August 6, 2007

 

Rising ocean freight rates slow Asian grain imports

 

High ocean freight costs have substantially slowed down Asian grains imports, traders said Friday (August 3).

 

Ocean freight costs have almost doubled this year, as port congestion in Australia and Brazil, besides increased freightage engaged in hauling coal and iron ore to China have left few vessels for carrying grains across the world.

 

According to online information posted by London-based ship brokers Simpson, Spence and Young, the Baltic Exchange Dry Index crossed the 7,000 points mark for the first time Thursday, more than doubling from 3,450 points a year ago. The Baltic Dry Index covers dry bulk shipping rates and is managed by the Baltic Exchange in London. Grain cargoes are considered dry bulk.

 

Analysts said the prospects of ocean freight costs coming down anytime soon are rather slim as congestion at ports is likely to continue. While some key Australian ports had ship queues of 10-20 a few years ago, now 50-ship queues are quite common, they said.

 

In the meantime, demand from around the world, especially, China, for industrial and agricultural commodities remains robust.

 

In China, the world's biggest soy importer, rising ocean freight costs are deterring traders from importing soys.

 

"I didn't hear a single import deal being struck all of last week," said Phillip Xu Guanghua, manager with Cofco International (Beijing) Ltd.

 

He added that ocean freight costs for US Gulf-China route have risen by around US$35/tonne since the beginning of the year, and is currently at US$100/tonne.

 

South Korean traders too have become inactive in the grains market.

 

"Everyone's waiting for freight costs to fall," said Je Hoon Lee, a trading manager with Daesang Feed Co.

 

US Gulf-South Korea ocean freight cost is now at US$95/tonne, up from US$80/tonne a month ago.

 

In Taiwan, a senior official of the Taiwan Flour Millers Association said that even as the government seeks to cut import duty on wheat by half, it won't really lower the import cost for flour millers, as ocean freight costs keep going up.

 

Over the past month, US Gulf-Taiwan ocean freight cost has risen by US$10/tonne to $80/tonne.

 

Taiwan's federal government has said it will cut the 6.4 percent import duty on imported wheat in half, to tame inflation.

 

Many Taiwanese traders are now switching to importing corn and soys in smaller volumes through containers, which brings down the average cost of importing grains by half.