Freight rates plunge amid crude oil sell-off, easing demand

Freight costs for shipments of agricultural goods slid for the second consecutive week as fuel costs eased on lower crude oil prices and spot shipment demand retreated.

September shipment for panamax cargo from the Americas to Europe plunged more than 13% on the week, while the cost of the same journey to Asia was down around 5% from the previous week, according to Agricensus assessments.

“Bunker costs were dropping about $20/mt-$35/mt. Some [panamax] owners with spot ships also gave up the resistance and accepted charters’ bids,” according to one freight trader.

Spot 0.5%-sulfur bunker fuel prices at Singapore fell more than 10% to around $309/mt this week while those at the European hub of Gibraltar slumped more than 17% on the week to $275/mt.

This was against the backdrop that global benchmark Brent crude oil plunged more than 5% on Tuesday amid threats from Saudi Arabia to cut its prices on weak demand.

Spot crude oil futures closed more than 13% down on the week at $39.72/mt.

Flat prices for panamax and supramax cargoes were dragged lower with September shipment from Brazil’s Santos to North China down 5% on the week to $31.5/mt and the same shipment from US Gulf to North China down more than 6% to $41.25/mt.

Similar price drops were seen for routes originating from the Black Sea area as lower demand pulled down time charter rates along with cheaper fuel prices.

“Supramax and ultramax [demand] were also eroding with Black Sea [market] getting quieter,” the same source added.

September shipment from Ukraine’s Yuzhne to Western Europe dropped 5% on the week to $15.25/mt and the same shipment to Southeast Asia was seen at $33.25/mt, down nearly 6% from last week.