Steadying the Ship

Gasoline volumes from Northern Europe to West Africa are expected to continue to grow, and new hedging tools may be needed for medium range clean tankers in the West of Suez market. Platts Shipping Editors Sam Eckett, George Griffiths, and Chris To discuss emerging benchmark opportunities into West Africa, while probing the unprecedented state of trans-Pacific container rates.

Please join us at this annual forum to get vital updates and latest analysis surrounding not only shipping, but also agriculture, metals and coal. We will share insights about these markets and the impacts to them in the midst of ongoing challenging economic situations from the COVID-19 pandemic, trade wars and IMO2020.

Due to the ongoing COVID-19 pandemic, we will be moving this forum to an online version this year.

This virtual forum will focus on:
– Platts Cape T4, KMAX 9 indexes: Reflecting dry bulk trade flow realities
– Grains and Oilseeds Spot Market Update
– Iron Ore: A closer look at iron ore market supply fundamentals amid multi-year high for prices
– Met Coal: Spot prices hit multi-year low, what is next for the seaborne met coal market?
– Thermal Coal: Influence of China, India on Coal Prices
– Dry Bulk Freight: IMO, COVID-19: What new challenges are on the horizon for the Dry Bulk Freight market for the rest of 2020 and beyond?
– Our analysts will decipher the market impact of recent times, summarize the insights and offer their views. They will also address any questions that you may have online.

REGISTER NOW

New York — The Atlantic basin’s strongest season for dry bulk time charter rates is traditionally the fourth quarter, but 2020 has proved that nothing can be taken for granted.

With European and US grains seasons coinciding in Q4, spot tonnage typically gets hard to come by as ships in the Black Sea and North Atlantic carry grains cargoes into the Pacific. With demand for ships high and supply low, freight rates are usually pushed up to yearly zeniths.

This year though, the ongoing (and sometimes volatile) trade tensions between China and the US and a below-expected wheat harvest in Europe and Southern Russia, means market talk is whether Atlantic dry bulk markets can expect their usual yearly payday in the run up to 2021.

Black Sea continues to weaken

In the Supramax markets, Q4 is typically strongest on the US Gulf Coast and in the Black Sea. Wheat, corn, and soybean cargoes underpin demand for the smaller-deadweight ships, and charterers seek out the most fuel-efficient vessels for these long-duration exports.

Ultramaxes –- the 60,000-66,000 dwt modern, economical design -– are preferred wherever possible as rising global prices of IMO-compliant 0.5% sulfur marine fuel (VLSFO) make fuel consumption critical to traders’ arbitrage calculations.

From the Black Sea and the EU, 50,000-55,000 mt wheat cargoes to Southeast Asia or the Far East are typically common throughout Q3 and Q4. However, lower-than-anticipated EU yields and increased demand for the larger Panamaxes and Kamsarmaxes in the Black Sea have meant Supramax grains inquiry for Q3 has been well below the market’s expectations.

According to S&P Global Platts Analytics, Russia is set to become the world’s largest wheat exporter this season as difficult weather conditions marred wheat crop prospects in the EU, most notably in France and the UK.

Time charter earnings for a 57,000 dwt Dolphin-type Supramax in the Black Sea have trailed Q3 2019 by an average of 12.5% through Q3. However, as demand continues to weaken across Europe, there could be a slower Q4 for the Supramax/Ultramax sector.

Looking further ahead, dry weather in southern Russia was expected to facilitate planting of winter grains for the 2021 crop, Platts Analytics grains analyst Victoria Sinitsyna said.

“Weather forecast models indicate some sporadic rains in Southern and North Caucasus Districts in the first week of September, but on average precipitation is likely to remain below normal at least until mid-September,” Sinitsyna said.

US exports strengthen despite trade tensions

Despite the trade tensions, US-sourced agricultural products have continued to flow steadily from West to East. So far in the 2020-21 marketing season -– that began June 1 -– China’s total commitments for US wheat have remained ahead of both Mexico and Japan, traditionally large buyers of US wheat.

China’s commitments reached 1.47 million mt for 2020-21, inching to a five-year high, according to a Platts analysis of USDA data. Similarly, US soybeans inspected for export in the week ended Sept. 10 were 1.284 million mt, an 8% drop from the previous week, but 92% above the same week in 2019.

