Atlantic Panamax spot freight slides on deteriorating fundamentals

Bearish sentiment and sliding freight levels so far in 2023 have surprised many Atlantic Panamax market participants, who were previously expecting the rapid recovery seen in rates between late February and early April to continue throughout the year's second and third quarters.

Despite the optimistic outlook for Brazilian seaborne grain exports in 2023, downward pressure has dominated the Atlantic Panamax market since mid-April, with freight rates in key routes now treading about 20% below the yearly peak levels and market participants reporting a lack of urgency in fixing.

"The market never really recovered after the Easter holiday pause," a Piraeus-based freight market source said. "It's not immediately evident what is going on in East Coast South America, but vessel oversupply is a clearly factor."

"Market really not looking pretty, very little demand across the board, too many ships," a Singapore-based Panamax shipbroker said. "Global economy not looking good. Perhaps feeding into commodities."

Platts last assessed the 60,000 mt, plus or minus 10%, Panamax Santos-to-Qingdao grains route, the regional dry freight bellwether, at $39.75/mt May 16, almost 19% below the previous peak of $49/mt during the sessions of April 11-12.

"East Coast South America had a pretty big drop, but there was a little more end-May cargo still left than I expected," a London-based Panamax shipbroker said. "Whilst I thought there was no real reason for levels to stop, we seem to have a kind of temporary level around $13,000/d fixing."

Notably, the 2008-built, 76,432 dwt De Ming Hai was heard fixed to open basis APS Santos off June 4-6, with redelivery Singapore-Japan at $15,000/d and a $500,000 ballast bonus with LDC.

'Close to the bottom'

"It's close to the bottom in ECSA," said a Dubai-based Panamax broker, referring to the fixture above. "I think next week ECSA should rebound, but right now looks dark. Thursday a lot of countries will be off."

"Quite reflective of the sentiment in general," a London-based shipowner said, referring to the recently reported fixtures. "Pretty lackluster."

Like the Southern Atlantic grain fronthauls, the trans-Atlantic mineral freight market has also been on the retreat.

"I would say there are a few fresh cargoes out today, but the levels we are discussing are dismal," a Hamburg-based broker said of trans-Atlantic mineral routes, pointing to time-charter rates as low as $7,000/d for Panamax coal time-charter trips out of the US East Coast.

Platts last assessed the 70,000 mt, plus or minus 10%, Panamax Hampton Roads-to-Rotterdam coal route at $12.25/mt May 16, now treading about 22% below the previous peak of $15.75/mt during the sessions of April 11-12.

ECSA Panamax flows lag 2022 levels

Aside from the emerging oversupply of vessels forming in the Southern Atlantic, an additional factor of concern could be arising in the demand side of the freight equation, including market concerns regarding a weaker soybean harvest in Argentina this season.

Despite signs that Brazil might eventually benefit from a bumper crop in 2023, agricultural Panamax flows out of East Coast South America could be lagging last year's volumes so far in 2023.

According to S&P Global Commodities at Sea data, tracked Panamax agribulk shipments out of Brazil and Argentina for the period Jan. 1-May 16 have reached slightly above 55 million mt, almost 10% below the 2022 levels for the same period, which were reported closer to 61 million mt.

Still, average daily agricultural Panamax flows out of Brazil and Argentina for the period May 1-16 crossed above the 500,000 mt/d level so far in 2023, slightly above the full month daily average for May 2022, reported closer to 482,000 mt/d, according to CAS.

Looking ahead, market participants are expected to focus on the amount of fresh ballaster vessels joining the region from the Pacific basin, as well as the appetite exhibited by traders and charterers, gauged by the levels of new cargoes released in the market.

Platts is part of S&P Global Commodity Insights.