Thursday, August 19, 2021

The spike in container freight rates finally reached brazilian shipments

 




Just as an example cost of one 40feter from Brazil to Mexico (ports of Altamira/Veracruz) was
in the range of U$ 1,500 /1,800 in April 2021 and rised to U$ 2,800/3,200 at the end of May.

In June it was billed already over U$ 4,000 and , now in August U$ 6,300.
It is previewd for  September/October in the range of U$ 8,000/9,300

Exporters are facing trouble to sell on CIF/CFR terms and prefer FOB terms with buyers assuming the risk of freight.

In June 16 we already published the report below:

Specifically in Brazil freight rates where little affected if any, until now, but it started increase from the beginning of this month.

Routes and availablity of vessels and containers where altered already before, with changes happening on already contracted and booked vessels and ports, causing delays and dificulties to plan shipment and arrivals.




Freight - Global trade runs into choppy waters

 





The spike in container freight rates smacks of top shipping lines exploiting the market with their oligopolistic power

A shipowner tries to fix freight rates in such a way as to recover capital costs, depreciation, operating costs, agency commission, administrative expenses and other overheads, and get a reasonable return on investment. But with coronavirus taking a toll on the global economy and seaborne trade in early 2020, the container shipping sector was badly hit.


The sector had been struggling with an over-supplied market and slow demand growth even before the pandemic which kept the container freight rates generally low over the past few years. As the pandemic weakened economies, this segment experienced major setbacks. The early part of 2020 witnessed modest recovery in demand and freight rates, but with the outbreak of the pandemic the prospects for demand not only decreased but fleet development was also affected.


With lockdowns coming into force in March 2020 and reducing the demand for container goods, shipping companies adopted strategies to manage supply capacity to reduce costs and keep freight rates from falling. The spread of Covid also led to a sudden drop in demand for seaborne transport. This development forced the container lines to apply strategies such as increased blank sailing (that is, skip port calls), idling of vessels and re-routing as a way of adjusting supply to low demand. This allowed freight rates to remain stable at a time of lower demand for ocean shipping.


Although blank sailing, accompanied by low oil bunker prices, helped shipping lines mange supply capacity and reduce costs, it still accounts for about 40 per cent of the operating cost of a vessel and has an impact on revenue due to capacity withdrawals (Drewry London 2020, Annual Report).


From the perspective of shippers, these strategies meant severe space limitations to transport goods and delays in delivery dates which had an impact on supply chains and the proper functioning of ports (UNCTAD Review of Maritime Transport 2020).


The levels of increase

These factors culminated in freight rates reaching historically high levels by early 2021. The surge in freight rates spread across some developing regions such as Africa and Latin America, and even outpaced the rise observed on the main East-West routes. While the increase in freight rates recorded on the Asia-East coast-North America route was 63 per cent, on the China- South America it was 443 per cent higher than the median for that route.


Rising freight costs over the last year due to shortage of shipping containers have reportedly had a detrimental impact on small and medium-sized exporters. Drewry’s Composite World Container Index — a global index for container spot market freight rates on all major routes — peaked at $6,727, up by over 300 per cent since the emergence of the pandemic in December 2019. Drip Capital, a California-based digital trade finance , in its analysis on the global shipping crisis has stated that small and medium businesses globally account for more than 25 per cent share of the $18 trillion maritime trade. While the Suez Canal hold-up in March 2021 unleashed different challenges on the shipping and logistics industry, small and medium businesses particularly have been going through a bad patch since the onset of the Covid pandemic.


At a time when exports are giving a big push to Indian economy, exporters are forced to shell out more to ship goods to global destinations. Container lines have announced surcharges and as on July 7, freight rates from J Port, Mumbai, Mundra and Hazira to the Mediterranean have seen an increase of $500 per TEU (twenty foot equivalent unit). Currently, it costs $2,800 per TEU to Barcelona in Spain — an extra $500 would mean an 18 per cent increase in shipping costs. CMA/CGM — a French shipping company — will apply a high season surcharge of $1,250 per TEU for dry cargo to the east coast of Central America from India via Malta.


Exporters hit

According to FIEO (Federation of Indian Export Organisations), a 40 foot container to the US before Covid costing $2,000 is now $6,200 6500; the rates to Europe have increased from $1,200 to $5,000, while the West Africa market has seen a 600 per cent jump.


