Corn exports from South America have hit record levels this year, with volumes already surpassing last year’s total. This has displaced some supply from the US and has offset the dip in soybean trade due to African Swine Flu.
Following a record 2018-19 corn harvest, Brazil and Argentina have shipped a combined 49m tonnes of corn over the first nine months of the 2019. This already tops total exports over 2018, which were 42m tonnes, and YTD, marks a 75% YoY increase according to AIS data.
This is in contrast to what we have seen in the soybean market this year: Soybean volumes out of South America are down 8%YoY as demand from China has been hit by African Swine Flu. But China takes more of a back seat in the corn market, and South American farmers have put more focus into their corn crops this year.
Corn accounted for 30% of South American Agri bulk exports over Jan-Sep this year, versus 18% over the same period in 2018. By switching the focus from soybeans, Brazil and Argentina have boosted agricultural sales to destinations other than China. As such, despite the dip in soybean trade, surging corn exports have pushed total agribulk shipments from Brazil and Argentina 8% higher YoY.
Increased demand for ships from South America has been benefitted all of the bulker segments in the grain trade (see below), drawing on tonnage in the region. Panamaxes saw the largest increase in corn liftings from these countries, rising by 80% YoY to 28m tonnes, translating to an additional 394 shipments.
Average monthly Panamax loadings in ECSA have increased by 77% YoY to 96 vessels per month. We also saw several Panamaxes part-loading cargoes of corn with other grains, so increased demand for these ships may be understated by corn trade volumes alone. So far this year Handysize and Supramax ships loaded 228 more cargoes than last year, with volumes jumping 48% YoY to 21m tonnes.
Strong corn supply from South America weighed down on export prices there, pricing out supply from the US. In contrast to South America, exports from the US have been lacklustre so far this year. Over Jan-Aug, exports from the US were 17m tonnes, down 41% on the same period last year.
This year we saw key US export markets such as Japan and South Korea switch to competitively priced Brazilian or Argentinian corn during the US’ seasonal exporting period. Shipments to East and South East Asia from ECSA over the first 8 months of this year reached 14.6m tonnes, a 230% YoY jump.
Meanwhile US shipments to these countries halved over the same period, standing at 7.4m tonnes. Amid the spread in corn prices across the Americas, we even saw a handful of Panamax and Ultramax cargoes making their way from Brazil to the US, despite it being the largest producer of corn globally.
Pacific vs. Atlantic volumes
The shakeups have disproportionally hit corn exports from West Coast USA, which is predominantly a Panamax load region. As such demand for these ships in the Pacific was hit the hardest (see below).
However, with Asian buyers replacing these volumes with South American supply, we see an upside for the bulker fleet. Supply from the Atlantic basin outpacing that of the Pacific means that corn being shipped to these countries is travelling greater distances and generating more tonne-mile demand for the fleet.
Black Sea volumes up
2019 has also been a bumper year for Ukrainian corn exports, which have almost doubled YoY to 25m tonnes over Jan-Sep 2019 (see chart). These extra shipments from the Black Sea have largely headed to Ukraine’s traditional trading partners in the Mediterranean and Northern Europe, providing a lift to regional trade.
Panamaxes enjoyed the greatest demand increase, loading 129 corn cargoes in Ukraine this year, vs. 47 over the same period last year. We also recorded an uptick in long-haul Ukrainian corn shipments to China, which have surpassed 3m tonnes so far this year, a 57% YoY increase.
Increased US volumes to come?
US and South American corn prices have aligned in recent weeks, and US supply is again competitive in the market. Swelling stocks in the US are weighing on prices and Brazil and Argentina’s corn sales are slowing as the soybean planting season commences.
As such we expect US exports to pick up over the next few weeks, though volumes will likely remain below average for the season.
Capesize: For the routes traded in Asian markets, we seem to be finishing the week on a distinctly softer note and the rates notably retraced on both Brazil and C5 markets over the course.
Owners appeared less sure to embark on the ballast past Singapore as 1H Nov fixtures started to print at below $21 bss C3. Likewise the C5 markets for end Oct / early November remained flat-softer as circa $9 was reported for the same position. TCE returns narrowed within $1,000 as the previously discounted Pacific markets showed relatively less movement compared to the C3. This being said, many ballasting Owners still seemed to hold off fixing. They have the view that demand will increase as we progress onto later laycans in November and suggest the current downturn is attributed mainly to the lack of cargo at the front end of the month.
