Dry Bulk Market: Grain Season Might Not Bear the Gifts It Usually Does for Ship Owners
Traditionally, spring marks a rebound in dry bulk fixtures’ activity, on the back of increased grain trade and high ton-mile demand. However, according to shipbrokers, things might not be that smooth this time around. In its latest weekly report, Allied Shipbroking said that “at the very start of this month, the BDI was easing back below this aforementioned psychological benchmark, leaving many to doubt the recent upward trends that had been noted in the final quarter of 2017 and the first couple of months of 2018, while also doubting the validity and robustness of any proposition of a market recovery. This can be seen as a mere reflection of the recent disruptions in the international seaborne trade scene and the increased sentiment of uncertainty that has grappled most”.
“Moreover, this came to curb the overenthusiasm noted amongst market participants, something that was clearly reflected in both the second hand and newbuilding markets and came as a reminder of the fragility and volatility that characterize this industry, an industry, prone to exaggerations and to rapid changes. On the face of a 25% import tariff, many feared and focused on the impact of the Soybean market, given the huge export volumes that are involved in the US to China trade route. However, let’s not forget the importance the US plays in the overall grain market and more specifically in the wheat and maize trade”, said the shipbroker.
According to Allied’s research analyst, Thomas Chasapis, “what’s more is that most tend to look upon the peaks in the seasonal grain trade as a strong driver in the market, helping boost momentum and drive the freight market forward. Yet, given that the wheat market is more fragmented from that of other commodities, with the total production being distributed in different regions and several different harvests periods, the market direction one can take is never really as clear as most would hope for. At the same time, it is a market that is also wildly susceptible to the byproducts of the random patterns in weather conditions, leaving limited room for any robust and serious forecasting of the market dynamics and how the trade will be shaped even in the short term”.
Chasapis adds that “at this point, we seem to be within the main window of activity seen for wheat and maize exports out of the US, however with so much geopolitical turmoil it seems as though things have not been moving as smooth as we would like. The overall indications taken form recent fixture activity has already shown for a relatively lackluster start for the month of April, while it looks as though export volumes may well stretch out for a bit longer than usual and more normalized as to the share of the trade we will see concluded each month. We are still one month away from the main peak in the trade, when the combination of exports of several different grain commodities starts to really provide ample support in the market and we are already looking at potentially serious disruptions taking place. US represents 8% of the total wheat production, but close to 30% of the total trading in terms of tonne-miles. The US gulf plays a vital role in all of this and is the feeding ground for most of the freight rate spikes noted in the Panamax, Supramax and Handysize size segments in the past. Where we to experience a more subdued US grain season this year, most of these markets would likely be faced with a considerable demand shock. While at the same time and given that it is only of recent that the overall market forces have found a relatively sound balance between tonnage supply and tonne-mile demand, it could well bring for a severe setback for the overall trends of the dry bulk market as a whole”, Allied’s analyst concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide