Atlantic Supramax dry bulk market shifts focus to Black Sea grain

25.07.2016

After weeks of waiting, the Black Sea grain trade has finally taken center stage in the Atlantic Supramax dry bulk market, pushing freight rates higher in this key loading area.

At the same time, the Black Sea’s resurgence has spurred shipowners positioned in other Atlantic regions, where loading opportunities are currently low, to consider ballasting towards the Eastern Mediterranean.

On Thursday, the owner of an eco-friendly 58,000 dwt Supramax vessel could earn $13,000/day for a trip with grains from the Black Sea to the Far East, a rise of $4,000/day from $9,000/day four weeks earlier, when the Black Sea grain trade was still muted.

A Supramax owner in El Dekheila, Egypt, was heard Thursday to be offering $11,500/day for a prompt trip with grains from the Black Sea to the Far East. A shipbroking source said that, basis Canakkale, Turkey, this offer would equal $12,750/day.

Shipping sources began reporting an increase in grain flows out of the Black Sea ports of Ukraine and Russia in the week starting July 11, with front-haul deals mostly involving trips to the Far East and Southeast Asia.

“The new crop is starting to get delivered to the [Black Sea] ports, and the market is keeping busy,” said an operator.

Also, the end of Ramadan in the first week of July brought with it an uptick in grain demand from North Africa and the Middle East, sources said.

The grain route from Nikolaev, Ukraine, to Alexandria, Egypt, jumped to $12/mt on Thursday from $9/mt on July 7.

“But I think [at $13,000/day] we are still about $3,000/day lower on front-haul rates than where they ended up during the Black Sea new crop season last year, so there is space to go from here,” said a broker.
Ballasting drive

The Black Sea’s recent rebound caught the area short of Handysize and Supramax tonnage, with charterers having to look as far afield as the Adriatic Sea, Greece and Egypt for available ships.

Market participants have for several weeks expected an increase in grain flows in the Black Sea towards the end of July.

But the ship count in the Black Sea has been persistently low, following a period of slow trade in the area that straddled the end of the second and start of the third quarter of 2016.

Also, fewer ships have been opening up in the wider Eastern Mediterranean region since April, with low Turkish demand for scrap metal and petcoke cited as a factor.

This shortfall of vessels, together with weak loading prospects in other areas, has led a fair amount of shipowners positioned in regions such as the Western Mediterranean and UK-Continent to decide to ballast towards the Black Sea, shipbroking sources said.

“Black Sea grain is all there is to the market now and it’s affecting the other areas too,” said a broker. “Ships are ballasting from UK-Continent to the Black Sea, tightening supply in the North Atlantic.”

“I’ve heard of Handysizes ballasting from the Western Mediterranean to the Black Sea, since it is more promising than ballasting to UK-Continent,” said another broker. “Two weeks ago it would have been the other way around.”
Bumper crops

The buzz created in the Black Sea in the past 10 days is chiefly due to buyers being attracted to it by competitively priced Russian and Ukrainian grain cargoes, as well as bumper crops in these two key grain exporting countries.

Furthermore, excessive rainfall since May has affected France’s primary wheat producing areas, resulting in deterioration in quality, while reducing yields, the US Department of Agriculture said July 7.

This means that France, which competes with the Black Sea in North Africa’s markets, has been less able to do so.

On July 12 the USDA revised higher its estimate for Russian and Ukrainian wheat exports in the July 2016-June 2017 season, up by 1 million mt and 0.5 million mt respectively from its June report, to 12.5 million mt for Ukraine and 25.5 million mt for Russia.

This follows a July 4 announcement by Russia’s agriculture ministry that Russian wheat exports for the July 2015-June 2016 marketing year reached 24.53 million mt, a 13% increase year-on-year.

Russia’s total grain exports, for the marketing year ended June 30, 2016, reached 33.8 million mt, an overall increase of 10.8% on the year, the country’s agriculture ministry said.

Ukraine’s wheat exports saw an even sharper year-on-year increase in the 2015-16 marketing year, growing 54.5% to 17.35 million mt, data from Ukraine’s ministry of agriculture showed July 5.


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