Midsize bulkers have received a boost from robust South American grain exports that should continue into the second half of this year, analysts said.
Since 25 July, the Baltic Exchange’s Panamax 5TC basket of spot-rate averages across five key routes has improved 72% to nearly $13,900 per day to reach its highest level in nearly four months.
“The kamsarmax segment … has gained some traction with shipbrokers reporting higher grains cargo availability in South America, as compared to a relatively weak grains export market during the first half of the year,” Jefferies analyst Omar Nokta wrote in a note on Monday.
He said these kamsarmax rates “may not seem exciting”, but they are up from their June and July average of $9,500 per day and above their year-to-date average of $11,500 per day.
The analyst also noted that kamsarmaxes are earning well above their breakeven expenses of about $10,500 per day, which include operating costs, dry-docking costs, interest and depreciation.
Recent fixture activity for kamsarmaxes in the Atlantic have been a little more exciting than the spot market average.
Among recent spot market deals, Louis Dreyfus Armateurs hired Pavimar’s 82,300-dwt Lili (built 2007) on Friday to travel from Belgium to US Gulf Coast and then carry grain to the Far East at $24,000 per day, according to the Baltic Exchange.
The Baltic Exchange assessed a similar journey on its P2A route at just $21,700 per day a week earlier.
On Thursday, the exchange reported that Engelhart Commodities Trading Partners fixed Beibu Gulf Ocean Shipping Group’s 82,000-dwt BBG Endeavor (built 2013) to travel from Indonesia’s Sunda Strait to load on the east coast of South America, delivering in South China at $12,500 per day.
The Baltic Exchange’s assessment of a similar voyage on the P6 round voyage from Asia to the Atlantic and back stood at $14,200 per day on Monday, up from $12,800 per day a week earlier.
Ultramaxes are also benefitting from the South American grain season, he said.
Spot rates are assessed at $11,500 per day, up from an average of $10,000 per day reached in June and July and since the beginning of 2023 that just meets break-even costs, Nokta said.
Spot rates for panamaxes and kamsarmaxes typically rise from July to the end of November during the Americas grain seasons, Stifel analyst Ben Nolan wrote on a note on Monday.
He said Americas grain volumes are expected to be 2.4% higher than last year, while its soybeans output should be up 5.5% from the 2022 harvest seasons, according to US Department of Agriculture forecasts.
“While much of the soybean gains are from South America, the grain improvement is largely from the US,” he wrote.
“While not a dramatically better year, the shipping dynamics should be exacerbated by delays in transiting the Panama Canal, helping rates for the panamax class.”
Midsize ships may also benefit from heightened consumption of large coal inventories this winter in China due to high natural gas prices, he said.
“While inventory is perhaps a headwind, high natural gas prices which are a strong possibility, could lead to increased coal consumption similar to what was the case in 2021 and 2022,” Nolan said.
“So, for now coal is a negative which could turn into a positive. “
