Freight rates continue to fall on over-supply and Black Sea fallout

Freight rates continued to fall in the week to July 26, as an oversupply of shipping in the Atlantic and the fallout from the collapse of the Black Sea Grain Initiative continued to weigh on the market.

Rates fell on the week to $33.40/mt from $34.50/mt for the Brazil-Northeast Asia route and $44.50/mt for the US Gulf-Northeast Asia route from $46.10/mt.

The major factor was a continued excess supply in the Atlantic, with a concentration of ballast ships.

The collapse of the Black Sea corridor has started to worsen this situation, as cancellations from the region have begun and are beginning to add to oversupply.

Rates in the Black Sea itself were largely stable, with the market notional as participants were gripped by the end of the Grain Initiative.

Rates for the Azov-Marmara route were heard between $30/mt and $32/mt, while rates for Russia to Egypt were around $16-18/mt.

Russian strikes against Odesa and Ukrainian Danube ports along with general threats to strike shipping have raised concerns, and combined with an unclear situation around ship insurance this has deterred many shipowners from sending ships into the region.

Shipments from Brazil continued to slow compared with the previous week, with soybean shipments at an average pace of 530,400 mt per working day last week, behind the prior week's 623,398 mt, while the pace of corn shipments was little changed.

The lower pace of shipments meant less support for Panamax rates when they were already under pressure.

Intermodal shipbrokers noted that “a lack of mineral and grain shipments” contributed to the decline in rates for Panamaxes in the Atlantic over the week in their weekly report.

Brazilian grain exporters' association Anec was still expecting a strong Brazilian export performance, with projected soybean exports for July raised to 9.1 million mt, while corn exports were projected at 6.4 million mt.

Indications for Chinese demand have continued to be mixed.

Chinese economic data has continued to underperform expectations, but seaborne iron ore prices, a key indicator for shipping demand, have been supported by expectations of government stimulus.

Demand for agricultural imports could be supported by data showing an increase in Chinese pig herds by the end of the second quarter.

More pigs mean more demand for feed, which supports crushers and demand for imported soybeans to crush into feed, which could in turn support demand for shipping.

Freight rates for vessels carrying palm oil to India and China from Southeast Asia were largely flat this week.

Freight for 18,000-20,000 mt vessels from Southeast Asia to West Coast India fell by $1/mt to $45/mt from a week earlier, while rates for 10,000-12,000 mt vessels to East Coast India were unchanged at $38-39/mt.

Freight rates to China were unchanged at $37-46/mt for 12,000-15,000 mt vessels compared with a week earlier, with abundant space still present for the second half of August.