July 31, 2007

High freight costs to sideline grain purchase of South Korea, Taiwan

Rising freight costs due to tight supply of dry bulk vessels may hamper this week's grain purchase by South Korea and Taiwan.

South Korean importers are seen quiet this week after making purchases for October and November arrivals for the past few weeks and will wait for a possible lower freight rates before stepping up purchases, traders said on Monday.

Spot voyage fixtures for modern panamax rates for the benchmark US Gulf to Asia route are being quoted at around US$92 per tonne, according to shipping officials in Seoul. The rates have risen about 70 percent so far this year.

A trader at an international grain house said little business will be done this week as many buyers are in for a summer vacation as well as waiting for a dip in freight rates.

Rates from the US Gulf to Asia continued to climb last week amid a lack of vessels due to strong demand in the Atlantic, trade sources said.

The Baltic exchange's Panamax Freight Index, a measure of global dry commodity demand for typical 80,000 tonne cargoes, rose 67 points, or 0.92 percent, to a new record of 7,324 on Friday (July 27).

Taiwanese grain importers are also weighing on freight rates, thus, traders believe there won't be much action this week, unless costs of private deals using cargo containers match the dry bulk vessels.

Another Taipei trader said the state-run Taiwan Sugar Corp wouldn't be in the market to tender for its regular mixed US corn and soybean shipments until the second half of August.