DRY BULK: Trans-Atlantic and front-haul rates diverge on coronavirus fears

New York — Dry bulk shipowners have strongly resisted moving their vessels out of the Atlantic basin, leading to weak intra-Atlantic freight rates but firm long-haul prices.

Persistent overtonnage in the Pacific basin, combined with widespread concern over the coronavirus outbreak, mean that shipowners are highly reluctant to leave the Atlantic, despite relatively low cargo inquiries across the Panamax to the Handysize segment. Increased restrictions on ships that have docked at Chinese ports -- up to and including 14-day quarantines in Australia -- mean that owners have shown strong resistance to moving their ships east, or redelivering their ships in the Pacific. These concerns have pushed trans-Atlantic time charter rates to record lows, particularly in the South Atlantic where grains cargo inquiries have collapsed due to lackluster Chinese demand.

On Tuesday, two trans-Atlantic Supramax grains fixtures were heard well below last-done levels, as rates continued a freefall that began in late January. In the morning, Cargill sent ripples of negative sentiment through the market by fixing the Ci Yun Shan, 56,686 dwt, 2010 built, from February 16 onwards, for a trip from Santos to Algeria at $3,000/d. News of this fixture was soon followed by Louis Dreyfus being heard having fixed the Shi Zi Feng, 56,625 dwt, 2011 built, open Antonina, via Upriver to the Mediterranean at a mere $2,000/d. Louis Dreyfus had fixed then failed the Shi Zi Feng for a comparable trip in late January at $8,000/d.

However, front-haul rates to China and the Far East held firm, as shipowners strongly resisted travelling into the Pacific basin. With low Pacific voyage rates and the risk of the coronavirus and/or potential quarantine playing into owners' calculations, time charter rates remained estimated at the $10,000-11,000/d plus commensurate ballast bonus range. The S&P Global Platts Santos to Qingdao, 50,000 mt grains route was assessed at $26.75/mt on Tuesday.

US Gulf Coast awaiting Phase One

Similarly, on the US Gulf Coast, trans-Atlantic voyages to the Continent and Mediterranean were snapped up cheaply, while long-haul trips commanded considerable premiums. With few grains inquiries while the Mississippi River waited for exports due to Phase One of the US-China trade deal, and long Panamax tonnage lists ready to sweep up any prompt cargo, petcoke made up the bulk of the business on Supramax and Ultramax sizes.

In the market, the Thor Chaiyo, 58,731 dwt, 2008 built, was heard fixed for a petcoke cargo from Houston to Greece, February 16-22 laycan, at $12,750/d, while Oldendorff was heard having fixed the Ilenao, 55,442 dwt, 2013 built, for petcoke from the USGC to Turkey at $9,250/d -- the first trans-Atlantic Supramax fixture below $10,000/d since January 2019.

However, like the South Atlantic, USGC front-haul time charter rates remained strong, with the market hearing fixtures completed even above last done. XO Shipping was heard having fixed the Amstel Stork, 60,437 dwt, 2016 built, from the US Gulf Coast to Japan with a prompt petcoke cargo at $22,000/d. The Houston to Qingdao, 50,000 mt petcoke route was assessed up 25 cents on Monday to $37/mt, despite voyage and time charter rates falling across most of the rest of the basin.

"There's such reluctance from owners to go to China right now, but even Southeast Asia and India are undesirable due to how many ships are sitting open spot in the Pacific basin," said one shipbroker source. "Front-haul rates are very high, whether from the US Gulf, the Continent, ECSA, or the Black Sea."