Signal Marine Dry Weekly Market Monitor - Week 44.2024

Chart of the Week: Dry Bulk Grain Flows - U.S. Vs Brazilian

This week, the US and Brazilian grain sectors are in the spotlight, particularly Brazil's strong position in soybean production and exports to China. Almost 90% of the Panamax shipping market is concentrated on the Brazil-China trade route. The Supramax vessel segment, on the other hand, appears to be more involved in the US grain sector, where 24% of the trade volume is handled, compared to only 10% for the Brazil-China route.

Brazil has increasingly solidified its dominant role in global grain production, particularly in soybeans, positioning itself as a key supplier to China—the world’s largest importer of soybeans. Over the past decade, Brazil’s agricultural sector has expanded rapidly, supported by ample arable land, favourable weather conditions, and significant investment in agricultural technology. This growth has enabled Brazil to surpass the United States in soybean production, with a production volume that consistently meets and often exceeds China’s high demand.

This shift has seen the U.S. gradually lose its share in the global grain market, particularly in soybean exports. While the U.S. was once the primary supplier of soybeans to China, tariffs and trade tensions have led Chinese importers to turn increasingly to Brazilian suppliers. Brazil’s competitive pricing, geographical advantages, and close trade relations with China have accelerated this shift, diminishing the U.S. share of this crucial market.

The result is a distinct competitive edge for Brazil in the Panamax vessel market, where almost 90% of the Brazil-China trade in soybeans is conducted, signalling a strong demand for larger, bulk vessels that cater to Brazil’s sizable exports. In contrast, U.S. grain exports to China seemed to lean more on the Supramax vessel market, with 24% share compared to 10% share from Brazil to China.

Meanwhile, looking at the evolution of freight market trends at the end of the month, there is still a significant weakening trend in the Capesize Brazil to North China route, while, iron ore price trends remain highly volatile, influenced by both the complex economic environment and China’s periodic economic stimulus measures aimed at revitalising its industrial sector. Recent stimulus packages have injected fresh optimism into the market, with the potential to stabilise demand for iron ore, which would benefit the freight market. However, the pace and scale of recovery remain uncertain, creating a mixed outlook for Capesize freight rates.

SECTION 1/ FREIGHT - Freight Rates ($/t) Weaker

‘The Big Picture’ - Capesize and Panamax Bulkers and Smaller Ship Sizes

The dry bulk freight market is still experiencing a weakening momentum in the large vessel size categories, with Capesize rates from Brazil to North China showing the weakest trend since the peak in week 39.

• Capesize vessel freight rates for shipments from Brazil to North China appear to have hit a bottom, stabilising at $21 per ton by the end of last week. This represents a significant 24% decline compared to rates from the previous month, reflecting ongoing challenges in the market and shifting demand dynamics.

• Panamax vessel freight rates from the Continent to the Far East stood around $33 per ton, reflecting a monthly decline of 10%.

• Supramax vessel freight rates on the Indo-ECI route dropped around $10 per ton, reflecting a monthly decrease of 10%.

• Handysize freight rates for the NOPAC Far East route have recently fallen below $35 per ton, marking a shift after several consecutive weeks of relatively steady sentiment since the end of the first quarter. This decline signals a change in market dynamics, as factors influencing supply and demand continue to evolve.

SECTION 2/ SUPPLY - Ballasters (# vessels) Mixed

Supply Trend Lines for Key Load Areas

The end of the October signalled a mixed trend, with the number of ballasters still rising in the Capesize, while the Panamax segment continues to experience a decline.

• Capesize SE Africa: The number of vessels has surged to approximately 140, exceeding the annual average by 30. This upward trend is expected to persist, indicating a rise above the annual norm in the coming period.

• Panamax SE Africa: There has been a persistent decreasing trend that seemed to have reached a bottom, with recent levels still hovering around 92, 40 lower than the annual average.

• Supramax SE Asia: Following a surge to 120 ballast ships two weeks ago, there has been a downward adjustment, with numbers dipping below the annual average of 100 and nearing 90 by the end of October. This decline suggests a tightening in availability as the month comes to a close.

• Handysize NOPAC: An upward revision above the annual average seems to be occurring over the last three weeks, with levels now around 88—22 higher than the low recorded in week 38.

SECTION 3/ DEMAND - Tonne Days Decreasing

Summary of Dry Bulk Demand, per Ship Size

In the last week of October, dry tonne-days for the Capesize segment continued to sharply decline, reinforcing the downward trend observed in the previous weeks of the month.

• Capesize: The current trend confirms a persistent weakening momentum, leaving it uncertain whether the sluggish growth will decline further in November.

• Panamax: Weekly percentage growth, seemed to have reached a peak at the end of the month fuelling positive market expectations for November.

• Supramax: The growth rate indicating a firmer growth than the previous week, even surpassing the most recent peak occurring in week 39.

• Handysize: The growth rate held a decreasing pace in the last two weeks of the month, while there are indications of a softening trend in the coming days.

SECTION 4/ PORT CONGESTION - No of Vessels Decreasing

Dry bulk ships congested at Chinese ports

Congestion at Chinese dry bulk ports has declined throughout the month, with a downward trend evident across the Capesize, Panamax, and Supramax vessel segments.

• Capesize: Capesize vessel congestion stood 120, a drop of 20 vessels compared to the previous week's levels.

• Panamax: The number of Panamax vessels held levels around the 200 mark, reflecting a decrease of 30 compared to the highs of week 39.

• Supramax: Congestion levels dropped below 300 vessels to around 270, a decrease of 30 compared to the levels recorded a week ago.

• Handysize: Congestion levels have once again fallen below the 200 mark, despite a brief uptick observed in the previous week. It remains to be seen whether this decline will hold steady below 200 in the coming days.