Ocean freight rates continue to soar
Over the past month, Atlantic Ocean freight rates have increased by approximately $3 /mt, while East Asian rates have risen by up to $10 /mt. While frustrated traders would appreciate some relief from what many consider to be astronomical prices, ocean freight rates are expected to stay strong due to the increased demand for large cargo ships.
The change in the typical trade routes, with more raw materials headed to the Far East and more steel shipments headed to Europe, is also putting pressure on prices for cargoes headed to the US. Another sector which is putting pressure on freight rates is grain, as a portion of the huge US grain crop this year is currently being exported to places like China, Argentina, and Australia. As a steel shipper told SteelOrbis this week, "The market just continues to keep going up every day."
Per metric ton Handymax rates (minimum 15k tons of rebar, wire rod, hot rolled):
Baltic to US East Coast: $68 /mt to $73 /mt
Baltic to US Gulf Coast: $63 /mt to $68 /mt
Black Sea and Mediterranean Sea to US East Coast: $65 /mt to $70 /mt
Black Sea and Mediterranean Sea to US Gulf Coast: $63 /mt to $68 /mt
East Asia to US Gulf Coast: $85 /mt to $90 /mt
East Asia to US West Coast: $76 /mt to $81 /mt
Ports look for alternative business
The major steel ports in the US continue to be uncongested as steel imports are becoming increasingly rare. Ports such as New Orleans, Houston and L.A./Long Beach have been particularly hurt by the slowdown of steel business and are expected to feel it acutely in the fourth quarter. Sources say that ports and stevedores have been looking for alternative business to make up for the lack of steel imports, and while some have been able to find it, others, unfortunately, have not.
Experts predict that steel imports will remain scarce through the remainder of the year, and into the first quarter as well.
Record grain crop puts pressure on barge market
Sources say that barge rates have gone up dramatically in the past month due to the very robust grain season this year. Barges are in short supply, and rates, currently in the $40 /ton range for southbound cargoes, are expected to continue climbing. This strength is expected to continue in October and November, and partially into December, as areas farther north enter the grain season. However, as very little steel barging is taking place, the tightness in the barge market should not affect the steel market much, other than to make importing and exporting activity even more expensive.
As we mentioned in our last report, third quarter fuel surcharges for barges are quite high compared to the previous quarter, with most carriers' surcharges hovering at the 20 percent level. With oil prices still rallying at record highs, the fourth quarter surcharge is likely to be high as well.
Trucking sector faces numerous challenges
The US trucking industry continues to face a slew of challenges with labor shortages, stricter emission standards, and highway congestion, among others. Financial analysts also say that the sector in general has been hurt by the slumping economy (evidenced in weaker freight tonnages this year) as well as climbing fuel prices.
Most fuel surcharges for trucking (LTL) have climbed to 20.5 percent, up two percent from the previous month based on the current on-highway average diesel price of $3.03 per gallon.
The rail car fuel surcharge for steel cargoes shipped in September is 16 percent, based on July diesel prices of $2.87 per gallon. In October, the surcharge will remain at 16.5 percent, based on August diesel prices of $2.87 per gallon; and in November, the surcharge will increase to 18 percent, based on September diesel prices of $2.95 per gallon.