The Dry Bulk Weekly Review in Shipfix Data
Global cargo order volumes for sugar have faced significant headwinds in recent weeks, heralding a period of elevated prices for the commodity. Adverse growing conditions in Brazil have been chiefly responsible for the decline in demand for seaborne transportation of the sweetener. The development will likely hurt tonne-mile demand for the smaller dry bulk vessel segments.
Global Cargo Order Volumes for Sugar Under Pressure
Sugar prices have surged over the past few weeks as dry weather conditions and fires in Brazil’s key growing area for the commodity have weighed on the global supply outlook. The adverse conditions have led to a downward revision of the projection for Brazilian sugar production during the 2024/25 marketing year. While the March #11 sugar futures retreated from their recent highs on Thursday and Friday, the contracts ended last week more than 20 per cent higher than two-and-a-half weeks earlier.
Before the recent surge, sugar prices lost some ground during the early parts of September as the supply outlook improved amid an upward trend for weekly global cargo order volumes during August. However, the changing circumstances have seen cargo order volumes for Brazilian sugar exports under significant pressure, with average demand for the past three weeks around half of what was recorded at the end of August.
The average cargo order volume for the past three weeks is 56 per cent lower than during the same period last year. Hence, unless India changes the policies limiting sugar exports, the global sugar deficit will widen in the coming year, with prices set to remain elevated.
Brazilian Sugar Trade to Generate Lower Tonne-Mile Demand
Under normal conditions, a large part of the Brazilian sugar exports are shipped to the distant shores in the Far East and Southeast Asia. Over the past two years, the two regions have, on average, together accounted for 30 per cent of the monthly cargo order volumes.
While cargo order volumes for Brazilian exports due for discharge in the Far East and Southeast Asia have recovered somewhat over the past three weeks, the aggregate for September is around 50 per cent lower than the same month last year. Although it is still early days, there appear to be no significant attempts for substitution, with cargo order volumes for Australian and Thai sugar shipments remaining low. Hence, the decline in demand for seaborne transportation of Brazilian sugar exports will have a negative impact on tonne-mile demand as buyers in the Far East and Southeast Asia make up a large part of the customer base.
The Headwinds for the Brazilian Sugar Trade Weigh on Demand in the Smaller Segments
The decline in tonne-mile demand in the global sugar trade will affect the smaller dry bulk segments and the container trade. For dry bulk, cargo order volumes for sugar loading in Brazilian ports have come under significant pressure, with the total for the past month around 55 per cent lower than a year ago.
The recent drop in demand for seaborne transportation of sugar from Brazil has weighed especially heavy on the supramaxes, which have recorded a year-on-year drop of almost 70 per cent for the month. While the handysizes also have faced significant headwinds, the year-on-year decline settled just below 50 per cent. Given last week’s decline, there is little to suggest that demand will recover in the short term. Hence, the adverse conditions for sugar in Brazil are likely to contribute to some headwinds for the small and mid-sized segments in the Atlantic.
In conclusion, the dry weather and fires in Brazil will contribute to higher sugar prices as robust demand will see the global deficit widen further. In contrast, freight rates in the supramax and handysize segments are likely to be negatively affected by the development as a significant substitution of Brazilian supplies is unrealistic.
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