The Dry Bulk Weekly Review in Shipfix Data
Despite a recent recovery, global cargo order volumes for sugar suggest that markets will continue to face tight supplies and elevated prices. Shipfix’s forward-looking data sets indicate that demand in Southeast Asia and the Far East will provide some support for tonne-mile demand in the global sugar trade. A recent recovery in demand for Brazilian seaborne exports has primarily benefitted the supramaxes and the ultramaxes. Still, the positive development may prove short-lived with the Christmas holidays rapidly approaching.
Soft Cargo Order Volumes for Sugar Suggest Prices Will Remain Elevated
After reaching a ten-month high in late September, sugar prices have been trending lower over the past two months, albeit in volatile conditions. The March #11 sugar futures listed on the ICE ended last week nearly seven per cent below the recent high. Still, despite the decline over the past two months, the contracts are trading around twenty per cent above the low for the year, which was recorded in August. Also, in a historical context, prices remain elevated.
The recent slide in sugar prices has been partly fuelled by a weakening of the Brazilian real against the US dollar. In addition, many futures traders closed long positions for the sweetener, which also weighed on prices. Improving growing conditions have also contributed to the headwinds, with the International Sugar Organization recently reducing its forecast deficit for next year. Still, Indian production and exports remain under pressure, contributing to prices being elevated compared to past years.
Global weekly cargo order volumes for sugar have recovered over the past six weeks, following weakness throughout much of September and October. The past week saw aggregate volumes jumping to the highest level since the middle of June. While Indian exports remain elusive, demand for seaborne transportation of sugar from Brazilian ports has been fuelling the recovery. However, cargo orders for exports from countries such as Australia and Guatemala have also contributed to the recent solid weekly readings.
Still, despite the recent rebound in demand, cargo order volumes for the past month were nearly 28 per cent lower than a year ago. While the closing of long futures positions and an improved production outlook may provide some bearish signals for sugar prices, the cargo order data suggest that global supplies will remain tight. Hence, prices are increasingly likely to recover some of the recent losses in the near future.
Sugar Imports in the Far East and Southeast Asia Support Tonne-mile Demand
Countries in the Far East and Southeast Asia account for a large portion of global sugar imports. However, with two important nearby suppliers, India and Thailand, facing production headwinds amid adverse growing conditions, sugar imports in the two regions have become increasingly long-haul. Following weakness in September, cargo order volumes for sugar discharging in the Far East and Southeast Asia have been reasonably robust over the past two months. Still, the aggregate for November for the two areas was around 22 per cent lower than a year ago.
Compared to last year, cargo order volumes for sugar loading in Thailand bound for the Far East and neighbouring countries in Southeast Asia have declined significantly and lost market share. Year-to-date, the total is approximately 60 per cent lower than for the whole of 2023. At the same time, the market share dropped to ten per cent from 24 per cent last year.
The year’s aggregate cargo order volumes for sugar discharging in the Far East and Southeast Asia look set to exceed last year’s by a few per cent. The headwinds for Thai exports have benefitted the long-haul trade from Brazil, which is on course for a market share of around two-thirds. At the moment, there is little to suggest that the development will reverse, and the trade will continue to support tonne-mile demand for the smaller segments.
Rising Demand for Brazilian Sugar Exports Benefitting Supramaxes and Ultramaxes
While sugar buyers in the Far East and Southeast Asia are increasingly looking towards Brazil for supplies, aggregate cargo orders for sugar loading in Brazil fell by 31 per cent in November compared to the same month last year. As the seaborne sugar trade from Brazil is dominated by the mid- and small-sized segments, the development has contributed to pressure on demand for supramaxes and handysizes segments in the Atlantic basin.
After two weeks of relatively weak cargo order volumes for the Brazilian sugar trade, last week saw demand rising to levels last seen in late May. The ultramaxes and the supramaxes were the primary beneficiaries of the rise in demand, which could provide some limited support for freight rates in the mid-sized segments. However, with Christmas and New Year rapidly approaching, past seasonal patterns suggest that cargo order volumes for sugar loading in Brazilian ports will soften in the coming weeks. Hence, any support for demand may prove short-lived.
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