Though import quantities to the US have come significantly down over the past few months, ocean freight rates are still strong, especially for cargoes coming from Asia as traders struggle to move their material before the April 15th cutoff date for the VAT rebate reduction on long products. FIFO (Free In Free Out) rates from the Baltic, Black, and Mediterranean seas have stayed stable over the past two weeks, while rates for ships coming from East Asia to the US have gone up $4 /mt to $5 /mt.
Most Handymax rates are at all-time highs. Sources say that part of the reason why the market is so tight is that there are approximately 140 bulk-loading vessels in Australia that are currently out of commission, as they still haven't been loaded because of labor issues. A shipping expert told SteelOrbis that the market is really feeling the removal of these vessels, as they make up approximately 1 month's worth of ships off the market.
Per-ton Handymax rates (minimum 15k tons of rebar, wire rod, hot rolled - big tonnage):
Baltic to US East Coast: $48 /mt to $53 /mt
Baltic to US Gulf Coast: $43 /mt to $48 /mt
Black Sea and Mediterranean Sea to US East Coast: $45 /mt to $50 /mt
Black Sea and Mediterranean Sea to US Gulf Coast: $43 /mt to $48 /mt
East Asia to US Gulf Coast: $73 /mt to $78 /mt
East Asia to US West Coast: $65 /mt to $70 /mt
Ports anticipate more relaxed year
The major steel destination ports are becoming less and less busy with steel cargoes as the number of imports dwindles. Sources say that there are no longer inside storage space problems or any kind of space problems in Houston, and some of the terminals are even starting to ask for business again. However, while major steel ports like Houston, and Long Beach are no longer congested, they are still active, and business has started to pick up slightly in the second quarter.
In general, 2007 will be a much better year compared to 2006 as far as congestion at the ports is concerned, as imports are supposed to remain relatively low for the remainder of the year due to US prices for certain steel products being lower than foreign prices for the first time.
Barge availability loosens up
Barge availability is reportedly very good, due in part to the lack of import cargoes. Barge traffic is running smoothly, as it is no longer plagued by icy river conditions.
Rising fuel prices are affecting fuel surcharges from the smaller carriers, who calculate their surcharges on a monthly basis, though the major carriers calculate their surcharge on a quarterly basis, and the recent rise in fuel prices has not yet affected these rates. Most second quarter fuel surcharges have not changed significantly since the first quarter, and are still at around 10 percent.
Rail car availability is tight, but better than last year
Rail car availability is still somewhat tight, especially in Houston, however, a railway executive told SteelOrbis this week that the company has seen a significant reduction in utilization of its fleet this year as compared to last year, due to the reduced amount of imports. He does see the market tightening up in the second quarter due in part to increased demand from the pipe market, but thinks in general that availability will be much better in 2007 than it was in 2006.
The rail car fuel surcharge for April is 12.5 percent, based on February diesel prices of $2.488 per barrel. The surcharge is unchanged from March. In May, the surcharge will rise to 14.5 percent, based on March's diesel price of $2.667 per barrel.
The fuel surcharge for truck transportation is approximately 18 percent, based on the current average highway diesel price of $2.79 per barrel on April 2. This compares to the fuel surcharge of 17 percent two weeks ago, based on the average highway diesel price of $2.861 per barrel on March 19.