Sea freight rates rising

Australian grain growers may gain a competitive advantage into key south east Asian markets with sea freight rates rising rapidly over the past six weeks.

The Baltic Dry Index, a key indicator of sea freight prices, has jumped rapidly which will influence the competitiveness of grain freighted over longer distances.

Brad Knight, Geo Commodities, said it would mean Australia’s freight advantage into Asia may become more important.

“There’s been stiff competition to supply the south-east Asian market from North America, now with freight rates rising, they may not be quite as competitive," Mr Knight said.

“The flipside of this is that Australia will have higher costs going into markets such as the Middle East, where it is competing against Black Sea grain which has much less distance to travel.”

But although sea freight rates have risen as a whole, it is less pronounced in the categories relevant to grain freight.

Cargill Australia spokesman Peter McBride said the highest gains was in the Cape ship sector, or ships more than 170,000 tonnes deadweight, which are used mainly in moving minerals.

“Rates for Capes saw an increase of 150 per cent in September on the back of stronger shipments of iron ore, but this is coming off historical lows earlier in the year,” he said.

In the Panamax sector, which comprises large export grain vessels, prices were up 100pc, but in the smaller Supramax and Handy size categories, price rises were much more modest, at 14pc and 11pc respectively.

President of US Wheat Associates Alan Tracy said with this in mind, the US wheat industry was confident it would be adversely impacted by a rise in freight rates.

“Much of the wheat we ship to those markets goes in the smaller sized vessels,” Mr Tracy said.

And he said North America would be advantaged into northern Asia even if sea freight did continue to rise in price.

Mr McBride said availability of ships was not going to be an issue to the Australian grains industry, but said exporters would not be able to leave booking of freight to the spot market, as vessel supply was tightening.

Meanwhile, prices in the container freight market remain relatively static.

Nicolaj Noes, managing director of international freighter Maersk Line, said the Baltic had little impact on container prices.

“There is no real correlation between bulk and container rates,” Mr Noes said.

“They are two different segments and we haven’t seen any uptake on rates on exports out of Australia.”
Source: The Land