According to the Indian Rice Exporters Association, African nations are the biggest buyers of Indian basmati rice. Africa as a market accounted for 54 per cent of India’s $4.796 billion non-basmati rice shipments during 2020-21. Freight rates to Africa has more than doubled to $115 per tonne compared with $45 per tonne a year ago. An African buyer, who used to get rice delivered at $400 per tonne last year, has to pay $500 now.


Container shipping lines will be able to advance a number of arguments like shortage of containers, congestion in the South China and the US ports on the west coast, delays and detention of ships at ports due to the pandemic and labour shortage, empty container repositioning, the hold-up of ships at the Suez, etc., to justify the abnormal increase in freight rates.


Had the increase in freight rates been modest or moderate, the global shipping community would have accommodated such increases. The world’s top ten container lines seem to control about 85 per cent of the total cellular container capacity and they seem to have taken unfair advantage by exploiting the market with their oligopolistic power. These container lines have formed shipping alliances among themselves to consolidate their position and continue to abuse the potential market power.


Latest reports suggest that the US President has issued an executive order demanding the Federal Maritime Commission to take all possible steps to protect American exporters from the high costs imposed by the ocean carriers. In the circumstances, the best antidote appears to be for the national Competition Commission to monitor freight rates and market behaviour with a view to creating a fair, stable and sustainable environment in the area of maritime transport with requisite regulatory oversight.

https://www.thehindubusinessline.com/opinion/global-trade-runs-into-choppy-waters/article35546658.ece


Global trade runs into choppy waters

Jose Paul  | Updated on July 26, 2021

The writer, a former Chairman of Mormugao Port Trust, is an Adjunct Faculty of Indian Maritime University, Chennai


Re- published on August 19, 2021 by






Wednesday, August 18, 2021

Pepper Market Report Week 33/ 2021 - A report from RGT

 









FOB PRICE ©IPC

Vietnam
Price soar week 32 reaching Tuesday last week at level 80,500 VND/kg for pepper raw material.

From beginning August, raw material went up of about 8.05% in span of ten (10) days with Black Pepper that is now higher of about 4.67% and White Pepper higher of about 6% today.

Succeeding days, raw price eased and stayed stable at 79000 VND/kg dubbed for a paused in demand overseas. Firmness persists even during weekend attributed to the inventory level that is believed to be running low along with the prediction that China will resume its buying spree by August/ September to cover their deficiency from Indonesia origin.

Day trade-78,5000 VND

Afternoon-80,500 VND

Almost 2.5% intraday gain

8.05% Upsurge in span of 10 days


Indonesia
Lampung reported stable whilst Muntok White continue to be seen at an upward trend reportedly being seen traded at level highs of $7000-7300 FOB from origin.

Though other might see it as déjà vu of week 12 market bubble, it is important to take note that Muntok farmers have been consistent with their standing since week 26 for the clarity in expected poor crop this year followed by overall pepper market situation.

Brazil
Trading activity was active entire week with a good volume of demand. In fact, the splurge in demand have caused offers from $3800 FOB level to go up at $3900-4000 FOB by ending week. Compared to Vietnam, this origin was seen a cheaper alternative from last week trade off.

Though raw material was being traded last week at level 18 BRL/kg, according to sources, some farmers prefer to hold their inventory materials in belief that it could touch at level 25 BRL/kg.

Freight

Freight Situation from Asia.
A severe equipment shortage across all Asia origins continues. Though certain destination ports such as Pakistan and Indian Ports have increased 182-219% compared to last year, this year rates are noticeably stabilizing for Karachi; while for India, though seen with an increasing trend, the level is only about 20-25% upsurge from Q1-Q3 of this year.

The top worst affected major destinations are Mexico, Europe, Jebel Ali and USA showing roughly 500-977% increasing uptrend in addition to difficulty in booking a secured space.

As from Indonesia to other destination, it is even seen at its worst condition this week. Taking note that no direct routing from Indonesia port which means transshipment to other congested ports is a must, contributing to the upscale in price trend

Freight Situation from Brazil.
Spike in freight cost along with a very tight vessel and container availability started to be noticed from Brazil ports mid Q2 this year and became obviously a major concern by Q3.

No hint of warning, it took everyone by surprise with a sudden upsurge from about 280%-330% clearly seen for all America routes.

Overall, ocean freight remains bullish going forward. This is despite a reported decrease of shipments from ports under lockdown such as China, Vietnam, and Indonesia. The latter does not change that fact that freight capacity is heavily curtailed by port congestion that is not easing. Vessels and containers can be shift easily from one trade to another but port from one to another cannot.

