Ocean freight price trend back on the upswing
Ocean freight rates saw moderate downward correction in January, which analysts attribute largely to a major iron ore port closure in Brazil as well as uncertainty about the iron ore contract negotiation outcome. At the end of February, however, shipping rates seemed to be back on the upswing again following the end of the Chinese New Year, and the end of the iron ore negotiations -- settled at a 65 percent premium to last year's prices. With the significant iron ore price rise now a certainty, and with the said closed port expected to begin shipping again shortly, the raw materials trade is certain to ramp back up, inevitably driving ocean freight rates up in turn. In February, only modest price recovery was seen, but further price increases are expected in the coming months.
Current per metric ton Handymax rates for large tonnages (ie: minimum 15k tons of rebar, wire rod, hot rolled coils) as of end of February were as follows:
Baltic to US East Coast: $88 /mt to $93 /mt
Baltic to US Gulf Coast: $83 /mt to $88 /mt
Black Sea and Mediterranean Sea to US East Coast: $87 /mt to $92 /mt
Black Sea and Mediterranean Sea to US Gulf Coast: $77 /mt to $82 /mt
East Asia to US Gulf Coast: $89 /mt to $96 /mt
East Asia to US West Coast: $75 /mt to $80 /mt
Barge chartering rates on the decline
Despite decent grain trade activity, barge equipment availability in the US remains plentiful due to the overall low import and export freight volumes. Sources say that barge rates are falling for the first time in the past three years due to this lack of demand. In many cases, barges are being sent to Mexico rather than being used in the US. With low import steel volumes expected to be seen again in 2008, it doesn't look like the barge situation will improve much, if any, this year. Carriers' fuel surcharges for barges remain high, however, most of which range from 20 to 30 percent presently.
Trucking businesses hope for improvement in 2008
Although 2007 was not a particularly profitable year for the US trucking industry, unionized LTL shippers are hoping for a better 2008 due to an improved labor situation and possible increase in demand. Industry data show that trucking volumes have recovered slightly in the past two months, and there is talk that the low trucking freight volumes may have finally bottomed out (though no major increase in volumes is expected in the near term). Also, a new five-year labor contracts have been inked between the Teamsters union at ABF Freight System and the YRC Worldwide group, covering 70,000 workers, and the carriers are expecting that this new deal will allow them to have more flexibility and profitability in the marketplace. Other factors, including high costs (especially the cost of fuel) and highway congestion remain concerns in the industry though.
As of February 20, the US average fuel surcharge for trucks was 24 percent (for LTL), based on the current national average on-highway diesel price of 3.396 per gallon.
Rail sector still seeing decent volumes
In spite of the continued low import steel volumes in the US, freight traffic volumes on US railroads continue to be moderately strong, largely helped by strong grain activity and some increase in preference of rail over other modes of transportation. According to recently released data from the Association of American Railroads, carload freight on US railroads for the first five weeks of 2008 was up 0.9 percent year-on-year, despite the year-on-year decrease in volumes of building products shipped during this period.
The market is still not super-tight though due to the general state of the US economy, and securing available rail cars is not a problem.
The carload fuel surcharge for rail cars from central and West Coats carriers Burlington Northern Santa Fe and Union Pacific will be 21.0 percent in March, though East Coast carriers like CSXT and Norfolk Southern are charging as high as 27.6 percent.