Ocean Freight Rates

(Contributed by the International Grains Council)

General

The dry bulk freight market continued to strengthen in all sectors during the past five months, but the main surge in rates occurred during September-October 2003. The Baltic Dry Index (BDI), the main market indicator, reached record levels. It jumped by 2 210 points (95 percent) from 2 337 at the end of May to 4 547 on 28 October 2003, when it was standing at more than three times above its long-term average since 1985.

China’s continued strong demand for iron ore, as well as the economic upturn in Japan and the United States increased demand for Capesize ships. Time-charter rates in the Pacific reached an all-time high of more than US$80 000 daily. In the Atlantic, the Capesize voyage rates for coal to Europe increased to US$25.00 per tonne from South Africa, and to US$20.00 per tonne from Brazil.

Panamax rates were pushed up by the Capesize sector, especially in the Pacific. Time-charter from Australia reached US$50 000 daily. Increased scrapping of old ships put extra pressures on availability of tonnage.

Grain

Atlantic Panamax rates increased strongly due to expectations of larger maize and soybeans exports from the United States, with the benchmark grain voyage rate from US Gulf to Japan advancing from US$35.00 per tonne in May to almost US$40.00 per tonne by the end of October. The rate from US Gulf to Chinese Taipei went up to US$44.00 per tonne (US$34.00 per tonne).

Time-charter contracts, rather than voyage fixtures, became the preferred method of business in order to spread the risks of further hikes in freight rates. During October, grain freight rates on the US Gulf - Japan route jumped by US$13 500 to US$32 000 daily with a US$530 000 ballast bonus, while those on the active US Gulf – Egypt route were recently reported at US$17 000 daily with a US$325 000 ballast bonus.

In the Pacific, the Panamax market was exceptionally strong due to surging mineral trade, Chinese soybeans imports and anticipation of large new crop wheat and barley exports from Australia. Soaring shipping costs led some Asian grain importers to postpone their purchases or to switch to nearby supply source, such as India for soybeans meal and China for feed wheat. Charterers had to resort to private deals, rather than placing orders on the market, to avoid further rate increases. Australia resumed wheat shipments to Iraq against contracts signed before the war. A grain voyage fixture was reported in October from Western Australia to Iraq at US$37.00 per tonne.

The Handysize market followed the trend with very firm rates, especially in the Far East. Period rates in the Pacific increased to US$15 000 daily. In the Atlantic, rates were supported by active grain trading from South America, US Gulf, the Black Sea ports and within Europe. The grain rate from Brazil to the EU (Antwerp-Hamburg) reached US$29.50 per tonne (US$25.00 per tonne). Grain fixtures from the US Gulf to the EU (Italy, Adriatic) were reported at US$28.50 per tonne (US$15.00 per tonne), while those to Algeria were indicated at US$35.50 per tonne (US$24.00 per tonne).