 and a grains shipment to Tunisia at US$29.00. Grain rates from Brazil to Europe (Antwerp-Hamburg) climbed to US$26.30. Grain rates from the US Gulf have generally increased: examples were Algeria, reported at US$24.00 and Venezuela, at US$15.00. Rates within the EU remained firm due to active trading. Recent business included a wheat fixture from the United Kingdom to Italy (Adriatic) at US$16.00.

At the end of 2002, exporters from Ukraine and the Russian Federation tried to ship as much grain as possible before the introduction of EU import tariff quotas in January 2003. Bad weather and subsequent port congestion, as well as increasing domestic prices consistently reduced the volume of business from the start of this year. Grain fixtures from Ukraine included a wheat cargo to South Africa at US$19.00.