An increase in eastbound long-haul grain and petcoke cargoes from the US Gulf Coast has triggered a rebound in Handysize and Supramax freight rates in this key loading area this week. Also, inquiries in the region remains spearheaded by solid Latin American demand for US corn, according to shipping sources.
Supramax owners can now earn $15,000/day for a trip with grain from the US Gulf Coast to the Far East, up from $12,000/day in the middle of the previous week.
On voyage basis, the freight rate for carrying 50,000 mt of grain from New Orleans to Kashima, Japan, was assessed Thursday at $29.50/mt, marking a $1/mt increase from a week earlier.
This recent rebound was spurred by an uptick in grain requirements from countries in the Far East and Southeast Asia, as well as a return of Indian demand for petcoke, sources said.
he increasing Latin American demand for US grain, especially corn, has also been the positive force that helped to keep the dry bulk freight trade in the US Gulf from going cold.
Crucially, it kept the tonnage count in the area in check, enabling a swift freight rebound in recent days, sources said.
'POPPING LIKE POPCORN'
"The US Gulf is really hot right now, it's popping like popcorn," said a US-based operator.
"It's mainly thanks to more grain heading to China, Malaysia and Indonesia, and some petcoke to India, but there's also always been the demand from Latin America in the background -- it has absorbed many inbound ballasters," another operator said.
According to a North America-based source, 50% of all new cargoes in the US Gulf Coast were currently grains to Peru, Chile, Colombia and Venezuela.
"I think the tonnage count in the US Gulf would have been a lot higher without Latin American demand," the source said.
According to US Census Bureau data, between September 2015 and June 2016, US corn exports to Central America, as well as Colombia, Venezuela and Chile, rose 18% to 18.8 million mt, up from 15.9 million mt in the same period a year earlier.
"This [data] tallies with what we are seeing in the US Gulf," said an operator.
The recent freight recovery in the US Gulf has also been reflected in freight rates to Central America.
On August 5, the Nikolaos A, a 58,133 dwt, 2009-built Supramax was heard fixed at $13,750/day for a trip with grain from Southwest Pass in the US Gulf to Puerto Quetza-Acajutla range in West Coast Central America.
With tonnage much tighter in recent days in the US Gulf, this route could earn a Supramax owner up to $19,000/day this week, said an operator.
Norden was heard August 17 to have fixed an Ultramax vessel for a US Gulf-to-Central America trip with grain at $9,000/day, basis Cristobal, Panama, on the Atlantic side. This equated to almost $20,000/day, $6,000-$7,000/day above last done, for West Coast Central America discharge, said the operator.
"The routes for West Coast Central America from the US Gulf tend to move first when the market goes up," said another source.
'SECOND BEST'
According to shipbroking sources, the strong increase in Latin American demand for US corn has been in part due to Argentina's corn exports falling short of expectations in recent months. This has been due to poor harvesting conditions, truck strikes and port congestion in the River Plate.
Even Chile, which traditionally sources its corn from Argentina, has had to import three times more corn from the US than it normally does, US Census Bureau data showed.
On August 12, the US Department of Agriculture revised its projection of Argentine corn exports from 24 million mt in July to 23 million mt in August.
But while steady employment thanks to Latin America's strong appetite for corn is welcomed by many shipowners in the US Gulf, these routes are still "second best" to front-haul runs, which translate to higher ton-mile demand, said a New York-based operator.
"I can't see how shipowners can be happy with trips to Latin America -- beats the petcoke to India though," said the operator.
Trips with petcoke to India from the US Gulf involve opening up in a region with weak loading opportunities. Also, following discharge, shipowners have to clean up the vessel's cargo holds, which takes a few days and adds to costs.
But while the recent increase in Asia-bound cargoes has helped generate a more bullish momentum in the US Gulf Coast, the jury is still out when it comes to this continuing well into the fourth quarter of 2016.
US corn exports to Latin America have increased sharply since September 2015: total US corn exports between then and June 2016 were down 4% at 36.5 million mt from 38.2 million mt, US Census Bureau data showed.
In addition, key importer Japan imported 20% less corn from the US during that time, its imports falling from 9.6 million mt to 7.7 million mt between September 2015-June 2016.
