The Dry Bulk Weekly Review in Shipfix Data
During the past week, Shipfix’s forward-looking data set has seen a continued increase in demand for seaborne transportation of sugar from Brazil, contributing to declining prices for the commodity. Furthermore, sweltering temperatures in China have yet to translate into rising seaborne imports of coal, while the country’s sluggish recovery has weighed on cargo ordering activities in the Panamax segment.
Sugar Giving Up Gains Amid an Increase in Brazilian Cargo Order Volumes
Sugar prices have come under significant pressure during the past fortnight. The October #11 sugar futures listed on the ICE have declined by around fifteen per cent since the middle of the month. After gaining considerable ground during the first five months of the year amid concerns over global supplies following adverse weather conditions and Indian export restrictions, prices have fallen back to the lowest levels since the beginning of April. Favourable growing conditions in Brazil, with reduced risks of frost and prospects for an early harvest, have contributed to the recent sharp decline.
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Global cargo order volumes for sugar have staged a recovery in the past two months. While the monthly aggregate for June is not at par with what was recorded in February, it is nevertheless among the highest levels in the past year. Still, the Indian export restrictions are weighing on global volumes, which are almost 20 per cent lower than the same month last year. The improved prospects for the Brazilian harvest have seen cargo orders for sugar loading in the country increase by 26 per cent year-on-year to top four million tonnes in June.
The rise in Brazilian order volumes has seen the average for sugar cargoes loading in the country’s ports moving higher. During the past month, the typical cargo loading in the Brazilian ports has been 41,000 tonnes, up from nearly 36,000 tonnes in May. In contrast, the average sugar cargo loading in the rest of the world saw a month-on-month decline in June to 28,000 tonnes.
Panamaxes Under Pressure Amid Lower Cargo Ordering Activities
Despite a minor recovery since the end of May, the Baltic’s freight rate index for the Panamaxes remains more than 41 per cent below the high for the year that was recorded in the middle of April. Aggregate global cargo order volumes remained below fifteen million tonnes in recent weeks, around a third below the levels observed in the middle of April. While the decline is broad-based, the demand for seaborne transportation to China onboard Panamaxes has been especially badly hit. Since the middle of April, cargo orders for discharge in China have fallen by more than 50 per cent. In contrast, volumes destined for non-Chinese ports have fallen by around 25 per cent during the same period.
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The suggestions by the Chinese Premier on Tuesday that more will be done to support the country’s economy, as the recovery is showing signs of losing even more momentum, could spur demand for seaborne transportation of commodities to China. Hence, should the stimulus materialise and be significant enough, the Panamaxes could mount a recovery.
Lower Demand for Seaborne Transportation of Coal to China
Temperatures in parts of China have been soaring in recent weeks, with the quicksilver topping 40 degrees Celsius in the country’s capital. China’s Meteorological Administration has also forecast that the extreme conditions will persist across much of the country's northern parts into the new week. The high temperatures will increase the demand for electricity in the world’s second-largest economy as air-conditioning and refrigeration use rises. As much of China’s electricity is produced by coal-fired power plants, the consumption of the fossil fuel will increase.
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Weekly cargo order volumes for coal discharging in China have shown weakness recently. Despite the rising temperatures and greater use of coal for electricity production, demand for seaborne transportation of coal to China has been trending lower throughout June, suggesting that there has been a build-up of inventories as the country’s recovery has stalled.
The decline in Chinese demand for seaborne transportation of coal has to a great extent affected the order volumes for Indonesia, which dropped below 2.5 million tonnes last week. At the same time, the spot order volumes for shipments from Australia continued to show a modest recovery following the removal of the Chinese ban on coal imports from the country.
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