Freight rates for grain runs from South America to the Far East declined on Friday amid low Chinese soybeans demand, oversupply of tonnage and generally bearish sentiment in the Atlantic market.
Grain runs basis 60,000 mt on the Santos-Qingdao route dropped sharply from $41/mt on Thursday to $38.50/mt on Friday. A 60,000 mt Noble cargo was heard fixed at $38.50/mt from Santos to China for April 15-30 dates. While there was also a Sinochart stem fixed at $43.50/mt for Argentina-China, market sources said that the higher rate is due to much steeper port costs in Argentina and the fact that cargo is fixed basis two-terminal load.
"The tone is very weak in the market," said a shipbroker. "We can now see owners offering below $38/mt and charterers pushing down to $37/mt. There are just too many vessels and too little cargo, so the outlook remains negative for now."
Timecharter rates for Santos Qingdao are now being assessed at $15,000/day plus $500,000 ballast, with a good chance of softening further it seems as owners were heard offering below this level already.
According to industry sources, a sharp fall in Chinese demand for soybeans has been one of the major contributors to the lack of front-haul cargoes from South America.
"The soybean crushing margins in China are negative as bird flu hampered the demand for soybean meal," said a market participant. "Existing soybeans stocks in China are high and there is a policy move to reduce spending of state-owned companies, so the impact on demand should not be underestimated."
While there are still a fair amount of grain cargoes coming out of east coast South America, including Intergis with early May laycan and Hyundai Glovis and Dana with middle-late April laycans, inquiries are overshadowed by a long list of vessels keen to work those stems. As sources indicated, the Atlantic market has about 70-80 vessels to deal with in the next 30 days, while the amount of cargoes for the same period is less that half that amount.
At the moment no support is expected from the pressured trans-Atlantic market, where rates have been suffering in the past few weeks on low minerals inquiry and a large amount of prompt ships available. The Mobile-Qingdao route, basis 70,000 mt coal, declined from $12.75/mt on Thursday to $12.50/mt on Friday as the mood remained bearish among market participants. Hampton Roads-Rotterdam coal runs, basis 70,000 mt stayed soft at $10/mt.
The weak Atlantic market might see some owners with positions in the East refrain from taking cargoes to the UK Continent. Vale with a 70,000 mt coal cargo from Beira to Rotterdam with middle April laycan was heard bidding $12/mt with owners pegging the route at $13-14/mt. As market sources indicated, the choice of vessels for such business might be limited.
"While you can still find cheap vessels, those are likely to be limited to big operators, who have their own requirement in UKC," said a freight trader. "Others might refrain from going to the Atlantic as there are not many left who believe it will rebound in the very near future."
