Over 15 Panamaxes are waiting off the coast of Brazil and avoiding committing to cargoes in the hope that considerably higher rates can be achieved next week once China fully comes back from the Lunar New Year holidays and grains exports surge, sources said Friday.
According to cFlow, Platts trade-flow software, at least eight Panamax-Kamsarmax class vessels have been anchored off the ports of Santos and Paranagua for over a week.
“Owners do not need to rush and fix vessels,” a shipbroker said. “They want to be available when Chinese are back in the market next week.” Many shipowners say they are expecting a considerable surge in grain exports from East Coast South America. So, taking some losses from waiting for four to five days is not too bad if you have your eyes on a bigger prize, sources said.
Waiting, could be a good bet if rates rise by about 20%. The current rate for a modern Kamsarmax to carry grains from Santos to China is $10,000/day plus $500,000 ballast bonus. This voyage takes around 38 days to complete at 12.5 knots speed and avoiding areas where there is piracy. A 20% or $2,000/day increase in rates would give shipowners at least $76,000 extra in earnings for one voyage. Operating expenses for an idling Kamsarmax are around $6,000/day, which amounts to $30,000 cost for five days of waiting. The total extra earnings for a vessel would be around $46,000/d for one trip.
The potential for extra cash is already inviting extra vessels to the region, mostly ballasters from the struggling Pacific market.
“The fact is that South America is considered the hottest spot in the market right now,” said a shipbroker. “So, we’d be seeing more ballasters coming over within the next few weeks.”
Sentiment is quite bullish among shipowners and even with extra tonnage supply flocking towards South America, extra grains demand may be more than enough to absorb them and support freight rates throughout February, sources said.