Ocean Freight Rates Surge

ROME - Nov 7/07 - SNS -- International ocean freight rate markets strengthened in the June through October period on strong demand for iron ore, coal and grains and worsening port congestion in the Pacific, notes the FAO in the November 2007 edition of Food Outlook.

"In addition, the number of newly-built ships entering the market was lower than expected," the FAO said in the report.

A temporary dip in August was attributed to a slide in freight futures prompted by global financial problems. However, from September onwards, unprecedented demand for minerals and grains, particularly for larger ships in tight supply, boosted the dry bulk freight market further, with indices breaking previous records. Period chartering continued to dominate over spot business.

In the Atlantic, recent additional support came from shipments of new crop grains and soybeans from North America. The Baltic Dry Index (BDI) set a new record of 10,513 on 11 October, an increase of 57% since June. During the same period, the IGC Grain Freight Index (GFI), which does not include Capesize vessels, rose by 37%, to 10,347.

In the Panamax sector, a jump in short- and medium-term chartering activity boosted rates in both basins. By October, short period contracts for three to four months were traded at about $83 500 daily, double the rates registered at the end of May. Longer-term period charters saw similar increases, a two-year contract recently concluded at $51,000 ($30,500) daily. Pacific rates were boosted by large volumes of iron ore and coal shipments to China, with port congestion in Australia, China and India continuing to tie up tonnage. Atlantic rates remained at very high levels, with more cargoes being exported from the United States Gulf this year. The grain rate from the United States Gulf to Japan surged by more than half, from U.S. $64 per metric ton (MT) to $101 MT. Atlantic round voyages were being fixed at around $75,500 daily, compared with about $50,000 last May.

The Capesize sector saw the steepest advances in rates, attributed to heavy mineral demand, limited new building deliveries and port congestion in Australia, Brazil and China. Between May and early October, the Baltic Exchange’s average of four time charter rates increased by 56%, to $172,187. The benchmark iron ore rate from Brazil to China climbed to about $82.50 MT ($51 MT).

In the Handysize sector, good demand for new crop grains, soybeans and sugar, as well as a tight supply of tonnage, pushed voyage rates higher, though to a lesser degree compared with other sectors. By October, the grain rate from Brazil to the European Union (Antwerp-Hamburg) increased by 19%, to $82 MT. Round voyages were up by about 50% from their May values, at $59,000 daily in the Atlantic and at $60,000 per day in the Pacific.