28-07-2017

Dry bulk: Black Sea grains season reduces tonnage supply, pushes up freight rates

Drybulk

The Black Sea grains export season is heating up, adding extra long-haul demand for both Panamax and Supramax vessels in the Atlantic and giving freight rates yet another boost.

An early flux of grain cargoes has been moved from the Black Sea towards the Far East, with Panamax freight rates averaging $22,000/day on a time-charter basis, up $5,000 from June dates.

After a few months of quiet, the Black Sea region woke up to a fruitful 2017-2018 marketing year for grains, estimated to reach 38.31 million mt of exported goods, USDA data showed.

Ukraine is a major exporter of barley, which is typically imported by Saudi Arabia, as well as wheat sold to Southeast Asia.

According to the Ukrainian Grains Association, barley exports hit a record number in the marketing year 2016-2017, with 5.35 million mt shipped against the 4.41 million mt of the previous year.

Given that this year the grains shipments started early at the end of July, it is possible to imagine that the Black Sea will see yet another busy season.

"We will have a strong presence of the Black Sea in the market this year," said a shipbroker, adding that "ballasters from the Persian Gulf and the Middle Easters ports are already competing to get their positions."

Industry sources also said that an unusual movement of ballasters from the Indian East Coast was seen reaching the Ukrainian ports, as the tight tonnage was pushing freight rates up, stimulating shipowners' appetite.

"The Black Sea hasn't shown its full strength yet," said a shipowner, adding that "the market will become very interesting around September."

The expectation for even stronger freight rates on the Black Sea-Far East routes by the end of Q3 was also supported by the thin vessels availability registered across the Atlantic market.

While Brazil will be in the process of clearing out their corn and soybeans crops harvested at the beginning of summer, the US Gulf Coast and the Black Sea will be in full grains season, releasing their fresh cargoes over September dates.

Industry players anticipate a tight battle for tonnage across these three main basins, with the expectation of voyage prices firming up across the board between the end of Q3, which has far exceeded the expectations freights-wise, and the beginning of Q4.


SUPRAMAXES JOIN THE PARTY


Strength in the Panamax market has trickled down to their smaller Supramax cousins, whose front-haul freight rates boomed on the improved shipowner sentiment.

Time-charter rates ballooned to $17,000/d and $19,000/d basis Canakkale for Supramaxes and Ultramaxes respectively for trips to Singapore-Japan range, an increase of nearly $2,500/d from the Daranee Naree, 56,500 dwt, fixed $14,500/d by Dreyfus mid-July.

Front-haul trips to the Far East have also been supported by shipowner resistance to taking their vessels out of the Atlantic, with bullish sentiment for the coming months as the Black Sea wheat season moves into full gear and the US grain seasons for wheat and corn begin towards the end of Q3.

Vessels locked into long duration trips risk missing the peak of these seasons and shipowners have been able to demand compensation in the form of higher freight as a result.

Handysize freight rates were much slower to increase than the Supramaxes, with the intra-Mediterranean grain flux yet to make its presence felt.

However, with surging activity reported by grains traders, this is likely to change in the coming weeks, and freight rates are expected to tick up in the coming weeks.

The Nikolaev to Alexandria grains route basis 25,000 mt was assessed at $16.50/mt Wednesday, steady on market indications.

Source: Platts 

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