Costly Panamax freight sees Capesize ore carrier loading grains

New York — The wide freight spread between the bigger Capesize and the smaller Panamax as well as Supramax bulk carriers has resulted in a rare move with the larger ship, which predominantly moves iron ore and coal, being employed to ship a grain cargo out of East Coast South America.

The 2019 built and 180,000 dwt Capesize ship, the MV Pacific Myra, controlled by trading house Cargill was heard to have been scheduled to load grains out of the Brazilian port of Paranagua, according to multiple market participants.

The ship is expected to arrive at Paranagua on March 27 and is slated to move a Panamax-sized grain cargo to Europe, a source tracking the matter said.

Grain shipments are predominantly the domain of the Panamax/Kamsarmax (75,000 dwt/82,000 dwt) and Supramax (57,000 dwt) class bulkers.

"Now the Panamax time charter equivalent [TCE or returns to shipowner] is around $20,000/d while the Capesize TCE is only a four-digit number, it's more economical to move Panamax stems on Capesize ships if possible," a ship-operating source said.

It is not common to see Capesize bulkers, which are typically mineral carriers, move grains considering the technical challenges and commercial benefits.

"It will be extremely difficult for a Capesize shipowner to find the right grain stem, but grain traders can puzzle it together," a Capesize shipowning source said.

The source added that Capesize ships are restricted by the cubic capacity of their cargo holds, especially for HSS grade stems -- heavy grains, soybean and sorghums. There are also some physical restrictions that are not limited to just the loading and discharging port facilities but also the cargo-hold conditions.

"Many players are exploring [clean Capesize ships to load grains] right now, but we know that not many ports can accommodate them as the [grain] silos will be too far," a Panamax ship-broker involved in grain shipments said.

In case the TCE spread between Capesize and Panamax stays at decent levels for market participants to overcome technical issues, it is possible to see clean Capesize ships loading grains, a source said.

"Due to many restrictions, definitely there aren't many Capesize ships that can perform grain business, but sentimentally we will see some support," a Capesize chartering source of a grain house said.

A China-based Capesize shipowner, which has a ship currently in the drydock for maintenance, said the company has received instructions from the ship's charterers to prepare cargo-holds as "grain-clean."