---------------------

Recommendation

Market remains stronger than ever despite all ongoing global supply chain disruptions and headwinds related to raw material, environmental concerns, crop issues and freight cost. This becomes more evident these past few weeks that ‘bullish believer’ is now taking a stand that situation going forward for pepper could rise in coming years till abundant supply exceeds demands which does not seem to happen in next 2-3 years times. Thus, staying strategically covered at all times will perhaps be the next logical thing to do at this point in time


RGT Pepper Market Report Week 33/ 2021
© Royal Golden 2021. All Rights Reserved..

Monday, July 26, 2021

VIETNAM PEPPER & SPICES MARKET UPDATE – WEEK 29

According to data from Vietnam Customs, in the first 15 days of July, Vietnam exported 14,320 tons of pepper, with a turnover of 52.7 million USD. Progressively from January 1st to July 15th, 2021, Vietnam exported 168,204 tons, total export turnover reached 548.8 million USD.

Vietnam facing with the serious development of the epidemic in many provinces and cities, the government has imposed social distancing, restriction, lockdown. Therefore, most export companies have focused on production and boosted exports for all order already signed with customers. It is forecasted that the export volume in July will reach approximately 28-30,000 tons, bringing the total export volume in 7 months reached 180 - 184,000 tons (same period last year reached 184,571 tons) although the business situation in the past month was very slow due to freight charges, booking, long holidays of the US / EU /Middle East...

Currently, the supply chain has been broken and the ability to supply pepper and other product for export has been seriously affected. Let's take a look at some notable news from the past time.

• After selling pepper after harvesting, now pepper materials are almost concentrated in households with good financial conditions. They only sell materials when absolutely necessary to cover temporary costs.

• Currently, households are also very limited in contact with and selling to agents /dealers due to / lockdown from the government as well as fear of epidemics situation.











Friday, July 23, 2021

BLACK PEPPER OUTLOOK: MID-YEAR REVIEW 2021

The report below was published by IPC and Namagro.
We believe it is very consistent and offers a very clear vision of the market which this year due to exceptional crisis cause by the COVID pandemic is very confused. 
MW
manager@peppertrade.com.br





Summary

# Aug/Sep period is period of convergence and is the only period with stock availability in all three major origins.

# We expect markets to align close to 3700/3800 USD/MT for 570 ASTA at an FOB Level.

# We expect EU to be back after holidays and book Indonesia and Brazil. 

# USA is expected to book new crop Vietnam and Q4 shipments from Brazil.

# Chinese demand could bring a squeeze suddenly. This may not happen in the next 15/30 days as Vietnam enters severe lock down.

# For MRL pass buyers are expected to turn to Brazil due to better freight rates

# Freights from Asia to NA/EU will remain firm.

# Overall activity in Vietnam is expected to be slow as stock at farm gate is lowest as compared to previous 2/3 years . 

# Downside is Demand from ME is expected to be slow as destination prices are lower than origin price 

# Fundamentally global demand for pepper remains strong with supplies not growing.

# Therefore any softness in the market should be seen as a buying opportunity.

----------------------------









Indonesia Price Outlook

Current price for ASTA Fob USD 4000/ MT
We expect prices to drop to 3800 USD/MT and align with Brazil to cover impact of freight
Slow Demand from traditional destinations will be countered by lower crop.
Unless Arbitrage improves Indonesia may not import from Vietnam.

Supply disruptions due to Covid are expected and market is inactive.
It is possible in the later part of the year prices rebound as China is uncovered and they would be aggressive in Vietnam and Indonesia.

Freights are not expected to reduce for next 3/4 months.

--------------------------------









Vietnam Price Outlook

Current price for ASTA Fob USD 3850/ MT
We do not expect prices to drop sharply.
Slow Demand from traditional destinations has been already factored in.
Unless Arbitrage improves Vietnam may not import from Brazil.
Supply disruptions due to Covid are expected and market is inactive.
It is possible in the later part of the year prices rebound as China is uncovered and they would be aggressive in Vietnam and Indonesia.

  • The origins processors especially ingredient factories, unlike previous years, have sold for 2022 and are carrying stocks. This means farmers have sold their produce much earlier and do not have much stock in hand.
  • This is evident by the fact that despite a lock down and poor fresh sales for the past 3 weeks prices of raw material is steady.

Freights are not expected to reduce for next 3/4 months.

