The Dry Bulk Weekly Review in Shipfix Data
The forward-looking nature of Shipfix’s unique data sets provides valuable insights into future developments for commodity prices and freight rates. Over the past few weeks, the cargo order volumes have indicated that the current downward pressure on rice and sugar prices may prove transitory. On the other hand, markets are providing a robust foundation for a seasonal rebound for the exports of agricultural commodities from South America.
Recent Weakness for Rice Prices Is Likely to Be Temporary
After gaining more than two per cent in January, rice prices have had a volatile February. While the May rough rice futures listed on the CBOT are currently trading broadly in line with where they were at the beginning of the month, they have nevertheless shed nearly four per cent since the highs at the end of the second week. Still, the contracts remain more than ten per cent above the levels seen a year ago and near the highest for sixteen years. Rising demand and pressure on global supplies amid export restrictions have contributed to the elevated price levels.
If the futures prices have been volatile over the past weeks, the same applies to the demand for seaborne transportation of rice. Weekly cargo order volumes have shown some signs of recovery from the lows during the middle of last year, but compared to past years, they remain low. Last year’s low cargo volumes are also likely to have weighed on inventory levels globally, contributing to the current high price levels.
Over the past month, India has made a reappearance in the global rice trade. Following the introduction of export restrictions to safeguard domestic supplies, demand for seaborne transportation of rice from the country dwindled. During the past five weeks, Indian cargo order volumes have averaged 400,000 tonnes, nearly three times higher than during last year. Still, the recent volumes are a far cry from what was recorded a few years ago.
At the same time as cargo order volumes for Indian rice exports have recovered, demand for shipments from Pakistan and Thailand has come under pressure. The offsetting development has likely contributed to the recent price volatility. Should an increase in Indian exports prove short-lived, the decline in exports from Pakistan and Thailand could see rice prices move higher again.
Short-term Pressure on Sugar Prices Amid Surge in Demand for Seaborne Transportation
After gaining considerable ground during the year’s first three weeks, sugar prices have been trending lower since the latter parts of January. The May #11 sugar futures listed on the ICE have shed around eight per cent over the past six weeks under volatile conditions. While the contracts currently trade approximately fifteen per cent below last year's highs, prices nevertheless remain elevated in a historic context amid high demand and tight global supplies.
Aggregate global cargo order volumes for sugar have risen in recent weeks, pointing towards an improved supply situation in the near term. The development has contributed to the current downward pressure on prices. However, compared to a year ago, demand for seaborne transportation of the sweetener in recent weeks has remained somewhat depressed. While the recent recovery in cargo order volumes could put further pressure on prices in the short term, seasonal patterns for cargo volumes loading in Brazil suggest that sugar prices will stage a recovery in the not-too-distant future. This is especially likely as spikes in demand for seaborne transportation of sugar from the rest of the world tend to fade rapidly.
Solid Foundation for a Seasonal Rebound for the ECSA Agricultural Trade
After a solid start to the year, cargo ordering activities for agricultural commodities loading on South America's East Coast have been under pressure in recent weeks. However, the average of the weekly aggregate cargo order volumes over the past month is nearly seven per cent higher than a year ago. While demand for panamaxes and supramaxes has faced some headwinds, the ordering activities in the handysize and handymax segments have been considerably more robust than during the same period last year.
Although aggregate demand has come off since the beginning of the year, current weekly volumes still remain broadly in line with the average for the past year. Hence, a seasonal pick-up in demand in the trade during the latter parts of March can be expected to provide support for freight rates in the mid and small-sized dry bulk segments as competition for available vessels increases.
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