Weaker Argentinian seaborne grain flows to weigh on ECSA freight market

Market concerns regarding a potentially meager harvest in Argentina have been adding to Panamax woes for East Coast South America fronthaul grains, as freight rates tread near the lowest levels observed since 2021.

Bearish dry bulk freight fundamentals have been keeping East Coast South America market participants on tenterhooks, with rates nosediving since the latter half of 2022 on abundant tonnage and an absence of sufficient cargo to balance the market.

Notably, the Platts KMAX 9, a weighted average of time-charter equivalent rates on key Kamsarmax routes, was last reported at $6,072/d Feb. 20, hovering close to the lowest levels observed since May 2020.

Local exchanges sound alarm

In the Atlantic basin, optimistic expectations for a bumper harvest in Brazil are paired with worries for a weaker export performance from Argentina, where local exchanges have been sounding the alarm regarding crop quality declines indicating a smaller harvest, and therefore lower demand for freight.

"First it was drought, but now it's also frost," a freight trader said, pointing to escalating risks weighing on already softening expectations for soybean and corn flows out of Argentina.

"If the harvest is modest, it definitely does not help the freight market, especially given that vessel availability is high," a shipbroker said, already confirming seeing fewer inquiries for cargoes out of Argentina.

Indeed, tracked grain flows out of Argentina have been trending near 117,000 mt/d so far in February, according to S&P Global Commodities at Sea, the lowest daily average for February in at least five years, with current daily volumes trending some 39% lower on the year and over 41% below the five-year average calculated for years 2018-2022.

This comes on the back of an even weaker January performance, with daily Argentinian grain seaborne flows dropping below 104,000/d, about half of the five-year average levels for January, according to CAS.

Bahia Blanca export share shrinks

With the aggregate grain flows out of Argentina posting the weakest start in 2023 in at least 5 years, individual export hub dynamics within the country have also shifted.

Notably, agricultural flows out of Bahia Blanca have been accounting for roughly 25% of seaborne exports out of Argentina so far in 2023, according to data from CAS, with its share so far shrinking to the lowest levels since 2020 but still maintaining second place after San Lorenzo-San Martin.

Platts last assessed the 60,000 mt grain Panamax run Bahia Blanca-to-Qingdao at $41.75/mt Feb. 20, down by over 1% on the day to hover just 25 cents above the two-year market lows of $41.50/mt Feb. 9, more than halving from the June 2022 highs.

In contrast, agricultural flows out of the Port of Quequen are claiming almost 17% of Argentinian seaborne exports so far in 2023, the highest share since at least 2018, data from CAS showed.

Platts is part of S&P Global.