Despite the solid transatlantic fixture for a bit forward 4-10 Nov, laycan for EC Canada/Cont at around $28k in terms of TCE on BCI, done by a European steel mill, the positivity appeared to have dominated the Atlantic market last week faded and the Fronthaul fixtures gone a bit lower than last week, although stayed much steadier than the C3 route. A cargo for EC Canada/Feast for mid-November was done on Wednesday at a rate which would equate to gross daily return of around $50k on BCI basis if duration adjusted to 65 days, and this compares to a couple of Fronthaul fixtures done at gross TCE around $53k middle of last week.
Panamax: The market continued slide in both basins, but at a slower rate in the Pacific. Being so close to the end of the week, it is hard to say if the Pacific is out of the woods. This is because some feel that Owners with prompt positions might be under a little more pressure, despite tonnage build up looking much less than last week.
Indo/South China although less cargo than the same time last week, a Panamax is close to 13.5k and a Kamsarmax close to 14.5k. East Coast Australia. Activity has also been slightly less than last week with India destinations looking the weakest, a Kamsarmax was heard fixing 14.5k basis Korea and a Panamax close to 13.5k.
Nopac was the saviour in the Pacific this week with the grain houses taking several vessels and some expecting them to continue doing so. A below average Kamsarmax was heard fixing 15k basis Japan and a Panamax is expected to be close to 14k. ECSA activity has slowed greatly even though there are cargoes. Charterers seemed more willing to wait, an eco Kamsarmax was heard holding 17+700 aps for early Nov dates. In the Atlantic, the slowdown in demand is slowly starting to cause a tonnage build up, although would say only slight, with a Panamax TA expected to close around 15k.
Handymax/Supramax - Atlantic: The Continent has yet to see some positivity as the tonnage list remained strong and more ships surfacing mid-week in strategical positions to grasp the small amount of fertilizers that surfaced out of the Baltic. Trips out of the Continent for ECSA were being concluded in the $13,000s for Supramaxes. Only two firm scrap stems surfaced for late October dates were quickly covered by Operators. Charterers were rating Supramaxes at 15,500 bss passing skaw with owners there to fix in the mid $16,000s. More fronthaul did appear later in the week with most shipments to India. Owners of eco Ultramaxes expect to send their ladies towards that direction should expect $24,000 for the trip. Finally, coal shipments into Med out of the Baltic were being priced at $15,000 bss dop Arag range for Supramaxes.
The Mediterranean continued its slowdown this week as we saw more tonnage appearing mid-week and driving some of the routes down. The usual clinker stems to West Africa did appear with owners expecting $17,500 for the trip. Some Ultramax fronthaul grain voyage cargoes for end October dates did appear but unfortunately charterers’ ideas remained in the very low $20s. Owners of Ultramaxes continued rating such trips at $26,000 bss Canakkale. The T/A was being traded at similar levels as per last week with a Supramax expecting $13,000 for a trip into the USG and a tick less to ECSA. We expect to see better numbers in the area as the tonnage list shortens and thankfully there are no more ballasters appearing out of West Coast India.
In the US Gulf, Owners finally got to see a glimpse of better numbers this week. It has been three consecutive weeks of numbers continuing their downward slope. A 58,000-dwt lady fixed at $18,000 to Italy. There was not enough fronthaul surfacing the market but owners of Ultramaxes were rating such trips at $31,500 bss aps SW Pass. A 63,000 dwt was reported fixed at $31,000 bss del SW PASS with petcoke to India. More trips into the West Coast did appear out of NCSA this week with owners expecting just above $32,000 for the trip. Overall, the market has been seeing lower numbers lately as an imbalance between cargoes and ships has been evident. Nevertheless by the end of the week we did see a large amount of cargoes appearing as many charterers have been trying to off-load their books on this falling market which has led to owners holding off and revising their ideas upwards. We do expect the market to continue improving in the area as Q4 starts slowly to kick in.
The south Atlantic has been experiencing positive momentum the past week, with a low number of vessels in position and a low amount of Ballasters out of West Africa. The rates reported were again strong out of the area with transatlantic trips on Ultramaxes in the $20,000s. In terms of trips East, due to the stem sizes it seems that Supramaxes have been unable to compete with the Ultramaxes. This led to a big gap in fronthaul numbers. A Supramax owner should expect $16,200 + $620,000 while Ultramaxes are getting fixed in the $17,000+ $700,000. Fortunately, the South Africa market is still pushing which could dissuade Owners ballasting into ECSA if the numbers reported fixed from the area continue, helping the market in the South Atlantic to improve of the back of this. Overall the market is healthy with a shortage of vessels in the area. Currently it seems that the rates are mainly driven by the discouragement of owners to send their ladies east which in turns increases the rates east leading into a domino effect for the T/A business.
