The Dry Bulk Weekly Review in Shipfix Data
Cargo order volumes for rice and sugar have seen significant volatility over the past two years. Recent developments suggest that market prices may continue to rise for sugar, while rice could see easing but continued headwinds. The seaborne sugar trade may see declining tonne-mile demand as shipments from Brazil to distant Asian shores have come under pressure. On the other hand, a robust flow of Indian rice to West Africa will support cargo order volumes for the smaller segments in the Indian Ocean.
Cargo Order Volumes Indicate Further Gains for Sugar Prices
For the past two years, sugar prices have experienced significant volatility. After trending significantly higher for much of 2023, the sugar futures experienced sizeable swings throughout the past year. Changeable market conditions have also remained a feature so far this year. The March #11 sugar futures shed around eight per cent during the year’s first three weeks but have since recovered the losses and ended last week marginally higher than at the end of December.
The price volatility for sugar over the past few years has been partly fuelled by extensive restrictions on Indian exports, which has weighed on global supplies. However, amid rising inventories, Indian authorities have recently allowed for one million tonnes to be exported during the current marketing year, which could weigh on prices in the coming months.
Like prices, cargo order volumes for sugar loading globally have been volatile over the past two years. Since India’s near-total withdrawal from the global marketplace two years ago, seaborne exports from Brazil have dominated. While demand for seaborne transportation of Brazilian sugar exports has fallen to the lowest since September this month, the global aggregate has nevertheless risen. Higher demand for shipments from Thailand and Guatemala has contributed to the increase in global cargo order volumes. In addition, the past week saw a minor increase in demand for seaborne transportation of Indian sugar exports. However, the volumes were a fraction of what was recorded prior to the export restrictions.
While global cargo order volumes have rebounded in recent weeks, aggregate demand has been significantly lower than in recent years. The global total for January is approximately 32 per cent lower than during the same month last year and around nine per cent lower than in 2023. Hence, given the forward-looking qualities of the cargo order data, global supplies are likely to come under pressure in the near term, providing support for prices. As a result, the price rebound during the past week could extend further.
Declining Long-Haul Shipments of Sugar to Put Pressure on the Trade’s Tonne-Mile Demand
In recent years, the Far East and Southeast Asia have accounted for a sizeable part of the global seaborne trade in sugar. Over the past three years, cargo order volumes for sugar discharging in ports in the two regions have accounted for approximately 40 per cent of the global aggregate. Hence, any shifts in volumes or origins will have an impact on tonne-mile demand for the smaller vessel segments.
Demand for seaborne sugar transportation remained strong in December, but January cargo order volumes fell compared to the same month in 2023 and 2024. Aggregate volumes for discharge in the Far East and Southeast Asia were down 36 per cent from last year and 21 per cent from 2023. A steady decrease in cargo order volumes for shipments from Brazil since April last year has contributed to the downward trend for sugar discharging in the two regions. Despite the general decline in demand, Brazil maintained its market share until the end of last year. However, the past month saw buyers in the regions shifting their attention to suppliers closer to home, with Thailand accounting for more than forty per cent of the trade.
The decline in the long-haul sugar trade will weigh on tonne-mile demand for the smaller vessel segment. While the recent decline in demand for shipments from Brazil may eventually prove temporary, the promise of a sizeable Thai harvest suggests that the coming months will see continued weak demand for imports of Brazilian sugar. In combination with the slow start to the year for the grains and oilseeds trade from South America, lower cargo ordering activities for sugar from buyers in the Far East and Southeast Asia will contribute to headwinds for the supramaxes and handysizes.
Demand Levels for Rice Shipments Suggest Prices Will Remain Under Pressure
Rice prices have endured significant volatility in recent weeks. During the first three weeks of the year, the March rough rice futures listed on the CBOT gained around six per cent. However, since then, the contracts have come under significant pressure and erased all of the recent gains. As a result, the contracts ended last week marginally above the three-year low recorded in late December last year. An improving supply outlook has fuelled the recent retreat. In addition, recent data show that Indian inventories are eight times higher than the government’s goal, potentially leading to the country’s authorities allowing for higher exports.
Cargo order volumes for rice loading globally have been trending lower since the beginning of October last year. Still, the weekly aggregates are currently relatively robust compared to conditions during 2023, when Indian exports were at a nadir.
The high global demand for seaborne transportation of rice during last year’s final quarter has contributed to an improving supply situation, which has weighed on prices. While recent weeks have been volatile, prices were generally significantly lower than during the fourth quarter as supplies started to arrive at their destinations. Despite recent weekly cargo order volumes being lower than a few months ago, the levels point towards continued, albeit easing, headwinds for rice prices. Also, should cargo order volumes for Indian exports rise in the coming weeks, it would provide a bearish signal for rice prices.
West African Demand Supportive for the Rice Trade’s Tonne-Mile Demand
Over the past twelve months, shipments to West Africa have accounted for a significant portion of the global spot cargo order volumes for rice. The region’s share of the global trade was 46 per cent during 2024. Still, during the past month, the portion increased further to 55 per cent. At the same time, monthly volumes for discharge in Southeast Asia have been volatile over the past year.
The recent robust cargo order volumes for rice loading in Indian ports have primarily fuelled the trade to West Africa rather than to the closer shores in Southeast Asia. Apart from a temporary spike in volumes bound for other parts of the world during October, shipments to Africa’s Atlantic coast have dominated Indian exports. While demand for seaborne transportation of rice to West Africa has shown some volatility recently, it has nevertheless remained robust and formed the foundation of global cargo order volumes. In contrast, the demand for seaborne transportation of rice imports in Southeast Asia has largely been confined to the fourth quarter in the past two years. Hence, should Indian exports increase in the near future amid rising inventories, there should be support for the tonne-mile demand and freight rates in the smaller vessel segments in the Indian Ocean.
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