The Dry Bulk Weekly Review in Shipfix Data
Shipfix’s forward-looking data set has been highlighting a potential recovery in demand for seaborne transportation of bauxite during the past week. In addition, the data have been indicating that shippers are looking for alternatives to Ukrainian ports for grain exports and that lower European demand for coal is shifting US exports to Asia.
Is a Global Recovery in Bauxite Demand on the Cards?
Aluminium prices have declined by around five per cent since the end of May as the demand outlook has darkened. The underwhelming Chinese economic recovery has weighed on most commodities recently, and aluminium has been no exception. In addition, fading optimism over any substantial Chinese measures to support the flagging growth rates has contributed to sentiments remaining subdued.
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Cargo orders for bauxite loading globally came under pressure during much of June, with weekly volumes among the lowest for the year so far. However, the past two weeks have seen demand for seaborne transportation of the vital ingredient for aluminium production rebounding, with global volumes topping one million tonnes. The current week could see volumes reaching the highest levels since the end of the first quarter, as ordering activities for cargoes discharging in both China and the rest of the world have recovered. While the development could signal an increasing demand for aluminium, greater production could offset any positive effects of higher demand on prices.
The recent recovery in weekly cargo order volumes has also fuelled an appetite for larger vessels in the spot market. While the current week has seen the average cargo sizes declining somewhat from the previous week, typical shipments for discharge in China have remained above 50,000 tonnes. In the past two weeks, the average cargo size for shipments to ports outside China has recovered to above 35,000 tonnes.
Time for a Plan B for Ukrainian Grain Exports?
The future of the Black Sea Grain Initiative is looking increasingly bleak, with the Russian leadership signalling that it is unhappy with the deal. In an attempt to soothe tensions, it has been reported that the European Union is considering allowing Russia’s Agricultural Bank to set up a subsidiary that can access the global SWIFT payment system. However, it appears unlikely that this will be sufficient for Russia to extend its participation in the arrangement.
The continued uncertainty over the deal and mounting problems have seen volumes shipped through the safe corridor across the Black Sea to the Bosporus falling to two million tonnes in June, approximately half of what was recorded in March. In addition, shipowners are increasingly unwilling to commit their vessels to the trade as the risks associated with it are rising. As a result, no inbound voyages for the Ukrainian ports have been recorded this week.
The increasing likelihood of an end to the BSGI in the coming weeks has put a renewed focus on alternative solutions for Ukrainian grain exports. One option is to send the commodities by rail to ports in other countries for seaborne transportation to more distant shores. However, this solution is limited in scope, with rail capacity providing a significant bottleneck.
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Cargo order volumes for agricultural commodities loading in ports in Romania, Poland and Croatia, which are reachable by rail from Ukraine, have seen a pick up in the past week. The aggregate volume saw a week-on-week increase of nearly 60 per cent and is similar to what was recorded during the same period last year before the BSGI was implemented. While Romania saw the greatest increase in absolute terms, Poland and Croatia saw the larger relative gains last week. Aggregate volumes of agricultural commodities loading in Romanian ports topped 900,000 tonnes.
The average cargo sizes for shipments from Romania and Poland have also seen an increase in the past week as demand for seaborne transportation has risen. Typical shipments from Poland approached 40,000 tonnes, while the average for the Romanian ports was just shy of 28,000 tonnes.
Asian Markets Are Replacing Europe for US Coal Exports
While European coal prices have increased by more than a quarter since the end of May, they remain around 50 per cent below the levels recorded a year ago as concerns over the continent’s energy supplies have eased. Following the implementation of sanctions on Russian coal shipments, European buyers found alternative supplies of the dirtiest of fossil fuels around the world, with the Transatlantic trade being one of the main beneficiaries. However, unseasonally high natural gas inventories have seen the continent’s appetite for coal declining.
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The past month has seen a substantial drop in demand for seaborne transportation of coal from the US to Europe, with cargo order volumes declining by more than 60 per cent. The decline contributed to aggregate cargo order volumes for US coal exports falling by approximately a quarter month-on-month in June. However, a recent increase in demand for US coal in China and other parts of Asia offset some of the negative effects of the declining European appetite. During the past two months, cargo orders for US coal to be discharged in Asian ports have exceeded five million tonnes.
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