-----------------------









Brazil Price Outlook

Current price for ASTA Fob USD 3900/MT
We expect prices for ASTA Fob should drop by 10% to USD 3600/MT
Drought and low crop is factored in.

Demand from non traditional destinations like ME will remain low.
Unless Arbitrage improves Vietnam may not import.
Supply disruptions due to Covid are not expected.

It is possible in the later part of the year prices rebound as China is uncovered and they would be aggressive in Vietnam and Indonesia.

Therefore,one can wait a little for the opportunity but being too pessimistic may not be wise.




Tuesday, June 29, 2021

VIETNAM PEPPER & SPICES MARKET UPDATE 28th JUNE 2021 - WEEK 26

 

PEPPER

 

Although the situation of freight rates and epidemics is still complicated, besides the lack of liquidity in the domestic market from exporters / collectors at different times. However, the market has had very strong gaining sessions in the past week with an increase of 4%. The main reason is that Vietnamese exporters actively buy raw material for June shipment. In addition, with a forecast quantity not less than 50,000 tons to be exported in the next 2 months, July and August, so farmers / dealer stock is now being too tight. Besides, the demand from different markets such as EU / USA / ASIA and China has also pushed up the domestic market. Thus, pepper prices in June have increased by 9.2% compared to May.




The market has gone through half of the crop of 2021 with a fluctuating but very steady increase since May. Therefore, farmers and dealers have a solid basis to believe that pepper prices will continue to increase in the second half of 2021 as different reasons that we have analyzed in the 24th week report.

 

Indonesia; The epidemic situation is still complicated and the harvest is expected to be come later than expected. Crop size is estimated to be poor and the quantity used for export in 2021 is forecasted only around 10 - 15,000 tons (Crop size around 30.000 tons max but huge domestic consumption already reached 15.000 tons). However, the situation of containers and freight from Indonesia is very stressful and it is difficult to get containers with high rates. Therefore, the price and time of shipment to abroad have not been fixed.

 

Brazil; The second crop of Brazil will start in end August / early September but quantity with max 25.000 tons. Prompt shipment still available but higher price compare with Vietnam. The Brazilian real Currency traded around 4.9 per USD in the fourth week of June, its highest level since June 2020, after latest data showed Brazilian consumer inflation surged in the first half of June, suggesting further monetary policy tightening, while the country's current account deficit was at its smallest in more than 13 years.

Therefore, it is likely that the price of pepper from Brazil will continue to increase in the near future when the local currency tends to appreciate quite strongly against the USD

(in contrast in 2019/2020).

 

With both the current Indonesia / Brazilian markets and max quantity of 2 these market for export around 50 - 60.000 tons for second half of the year 2021. The ability to import for re-production and export is not feasible in Vietnam now. Therefore, all Vietnam exporters / processors / traders will have to focus on buying domestic raw material for export.

 

 

SPOT market in ASIA & USA & EU; Material at the ports of destination continuously increase in price due to the increase rapidly in freight rates, consumption… This will also promote the price of raw materials in exporting countries to continue to firmer in the near future.

 

CASSIA/ STAR ANISE/ TURMERIC;

 

High demand coming from different countries while new crops are still in the next 3 more months. Stock being tight and price continuing firmer / uptrend is foreseen until August at least.

 








 



Wednesday, June 16, 2021

The Impact of Ocean Freight to Pepper Market

We got this important information from the last RGB Pepper Market Report

Since last year, deficiency in shipping containers alongside the growing port congestion issues have created an unfavorable impact and disruptions to all exporters particularly from Asia.

Routes that are mostly affected are shipments bound to USA and EU ports with rates that are
now up of about 438%- 950% respectively from our last noted rates in June 2020.

If before large exporters were having an advantage to plan shipments ahead of time with contracted rates
from carriers, nowadays situation is completely distorted. The reportedly China’s aggressive tactics to bring back empty containers became even more challenging for USA/EU exporters.

Europe specifically Hamburg port is having a severe congestion issue with major carriers that are now
compelled to re-route containers to other available EU ports such as Bremerhaven and Wilhelmshaven as end of carriage obligation.

The desperation to export goods abroad often leads seller to commit and booked premium rates just to
acquire containers. Current situation for June: Another GRI rates implementation on June 15 with a critical space availability on the demand that is currently exceeding the current supply.

Specifically in Brazil freight rates where little affected if any, until now, but it started increase from the beginning of this month.
Routes and availablity of vessels and containers where altered already before, with changes happening on already contracted and booked vessels and ports, causing delays and dificulties to plan shipment and arrivals.