Owners and operators of mid-size bulkers are taking advantage of rising backhaul rates as the conflict in Ukraine continues to play havoc with the global trading of grain and coal.
Ukraine’s grain exports have ceased since Russia invaded the country in late February, while dozens of countries are boycotting Russian coal in protest of the unprovoked, brutal attack.
This has forced importers from Europe and elsewhere to get these commodities from countries that are much farther away, such as China, Indonesia and the Americas.
“The supramax-ultramax segment has been benefiting from positive demand fundamentals for minor bulks and increased tonne miles caused by the war in Ukraine, including a strong backhaul market,” one owner of midsize bulkers told TradeWinds.
When war broke out on 24 February, the average spot rate for the Baltic Exchange’s S2 roundtrip supramax route between China and either Australia or the Pacific Northwest jumped 26.5% to $35,250 per day on 11 March.
The rate has cooled since then, but it is still at the same level seen at the start of Russia’s invasion of Ukraine.
“Given how dynamic the markets have been, it is imperative for owners and operators to remain nimble and flexible in order to be able to maximize revenues,” the owner said.
These war-influenced market fundamentals have, for example, driven owners of mid-size bulkers to import grains to Colombia and then export coal on backhaul routes, according to shipbroker Barry Rogliano Salles’ BRS Research division.
“They could load up coal quickly in the Santa Marta, Cartagena and Barranquilla ports, reducing their ballast legs,” BRS Research said in a report.
“If shipowners are reluctant to dirty up, they could also ballast down to Brazil or Argentina to pick up fresh agricultural shipments with the options to reposition their vessels to Skaw-Passero or Singapore-Japan range, offering flexibility.”
Colombia exported 19.4m tonnes of coal and imported 3.5m tonnes of grain for the first four months of 2022.
BRS Research pointed out that the Netherlands became Europe’s second-largest Colombian coal importer during this time, up from fourth in 2021, after banning Russian coal.
Pacific Basin, an owner and operator of 121 supramaxes and 116 handysizes, said that mid-size ships are finding lucrative fixtures on backhaul routes due to seasonality as well.
“Ships are not fixed assets and, of course, vessels will move between the basins depending on market conditions,” spokesman Peter Budd told TradeWinds.
“Rates are currently being impacted by the seasonal lull which is typical for this time of year, in combination with an increased percentage of tonnage of both handysizes and supras available in the Atlantic.”
Owners start shipping an abundance of grain when harvesting starts in late July and early August.
Budd acknowledged, however, that rates for backhaul Asia-to-Europe trades have been “particularly strong” for coal and steel, possibly due to the war forcing importers to go beyond the Black Sea for such commodities.
He also noted that his fleet, which has many handysizes in the Pacific basin, hence the company name, also tries to find fixtures on the profitable backhaul trades.
“We also use [contracts of affreightment] to help with our repositioning of ships on backhaul trades,” he said.