Ocean freight rates may have peaked
Over the past month, ocean freight rates for steel cargoes went up and then softened slightly, with the net effect of a small gain over the previous month's rates. There is still a shortage of ships available to move cargo despite the slowdown in the steel trade between the US and other countries. This may be because typical trade routes have changed along with the markets, with more steel cargoes now headed from Asia to Europe than from Asia to the US. The result is that fewer vessels are available to ship cargoes to and from the US, thus pushing up prices.
However, the US steel import industry is a significant part of the ocean freight market, and ocean freight rates will eventually feel the effect of the steep decline in trade from last year. Shipping insiders predict that ocean freight rates will stay stable for a while or start to trend down slowly over the coming months.
In the past month, handymax rates for cargoes bound from the Baltic, Black Sea and Mediterranean, as well as from East Asia, have risen by approximately $3 to $5 /mt.
Per metric ton handymax rates (minimum 15k tons of rebar, wire rod, hot rolled - big tonnage):
Baltic to US East Coast: $58 /mt to $63 /mt
Baltic to US Gulf Coast: $53 /mt to $58 /mt
Black Sea and Mediterranean Sea to US East Coast: $53 /mt to $58 /mt
Black Sea and Mediterranean Sea to US Gulf Coast: $51 /mt to $56 /mt
East Asia to US Gulf Coast: $81 /mt to $86 /mt
East Asia to US West Coast: $73 /mt to $78 /mt
Steel ports are quiet
Steel shippers report that the major US steel ports are pretty empty due to the drastic drop in steel imports this year. Congestion problems are rare, and the steel terminals are now competing with each other for the small amount of business still available. Inquiries have slowed down dramatically. Carriers report that import pipes are the only steel imports arriving in any significant quantities; however, recent antidumping and countervailing duty petitions against pipe from China could potentially slow down these imports too. Large shipments of wire rod and rebar are coming as well, but they will not make up for the extraordinarily low import figures for year-to-date arrivals.
With the slow demand for most steel products in the US, and with other countries willing to pay higher prices for steel than the US is willing to pay, incoming steel cargoes should remain relatively slow for at least the next few months.
Barge availability is plentiful for now
Barge availability is still very good, though carriers are forecasting a strong grain season and are expecting tightness in the market to start this summer, which will in turn raise spot prices for barges. For the time being, there is plenty of availability, and rates are at around the same range as they were a year ago.
There are currently very few upriver steel cargoes since, due to the slow steel markets and added shipping costs, it is no longer possible to barge steel to the Midwest and remain competitive. Inland freight, such as rail and truck transportation, is currently the preferred method. Barge companies may have to lower their rates significantly and cut some of the high fuel surcharges in order to get the steel to the Midwest at competitive transportation rates. Right now, imported steel prices are too close to domestic steel prices.
Steel shippers tell SteelOrbis that third quarter fuel surcharges for barge contracts from larger carriers are still hovering at around 10 percent, but surcharges from the smaller carriers, which base their fuel surcharges on a monthly basis, can be as high as 20 percent. For the larger carriers, third quarter surcharges are based on first quarter fuel prices, which were at around $1.80 /gallon on the river. Barge fuel prices are now at around $2.07 /gallon on the river, so we should expect fuel surcharges for barges to register increases for at least the next two quarters.
Rail fuel surcharge down in July, truck surcharge stays stable
The rail car fuel surcharge for steel cargoes shipped in June is 16.0 percent, based on April diesel prices of $2.83 per gallon. The June surcharge is up 1.5 percent from May. In July, the surcharge will fall to 15.5 percent, based on May diesel prices of $2.80 per gallon.
The fuel surcharge for truck transportation is still approximately 18 to 21 percent, based on the current average highway diesel price of $2.80 per gallon. This marks no change in the surcharge from last month, since on-highway diesel prices have remained more or less stable since May.