Freight rates slump amid coronavirus outbreak

Freight rates for shipping soybeans and corn from Brazil and Argentina to Asia have fallen by around 15% since the outbreak of coronavirus, according to market sources, amid a hit to key Chinese commodity demand caused by the ongoing coronavirus outbreak. 

Several market sources said that freight rates from Santos to China – a key benchmark route – have fallen from over $32/mt since the start of January to as low as $25-26/mt for south China and around $27-28/mt for north China.

And while China has largely been out of the soybean market this week amid extended lunar new year celebrations, such falls in freight rates will likely hit CFR China prices into next week.

The coronavirus outbreak, coupled with extended lunar new year holidays, has weighed not only on soybean demand from key origins in the Americas, but also on Chinese demand for other commodities such as coal from Indonesia and Iron Ore from Australia.

"Not only has demand taken a hit, weak rates in the Pacific have led to vessels chasing what were higher rates in ECSA (East Coast of South America)... thereby increasing supply significantly," a ship operator said.

And owing to an extended lunar new year holiday to February 2, and February 9 in the epicentre of the outbreak Hubei, a recovery in freight is likely to take longer than usual. 

"The dry bulk sector is likely to be affected by reduced industrial activity. Typically activity picks up after the Chinese New Year holiday. [But] the usual recovery is probably going to be delayed by at least a few weeks," Arrow Shipbroking Group said in a note to clients said this week.