Tuesday, July 31, 2012
U.S. drought, global heatwave deal blow to Supramax shipping sector
Global grain trade could reportedly drop 4.9 percent for the 2012-2013 amid a historic U.S. drought, unusually dry weather conditions in other global regions, and money-losing rates for Supramax commodity vessels.
The largest Supramax carrier, Eagle Bulk Shipping, will experience a 30 percent plummet in shares over the next 12 months as forward freight agreements reveal a forecast of ship-hire rates of $9,117 per day in the usually busy fourth quarter – 17 percent below current Baltic Exchange data, according to statistics compiled by Bloomberg.
Supramax vessels need to earn $5,000 to $6,000 to cover operating expenses and $12,000 to $14,000 once financing costs are included, according to RS Platou Markets AS.
"Those droughts are very bad news for the shipping industry," said Marc Pauchet, analyst at London-based shipbroker ACM Shipping Group Plc, to Bloomberg. "It seems grain production is going to be worse than even we had anticipated," he said.
While U.S. farmers deal with the worst drought since 1956, dry and very not weather has reportedly damaged crops across Australia and Europe as well.
The United States Department of Agriculture reported corn and soybean conditions "further declined" in its latest USDA/NASS crop condition report.
"The most significant crop deterioration occurred across the southern and western Corn Belt, where little or no rainfall accompanied temperatures that averaged 5 to 10 degrees above normal," the USDA reported.
"U.S. soybeans, rated 37 percent very poor to poor on July 29, 2012, have matched lowest conditions observed during the drought of 1988," the USDA report said.
"That year, soybeans rated very poor to poor peaked at 37 percent on July 10, with a secondary peak of 35 percent on August 21. Nearly half (48 percent) of the U.S. corn was rated very poor to poor on July 29, 2012. In 1988, corn rated very poor to poor peaked at 53 percent on August 21," the report said.
The following Bloomberg source was used for part of this news report: bloomberg.com
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