Handymax/Supramax - Pacific / Indian Ocean: Despite the apparent lower cargo volume in SE Asia, which was followed by a slight softening, the market seems to be holding at healthy levels. Monday started with most players talking at around last done, but as the day progressed, we saw less fresh cargo, with the most notable absence being coal to India (with many stems postponed for November dates). Charterer's ideas then started to drift apart from owners’ numbers, who remained bullish. Opinions were split on Tuesday with many ppt ships getting decent numbers and the Ultramaxes maintaining their value, seeing well over 14,000/day from S China for a trip with Indo coal to China. A nice Supramax in S China is now however worth around low 11,000/day for Indo WCI, and high 12,000/day for Indo- S China. The nickel ore season is coming to a close and that means that the market will be losing support going forward. In the Far East, the cargo list is slim and tonnage is pilling up, and it looks like a further drop is around the corner. NOPAC can pay in the 11s on a Supramax in Korea.
In the Indian Ocean, tonnage is tight in the PG WCI area and rates are holding, with Supramaxes getting numbers in the 13s DOP WCI for trips via PG back to WCI, 14-14500/day via PG to Bangladesh, and looks like will remain flat in the next few days. However ECI seems to have softened significantly, far from the numbers it had been enjoying till recently. In South Africa, Supramax was reported fixed at 14000+400K gbb APS Durban for a trip
Handysize: The Med market did lose ground early in the week with rates falling by about $1-2,000 per day across most routes. By the end of the week the market managed to balance out as a healthy number of orders surfaced to accommodate the large tonnage list of spot prompt ladies. Inter-Med was fixed early in the week on a 32,000 dwt at $11,000 for a trip with clean cargo to East Med. Thankfully by the end of the week charterers where willing to pay in the mid $12,000’s for Similar. Trips into Continent were being fixed in the very low $13,000s bss 38,000 dwt aps Canakkale. T/A did lose some ground with charterers fixing at $11,000 bss Canakkale on small Handy’s and $12,000 for the larger sizes for trips into USEC/USG range. More trips with clinker surfaced mid-week with ships fixing at $14,500 trips ex Wmed to West Africa. We do expect to see the market gaining ground next week as a healthy cargo list for early November dates has appeared.
The market off the Continent seems to be trading like last week. If anything, it was slightly down due to general Atlantic sentiment. This week Handies were getting around mid/high $13,000’s for scrap trips basis Skaw, and one 37,000 DWT was said to have fixed 15,000 DOP ARAG for a trip via France to West Africa. We expect a flat market next week.
ECSA continued to come off this week, with any business other than WCSA trips few and far between, rates fell significantly for any Atlantic biz. Charterers were aiming to take large handies at around $15,000 for TA’s ex Recalada to the Baltic. WCSA trips were down to rates around $21,000 from Recalada on large Handies
USG has continued to experience small numbers being reported across its trade routes. The tonnage list heavily outweighed the cargoes and it has to be stated that most of the stems were mostly backed by charterers own backstops. More ballasters out of USEC drove the sentiment downwards. The was some period activity with one large handy reported fixed at $13,000 for 4/6 months redel atl. Transatlantic trips were being fixed at $14,000 bss aps SW Pass. We do not expect many changes in the numbers for next week.
Cape: Cape FFAs remain volatile with an air of uncertainty on physical continuing to abruptly steer rates in either direction. A slow start to the week saw weight on the sell side before a rumour of a firmer TA equivalent fixture boosted the curve, further renewing optimism in the market. The push however was brief as lower fixtures in the Atlantic circulated in the market, causing a fresh round of selling. October, November and the Q4 contracts have lost around $500 in value each since the start of the week. On the back end, the Q1 and Cal20 printed week lows of $16,000 and $16,150 (-250) today.
Panamax: A poor week for the Panamax market which saw steady and consistent erosion down through the curve with the Q4 elements worst-affected. The week had started relatively flat with some late buy-back on Monday evening seeing the day close flat. Mid-week however, brought some weight on the sell-side with the Oct and Nov shaving about $1,000 and $1,800 respectively over the course of the week from Monday’s open. The Q1 and Q2 contracts were arguably the least affected with enough buying support in evidence to partially sustain the haemorrhaging. All in all, both contracts shed roughly $450 and $250 respectively. Towards the back of the curve, the Cal20 also fared poorly, with the most recent trade seen at $10,850 – down from $11,100 at the beginning of the week.
Supramax: The Supramax paper market fell out of bed this week with Nov and Dec touching as low as $12,600 & $11,400 respectively. The quarter periods were heavily discounted with the focus on Q1 breaking $9,400. The deferred remained resilient throughout the week with Cal20 hovering at $10,000 value. The index continues to show signs of relief after recent weeks of erosion settling at $13,624.
Source:Braemar Atlantic Securities/Braemar ACM Research
The opinions expressed herein are the author's and not necessarily those of The Xinde Marine News.
Please Contact Us at：