Sugar Shipping Costs to Climb Further as Oil Prices Rise

2021 has started like no other year for the dry bulk freight market, breaking from traditional form and commencing with high prices.

January and February are usually the slowest months for the market, along with August, which is the summer holiday period for a large proportion Northern Hemisphere.

The nature of this freight market rally also breaks away from tradition.

Generally speaking, the dry bulk freight market takes its lead directionally from the larger Capesize vessels that transport Iron Ore and Coal around the globe to make Steel. When the Capesize sector is strong, the rising tide of sentiment lifts all the vessel class earnings.

Whilst Iron Ore is at a 10-year high, it seems the driver of the dry bulk freight rates is not coming from the Capesize sector, which has seen a dramatic plunge in earnings recently.

The star of the 2021 freight market has been the smaller vessel classes. Today’s Panamax ($15,502) and Supramax ($13,164) earnings are almost 50% higher than the Capesize sector’s $10,312.

Whereas Capesize haul Iron Ore and coal, Panamax and Supramax are primarily engaged in the carriage of grains and other diverse materials.

The futures market for Panamax and Supramax point to a very bullish year ahead. Whilst Panamax have averaged year-to-date earnings of $13,281, the futures curve shows them continuing to climb at least $1,000 per day for the rest of 2021. Supramax have made owners a pleasing $12,238 per day with futures also climbing closer to $13,000 per day for the balance of 2021.

If you’re a charterer of Grain, Sugar or Fertiliser, the cost of freight looks set to get more expensive over the coming six months, compounded further by a remarkable (and perhaps unpredictable) hike in oil prices adding more Dollars per tonne to commodity freight costs.

Having said this, where does this leave the outlook for the Capesize sector for 2021?

Whilst Capesize vessels have earned a huge average of $18,822 per day so far this year, they are currently in a rout at $10,312 per day. The good news for shipowners is that the second 2H’21 futures market sees them rebounding strongly, with Q3 futures contracts for Capesize vessels changing hands last night just shy of $19,000 per day.

If Chinese culture is our theme for today, then the 2021 Chinese New Year celebrations will be good for any superstitious shipowners. This year is the year of the Ox.

While you may have heard of the 12-year Chinese zodiac calendar, represented by 12 different animals, it’s actually far more complicated. A year isn’t just categorized by its zodiac animal.

The 12^th February marked the beginning of the xin chou year, according to the sexagenary cycle. “Xin” represents the heavenly stem for the element metal, while “chou” is the earthly branch symbol for ox, making it the Year of the Metal Ox.

The ox, in Chinese culture, is a hardworking zodiac sign. It usually signifies movements and dynamic activity. Here’s to a prosperous 2021 and a busy year for moving metal!