That is good news for Supramax and Ultramax vessels off the US Gulf Coast. In 2019, the New Orleans-to-Kashima, Japan, 50,000 mt grains route fell dramatically from Sept. 20 through to Nov. 5 — $53/mt to just $38.50/mt -– as the political-economical rhetoric between the US and China escalated.

But with grains exports appearing to return to pre-COVID, pre-tariff levels, Q4 2020 is looking healthier for the US Gulf Coast dry bulk markets.

Houston — Bunker pricing in the Americas starts the week focused on the energy complex, which helped values strengthen in previous days, with some exceptions.

US/CANADA

North American bunkers pricing ended the week on a generally bullish kick following several days of support from a stronger energy complex, with stagnant demand fundamentals doing little to mitigate rising values.

In the futures and upstream markets, ICE Brent prompt-month futures contract rose $3.57/b, or 9.02% last week to $43.14/b, while the Gulf Coast 0.5%S barge market gained $13.50/mt, or 4.67%, to $302.75/mt.

Participants in USGC markets will keep an eye on logistics following talk of congestion in Houston and New Orleans late last week in the wake of Hurricane Sally impacting the latter, with Tropical Storm Beta now bearing down on the region.

Spot 0.5%S retail pricing in Houston climbed to $315/mt ex-wharf Sept. 18, up $5 (1.6%) week on week, while MGO value rose to $350/mt ex-wharf on a gain of $30 (9.4%) over the same period.

In the Northeast, spot pricing in Montreal has been talked as more competitive with New York and Philadelphia, both of which have dealing with limited liquidity on weak demand in recent weeks.

The New York market saw spot pricing for 0.5%S rise to $329/mt ex-wharf, up $15 (4.8%) on the week, while Montreal’s 0.5%S assessment climbed to $385/mt for a gain of $17 (4.6%) week on week.

MGO spot pricing in New York moved $14 (4.2%) higher on the week to $349/mt ex-wharf, and Montreal registered a gain of $18 (4.8%) over the same period to close at $395/mt ex-wharf Sept. 18.

On the West Coast, fundamentals in Vancouver are expected to receive some support from the grain industry on seasonal improvements in demand, although pressure from the lack of consumption via cruise ships continues to be felt.

The ex-wharf spot price of 0.5%S in Vancouver rose to $317/mt to close last week, up $31 (10.8%) from Sept. 11, while MGO value moved up $7 (1.9%) to $377/mt ex-wharf over the same period.

LATIN AMERICA

Pricing in some key Latin American ports is entering the week strengthened by gains in energy complex markers the region follows traditionally for guidance. However, low demand is still pressing some ports.

Panama’s 0.5%S market is experiencing tight availability both in Balboa, on the Pacific Coast, and Cristobal, on the Atlantic, leading to higher resupply costs, according to a market source. The pattern is expected to last at least until October, the source said. Panama’s 0.5%S rose last week $16/mt (5.11%) to $329/mt.

In Argentina, 0.5%S increased $19/mt (5.46%) to $367/mt in Buenos Aires port, aided by an increased demand seen throughout September, according to a market source.

Marine fuel 0.5%S strongest advance was seen in Santos, which rose $24/mt (7.84%) last week, assessed Friday at $330/mt. State-led Petrobras said it will slash exploration and production investments by as much as 37.5% over the next five years amid expectations of reduced global demand and lower oil prices. However, the company said it will keep revitalization efforts at several major heavy oil fields in the Campos Basin. Output of heavy sweet crudes, with 0.5% or less sulfur, has been the basis for Brazil’s increasing exports of IMO-compliant bunker fuels to Asia.

In Peru, demand picked up sharply last week with expectations of a continued trend, according to market participants. The 0.5%S market rose $2/mt (0.52%) to $385/mt.

Stagnant-to-lower demand has been pressuring prices in Colombia, where 0.5%S was assessed Friday at $365/mt, unchanged from the beginning of the week.

The marine gasoil segment moved only slightly, up or down 1% or 2% in most of the ports, with the exception of Balboa, where the fuel saw a 3.26% increase, or $12/mt.

According to Panama’s Maritime Authority, bunker sales in the country rose for second consecutive month in August, after a steep fall in June, with high sulfur IFO 380 fuel showing the strongest increase, of 41% month on month. VLSFO comprised 72.46% of sales in Balboa, IFO 380 represented 16.02% and MGO, 11.52%.