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22-12-2018

US-China soybeans offer hope to Atlantic Supramax market

The Atlantic Supramax dry freight market tiptoes uncertainly into 2019, as China’s tentative purchases of US-sourced soybeans upends bearish outlooks.

CHINA SOYBEAN PURCHASES
In mid-December, Chinese state-owned companies made their first two sizable purchases of US soybeans since Beijing imposed a 25% tariff on US-origin soybeans in July. Shipowners quickly began predicting a bumper first quarter for the Supramax dry cargo market, reversing earlier bearish sentiment.

“The reaction to the soybean news has been like watching six-year-olds play football,” said one ship operator source. “Everybody running in different directions.” Yet the immediate impact on US Gulf freight rates was limited, with only forward rate ideas for January-February affected. The expectation is for soybean cargoes to boost the US Gulf market, which has been struggling to provide enough exports to fill the unemployed vessels ballasting from Europe.

The New Orleans to Kashima, Japan 50,000 mt grains route was assessed down 50 cents between late November and late December as time charter rates fell around $1,000/day to $25,500/day.

LOADPORT UNCERTAINTY
Questions are slowly arising about whether the Atlantic Supramax market will be affected positively by the soybean news, with some participants left unconvinced that the US Gulf and East coasts will house the primary loading ports for the intended January-March cargoes.

Instead, Supramax vessels were reported ballasting towards Pacific Northwest ports in anticipation of an opening trans-Pacific route route to China.

Sources also questioned whether the cargo stems would be better suited for Panamax vessels or larger.

One shipowner source said after the first sale: “There is a big expectation for a bumper Q1 in the market, but a lot depends on not only whether the Chinese actually keep buying soybeans, but whether the cargoes are better suited to Panamaxes.” The second December sale — to COFCO and Sinograin — was described by its traders as a total of 20-25 Panamax cargoes.

US GULF OVERTONNAGE POSSIBLE
US Gulf freight rates sit on a knife-edge as the Atlantic Supramax market heads into the first quarter of 2019, with tonnage lists growing and forward cargo demand uncertain.

The data from S&P Global Platts trade-flow software cFlow shows upwards of 25 Supramax-Ultramax vessels headed into the US Gulf from the Continent. Sources in Japan reported Pacific vessels ballasting to the Atlantic in anticipation of a reopened soybean trade route, further lengthening available tonnage lists and raising the prospect of an overtonnaged Supramax market.

While demand for petcoke and grains cargoes to Indian and Mediterranean discharge ports has been steady, census data shows China has not imported any US fuel-grade petcoke from the US Gulf Coast since June. Petcoke demand from India in January-February has also been hampered by an expected price correction on the commodity by India-based traders.
Source: Platts

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