The Dry Bulk Weekly Review in Shipfix Data
The new quarter has begun with Shipfix’s forward-looking data pointing towards an increasingly tight supply situation for sugar, which will provide support for higher prices. Additionally, falling cargo order volumes for Chinese steel exports suggest that more of the country’s production will be absorbed domestically. The unique data set has also highlighted a decline in demand for seaborne transportation of US grains and oilseeds, which has contributed to the weaker freight rates in the mid and small-sized vessel segments.
Falling Cargo Order Volumes for Sugar Suggest Prices Will Continue to Rise
After peaking in the middle of September, sugar prices fell by around eight per cent over the following two weeks. As a result of the drop, the March sugar #11 futures returned to the levels seen at the end of August. Still, prices have since recovered, and the contracts are currently trading near the highest levels since 2011.
The recent decline for the sugar futures followed several weeks of elevated cargo order volumes for the commodity. Solid demand for seaborne transportation of the sweetener from Brazilian port was chiefly responsible for the surge in volumes, as exports from India remained affected by shipping restrictions.
However, the price decline proved to be short-lived. Prices have risen by more than four per cent since early October, fuelled by increasing concerns over supplies. In a testament to the woes over global supplies, cargo order volumes have been trending lower in recent weeks. While order volumes recovered to just shy of 1.5 million tonnes last week after falling to one of the lowest levels for the year during the preceding seven days, global volumes remain subdued. Hence, declining global supplies may see sugar prices continuing to recover and challenging the recent twelve-year high in the near future.
Despite the downward trajectory for cargo order volumes for sugar loading in Brazil over the past few weeks, the average cargo size has remained stable at around 40,000 tonnes since the middle of August. As a result, the lower volumes will weigh on freight rates in the smaller segments.
Chinese Steel Exports to Face Headwinds During the Remainder of the Year
When the trading closed at the end of the week ahead of the recent weeklong Chinese holidays, the November futures for steel rebar listed on the Shanghai Futures Exchange settled nearly fifteen per cent below the high for the year set in March. While the contracts have recovered somewhat in the past few months, the weakness is a testament to the disappointing Chinese recovery following the removal of the strict anti-COVID policies and the continued travails for the country’s beleaguered real estate sector.
The weak domestic demand for steel has led to an increase in Chinese steel exports since the beginning of the year. However, after almost reaching six million tonnes in August, cargo order volumes for steel loading in Chinese ports dropped during September. The past month saw order volumes fall by around a third, compared to August, to just above four million tonnes. Lower demand for shipments to the Middle East and the Eastern Mediterranean contributed to the slide. Hence, Chinese steel exports will decline in the coming months, likely signalling a rebound in domestic demand.
The drop in demand for seaborne transportation of Chinese steel products has put pressure on the average cargo size, which dropped to around 20,000 tonnes in September. The decline was primarily due to a fall in demand for Handymaxes, while volumes in the Handysize segment remained relatively stable.
Demand for Seaborne Transportation of US Agricultural Commodities Is Trending Lower
After trending higher for around three months, the past two weeks have seen demand for seaborne transportation of US agricultural commodities retreating from the recent high. During the past seven days, the aggregate order volumes for US grains and oilseeds dropped to the lowest volumes since the beginning of August. The past week’s decline represented a thirteen per cent drop in demand compared to the weekly average for August and September.
The drop in ordering activities was primarily the result of falling demand for shipments from the ports in the US Gulf. While aggregate cargo remains high compared to what has been observed for much of the year, the easing demand has contributed to the mid and small-sized vessel segments underperforming the Capesizes over the past few weeks.
Despite an uptick in demand last week, the Panamaxes have seen cargo order volumes for US agricultural commodities falling by around a third since early August. For the Supramaxes and Handysizes, demand peaked in the middle of September, and volumes have since come under significant pressure. Still, based on the pattern of previous years, volumes for the US trade could stage a recovery during the latter parts of the month.
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