Santos-to-Qingdao grains route falls 13% amid bearish market, US competition

London — The Santos-Qingdao grains route was assessed 13% lower week on week amid a bearish market and US Gulf coast competition, according to sources.

The Santos-to-Qingdao, 60,000 mt grains route was assessed down $3.50/mt at $29.00/mt on July 22, the largest single-day fall since the coronavirus pandemic took hold in March. Bearish sentiment has contributed to reduced voyage rates across the Atlantic, sources said.

"Terrible week indeed, big write-off and yes, fixtures look poor," a shipbroker source said.

The East Coast South America region was by far the hardest hit. As Brazil comes to the end of its harvest season, exports of soybean have begun to decline. Soybean exports from Brazil peaked in April at 15 million mt, according to the US Department of Agriculture. Exports fell to 14.4 million in May and 13.8 million in June. Conversely, as the US harvest season begins, its own exports are increasing, sources said. The fall in the Santos-Qingdoa voyage rates had a significant effect on the KMAX 9 (Index weighted time charter equivalent average), which fell $1,221/d to $10,621/d, signaling a substantial weakening of the Atlantic Panamax/Kamsarmax market.

"ECSA activity is sliding... we see now a limited list of cargoes," a shipbroker source said. "The cargo list is now longer from USG than from ECSA.

Cargill was heard in the market having retained the 82,177 dwt Flora on subjects for a trip from ECSA to Singapore-Japan at $14,300 + $430,000 on an APS basis. The increase in APS basis fixtures is an indication of a weakening market, according to sources. In addition, the ECSA region was long on vessels, which put voyage rates in the region under further pressure, sources said.

Although the reduction in the Santos-Qingdao rate was sharp, it was not unexpected, sources said. As Brazil's grain exports fell, the US joined the market. Although fixture activity has increased from the US Gulf to China, voyage rates remain subdued in a bearish market.

"To give you an idea, this is pretty normal; ... the ECSA grain season is coming to an end, we start seeing Q1 2021 bids, but spot activity is now moving to the US Gulf Coast," the shipbroker source said.

Prior to the sudden drop in ECSA voyage rates, the market had seen low fixture activity due the discrepancy between bids and offers. However, shipowners in the Atlantic Panamax/Kamsarmax market moved swiftly to fix vessels on July 22 as the market cooled, according to sources. The previous gap between bids and offers narrowed as charterers and owners were eager to complete fixtures before annual leave, sources said.

"Resistance is gone, holidays make a big difference in this market'" a shipbroker source said.

As the stalemate within the market eases and liquidity increases, the bearish sentiment appeared in the lower voyage rates in the Atlantic Panamax/Kamsarmax market.