ECSA FREIGHT WATCH:  Market bearish as fundamentals tip in charterers' favor

As the South Atlantic grain market enters June, its fundamentals are strengthening significantly, largely driven by healthy agribulk shipments emerging from Brazil.

However, the recent dismal performance in the Pacific has constrained options for vessel owners, compelling them to seek employment opportunities in the Atlantic. This influx of tonnage is exerting downward pressure on freight rates, ultimately capping any potential gains in the market. Market participants are exercising caution, maintaining a negative outlook for the remainder of the month, particularly as the harvest season for soybeans is expected to conclude by the end of June.

In week 21, freight markets for Atlantic Panamax and Kamsarmax vessels experienced a midweek decline, driven by persistent negative sentiment stemming from a lackluster trading environment following the holidays in the US and the UK. Compounding the situation, despite healthy cargo volumes, an increased number of ballasters continued to exert pressure on freight rates.

"Charterers maintained the upper hand throughout the week, as owners were forced to reduce offers to secure cover," said one shipbroker.

Soybean harvest cycle to end in June

In week 21, soybean cargo volumes began to decline slightly, with shipments dropping to 37, down from a previous peak of 45 in week 19.

Shipments of barley, sugar, corn/maize and sorghum continue to show limited change, with each grain type recording one or fewer shipments over the past seven weeks. According to the US Department of Agriculture's Brazil crop calendar, the soybean harvest cycle will end this month, while the second crop of corn is set to begin its harvest cycle.

Additionally, one wheat shipment was noted by CAS in week 20.

"We are currently in, or nearing, a seasonally weak phase for Panamaxes. With the US grain season having concluded and the South American grain season expected to slow down after June, demand is anticipated to remain low," a dry bulk analyst said.

"Quarterly shipments are projected to peak in the second quarter of 2025, with soybean shipments from Brazil to mainland China expected to be a bright spot, while subdued wheat exports from the Black Sea are likely to weigh heavily on the market," S&P Global Commodity Insights reported in its latest Dry Bulk Commodities Review & Outlook report.

According to CAS, shipments to China have steadily declined since week 19, when they peaked at 45. In the most recent week, data indicated an increase in shipments to East China, rising to 25 in week 21 from 21 in week 20. Conversely, shipments to North China have reached their lowest levels in the past seven weeks, with week 21 recording only six shipments, down from 11 in the previous week.

Commodity Insights further elaborated in its Dry Bulk Commodities Review & Outlook report that, "Mainland China's demand for other agribulk commodities, such as barley and sorghum, has also been tepid, and the declining Chinese population may limit growth potential in shipments in the long term."

Additionally, shipments to Japan-Korea-Taiwan (JKT) initially rose to four in weeks 19 and 20; however, this increase was short-lived, as week 21 saw a decline to only one shipment to the region.

No room for improvement in freight

Another dry bulk analyst commented on the Pacific markets and increasing ballaster list, stating, "Coal demand from China has been subdued, and a robust domestic wheat harvest is decreasing the need for Australian imports. Currently, there are few indications of any significant upside for overall Panamax rates."

The latest figures for week 21 indicated 131 laden ships and 140 ballasting vessels, widening the spread to 11, nine more than the previous week. The number of laden ships has decreased since week 20, where data from CAS showed 137 ships.

In its weekly Freight Signal Monitor report, Commodity Insights noted, "Panamax ballasters in ECSA have increased further. While Panamax shipments from Brazil saw a marginal uptick from last week, shipments from Argentina declined. Movement at key transit points remains stable, with no increase in Panamax transits observed through the Suez Canal. Laden Panamax shipments around the Cape of Good Hope have experienced a slight month-over-month decrease in May. Congestion levels for Panamax vessels remained similar to the previous week, with anchored congestion in East Coast South America rising week over week, while it declined in Europe."

"Further south, a significant disparity persists between prompt tonnage and 30 days ahead arrivals," a second shipbroker said. "Charterers are in no rush to fix 30 days ahead and picked the cheapest units for the first half of June dates, they added.

Market participants are proceeding with caution, as bearish fundamentals continue to prevail, with ballasters moving into the region and the soybean grain season approaching its end. Consequently, the South Atlantic market seems set for further losses. Unless there is a significant increase in cargo volumes to the Pacific to retain tonnage in the basin, there are few signs of an imminent recovery in freight rates.