Ocean freight rates maintaining at high levels
Ocean freight rates for Handysize ships have risen in the last month, as the same market dynamics of lack of ships, high international demand for raw materials trade and sky-high fuel costs remain in play. Shippers say that rates are currently maintaining rather than shooting straight up, though the recent settlement of Rio Tinto's iron ore contract should put increased pressure on the dry bulk shipping market, as China is expected to ramp up its iron ore imports now that the ore prices have been agreed upon.
Per metric ton Handymax rates for large tonnages (ie: minimum 15k tons of rebar, wire rod, hot rolled coils) are currently in the following ranges:
Baltic Sea to US East Coast: $95 /mt to $100/mt
Baltic Sea to US Gulf Coast: $90 /mt to $95 /mt
Black Sea and Mediterranean Sea to US East Coast: $95 /mt to $100 /mt
Black Sea and Mediterranean Sea to US Gulf Coast: $85 /mt to $90 /mt
East Asia to US Gulf Coast: $95 /mt to $100 /mt
East Asia to US West Coast: $85 /mt to $90 /mt
Mississippi River flooding still slowing barge traffic
The recent flooding and high water conditions on the Mississippi River has had a major impact on the US barge market in the last couple weeks, with both ETAs and loadings in many cases being delayed. Some locks are starting to reopen as of this weekend, though there are still some stranded barges, and until the river is completely reopened, barge traffic will be very limited. River conditions have returned to normal for some areas, like the upper Ohio, though the lower Ohio remains closed.
Barge demand from the steel side of the market remains rather depressed due to the lack of import steel activity, and in general, rates are softening. At the same time, however, the fuel surcharge is increasing to due the rising cost of fuel, to some extent counteracting the softening rates.
Rail still seeing high demand, rising prices
US railroads have also been impacted by the flooding in the Midwest, in the form of service problems and a decrease in volumes. The American Association of Railroads recently said that in the week ending June 21, volumes of weekly carload freight decreased 5.7 percent from the same time frame last year, due largely to the Midwest floods.
Apart from the recent disturbance, rail demand continues to be quite strong and may continue to grow in popularity for the transport of domestic steel. With fuel prices rising to insane levels, shippers want to find the most cost-effective way to move their materials, and rail, being three to four times more fuel-efficient than trucks, has a competitive advantage as fuel is a smaller part of the cost structure. Still, with the strong demand, tight availability, and rising diesel prices, both rates and fuel surcharges are increasing significantly. In July, both Union Pacific and Burlington Northern Santa Fe will raise their surcharge to 32 percent (from 28.5 percent in June), while some carriers like CSX and Kansas City Southern raising theirs as high as 41.2 percent.
Truckers continue to feel the pain at the pump
Prices for diesel, which fuel most of the nation's commercial trucks, continue to rise on the back of strong international demand and surging crude oil prices. Due to the rising fuel costs, the trucking industry is expected to spend $168.0 billion on fuel in 2008 - a record high which surpasses the industry's second-largest cost, labor. The American Trucking Association says that in 2008, year-over year comparisons continue to reflect a weakness in freight volumes due largely to the high diesel costs.
As of June 26, current LTL fuel surcharges are at an average of 36.5 percent, while TL surcharges are at 47 percent. These surcharges are based on the national HDF average monthly price of $4.648 per gallon.