Shipping Rates Skyrocketing, As Demand for Goods Soar

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  • Rising demand for everything from soybeans to steel has sent the cost of hauling dry goods soaring more than 50% this year.
  • Manufacturing, which first picked up in China, is now accelerating elsewhere, and countries are stepping up commodity purchases to rebuild stockpiles.
  • Analysts say the rally isn’t over, with rates to carry unpacked commodities like grains, iron ore and coal expected to remain high this year and possibly into 2022.A recent news article published in the Bloomberg Quint reveals that there is a rising demand for all the goods and it is to soar more than 50% this year.

Freight costs

Freight costs started to recover as top commodities buyer China emerged from the pandemic faster than other countries.

Rebounding manufacturing in the Asian nation and huge imports of American crops to feed an expanding hog herd gave dry-bulk rates a first leg up.

“We’ve had very strong U.S. shipments that continued well into the first quarter and we are still going to see high corn shipments out of the U.S. going forward,” said Peter Lindstrom, head of research at Norwegian shipping firm Torvald Klaveness Group.

That will happen at the same time as the peak of the export season from the east coast of South America, a positive factor for Panamaxes, he said.

The big American corn shipments

The big American corn shipments in the second quarter will also coincide with increasing coal volumes, another commodity that helped boost the cost of dry bulk shipping.

A trade spat between Australia and China left more than 70 ships carrying over 8 million tons of coal stranded late last year, reducing the supply of vessels.

While that situation has eased, roughly 35 carriers remained stranded and unavailable to take on new trips as of earlier this week.

China and steel mills

The uneven recovery has also brought some surprises. China fired up its steel mills well ahead of other countries, creating a massive difference between prices there and in North and South America.

At the same time Americans and Europeans started buying up China-made goods online during the pandemic, snarling traffic for containers commonly used to ship steel products.

“The arbitrage between the Pacific and the Atlantic got to such a high level that it made sense to ship in bulk,” Cetinok said.

Getting creative

Grain traders also had to get creative, with many Midwestern companies that usually ship specialty grains in containers opting for bulk freight.

In Brazil, top crop trader Cargill Inc. even booked a Capesize vessel able to carry 180,000 tons of bulk grains, to pick up soybean meal, shipping data showed.

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Source: Bloomberg Quint

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