North American transportation and logistics – August 17, 2007

Friday, 17 August 2007 13:59:49 (GMT+3)   |  
       

Ocean freight rates continue their ascent

In the past month, Atlantic Ocean freight rates have increased by approximately $7 /mt, while East Asian rates have come up about $2 /mt. Demand is slow from the steel sector, but ships remain in high demand, due to the strength of other commodity markets. Also, despite the reduced steel shipments, raw materials trading, which typically uses Capesize ships, is still strong. When Capesize ships are in short supply, Panamax or Handysize ships are used in their place, contributing to the shortage of Handysize ships. Sources say that there is a lot of shipbuilding taking place, but it is not happening fast enough to catch up with demand. Demand for ships may be strained even further this fall if there is an export program for the larger-than-usual grain crop this year.

The overall trend for ocean freight rates is still slightly up.

Per metric ton handymax rates (minimum 15k tons of rebar, wire rod, hot rolled - big tonnage):

Baltic to US East Coast: $65 /mt to $70 /mt

Baltic to US Gulf Coast: $60 /mt to $65 /mt

Black Sea and Mediterranean Sea to US East Coast: $60 /mt to $65 /mt

Black Sea and Mediterranean Sea to US Gulf Coast: $58 /mt to $63 /mt

East Asia to US Gulf Coast: $80 /mt to $85 /mt

East Asia to US West Coast: $73 /mt to $78 /mt

Port earnings hurt by slow import year

The main steel ports continue to experience very slow steel business, with very few congestion problems. Sources say that the Port of Houston saw some delays last month and at beginning of this one, but other than that the market has been very quiet. Stevedores are reportedly looking for non-steel related business. Many of the ports have been hurt by the continued lack of steel import business. The Port of New Orleans recently cited the loss of steel import revenues as the main reason why overall revenues at the Port were down seven percent for the 12 months ending June 30th. During the first four months of 2007, the Port of New Orleans handled 874,000 tons of steel and iron imports, only a little over half the amount of steel and iron imported during the corresponding period of last year, i.e. 1.6 million tons. However, the port optimistically forecasts that steel imports will ramp up again next year and result in operating revenues of more than $40.3 million for the fiscal year 2008, compared to the $36.9 million in operating revenues for the fiscal year 2007.

Expectations of busy grain season drive barge rates up

As very little steel-related barging is taking place, barge availability is still good. However, this may not remain the case once the grain season kicks off. Due to the anticipated ramp-up in demand, carriers are quoting much higher rates for future business. One market player told SteelOrbis that he has seen some southbound rates for September/October increase from the current average of $25 /ton all the way up to $40 /ton. He told us, "Futuristically, carriers are very bullish and they think there's going to be quite a grain season." Low water levels in the Mississippi, Ohio and Illinois rivers from continuing drought in those areas is a concern, and if the drought continues, it may cause some traffic problems in the next two months when grain shipments are expected to be at their highest.

Last week, the US Army Corps of Engineers had to send a dredge to clear silt so barges could travel in the Mississippi and Ohio rivers. The US corn crop is estimated to be 13.1 billion bushels this year, the largest since 1933, according to the US Department of Agriculture. Meanwhile, with oil prices still on the rise, fuel surcharges for barge contracts from some of the major carriers have risen to 20 percent in the third quarter, reflecting the rising oil prices. Fuel surcharges as high as 29 percent have been heard from certain carriers.

Rail and truck fuel surcharges still lingering at record highs

The rail car fuel surcharge for steel cargoes shipped in August is 16 percent, based on June diesel prices of $2.81 per gallon. In September, the surcharge will rise to 16.5 percent, based on July diesel prices of $2.87 per gallon. The fuel surcharge for truck transportation has stayed flat since last month, reflecting no change in the on-highway average diesel price from July to August (though the daily price did experience gains and dips throughout the month). Most fuel surcharges for trucking (LTL) are still at around 18.5 percent, based on the current on-highway average diesel price of $2.85 per gallon.


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