The summer market has begun in earnest and is turning rather quiet in June after a relatively robust May. Brokers and owners note that even with the modest slump in the past few weeks, rates have enjoyed a solid year-on-year improvement thanks in part to a ‘fantastic’ winter period that was far better than historically the norm. The fertilizer season is over in the north, for all intents and purposes, giving less urgency to agri-prod markets and the Baltic Sea and North Sea markets at large. More vessels are spot than in weeks past and charterers are starting to feel their negotiating power grow. With the bottom yet to be reached (perhaps getting closer by end-June), bunker prices are the new ‘red line’ deciding just how far owners will be willing to compromise on rates yet still cover their operating costs. With a growing upside on oil prices, due to supply concerns from Iran, and the fact that bunkers are now up some 25% from March, rising bunker prices would be the one countering factor owners may have in their arsenal to offset unlimited rate erosion.
Rates are down by some EUR 3/mt on average compared to the winter and there is a growing possibility that they will start falling more sharply if June remains as quiet as it seems to be now. On the plus side, we are told that more charterers are looking for time charter period contracts, which is already unusual for the European market, but also indicates that charterers feel as if the market could very well start improving after the summer and remains in a modest bullish mode in the current supercycle. The persistent lack of tonnage in the European short sea market, thanks to a nearly nonexistent newbuilding programme, ensures that freights will likely bounce back as soon as the slightest uptick in transport demand is perceived. For the moment, however, bearish trends are likely to gain force. Barley cargoes of 3,000mt have been reported from Denmark to Rotterdam at EUR 15.75/mt. Peas of 3,800mt have been secured from the Upper Baltic to Rouen at EUR 24/mt. General cargoes, as per BMTI’s benchmark westward route implies, are getting high teens of EUR 17-18/mt on 3,000mt parcels from Klaipeda to ARAG. Fertilizers of 2,000mt have secured very strong rates of EUR 39-41/mt from St. Petersburg to Koper. Traders wonder if this is an exceptional rate or a new benchmark. SCUK general cargoes are fixing around EUR 11-12/mt on 3,000mt to ARAG. Owners are ready to dig in for the summer, hoping last-done rates stay as the lowest bar for new freights going forward.
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