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Dry bulk: Panamaxes set for firm Q1 on Chinese grains demand



2018 Shipping Outlook



The Atlantic Panamax market is set for a firm start of 2018, on sustained grains demand from China and expected high exports volumes from South America and the US.



  • Chinese grains demand will drive Q1 2018
  • Atlantic coal unsupportive of the general market


According to the International Grains Council, 2018 will see global soybeans imports rise by 4% to 153 million mt, led by the Chinese appetite which is expected to account for more than 60% of the total exports.


And while the Chinese giant is hungry for soybeans, Brazil is ready to supply the Far Eastern region, with an estimated soybean production comparable to last year of approximately 114 million mt.


Also, as reported by the Soybean and Corn Advisor, estimates for the 2018 soybeans production are uncertain, as farmers might increase soybean acreage while reducing the one dedicate to corn plantation.


Good volumes of exports against a backdrop of tight Atlantic tonnage saw front-hauls boosting the freight on long-haul grain trades.


Analysis continues below...


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The US Gulf Coast to the Far East route, basis 60,000 mt, reached a year-high price of $45/mt by December 14, which is a 17.5% increase on last year's high of $38.25/mt on December 7.


This peak in USG activity backed up the overall Panamax ton-mile demand that, up till Q3, was mainly relying on the ECSA exports towards China.


With projections for grains exports to rise further in 2018, Panamaxes in the Atlantic might enjoy positive sentiment in the first quarter of the new year.


However, potential gains for shipowners are likely to be limited by only a feeble support from other commodities, like iron ore or coal.


While there were some signs of renewed activity for Panamaxes involved in the US coal exports in December, they proved to be short-term.


According to industry sources, the extra Panamax stems at the end of this year spilled from a stronger Capesize market, which benefited from a combination of strong demand as well as bad weather and port delays in the Pacific region.


As a result some Capesize cargoes were split into Panamax and post-Panamax parcels in the attempt to capitalize on cheaper rates on the smaller sized ships.


This increased demand was specifically reflected in rates on the Mobile to Rotterdam coal run, which rose to $15.50/mt mark on December 14, reaching the year-high for the second time since April 2017.


Despite that, shipping sources do not expect to see higher coal volumes out of the US next year, as most trades from this loading region are covered under long-term contracts and the spot inquiry keeps shrinking.


Also, as the weather improves and more Capesize vessels get their itineraries sorted, their rates might get under pressure making the firming Panamax prices uncompetitive again.


Overall, Panamax shipowners are likely to have an easy start to the New Year, considering that the market is looking quite balanced before the holidays.


The grains front-haul business will remain their lifeline trade and with China already eyeing the new Brazilian crops, rates may at least remain stable until a proper shift in market fundamentals.


--Jamila Al Ibrahim, jamila.al.ibrahim@spglobal.com
--Edited by Maurice Geller, maurice.geller@spglobal.com







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