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By Karl Plume
(Reuters) – Bulk grain shippers hauling crops from the U.S. Gulf Coast export hub to Asia are crusing longer routes and paying increased freight prices to keep away from vessel congestion and record-high transit charges within the drought-hit Panama Canal, merchants and analysts stated.
The delivery snarl by means of one of many world’s major maritime commerce routes comes on the peak season for U.S. crop exports, and the upper prices are threatening to dent demand for U.S. corn and soy suppliers which have already ceded market share to Brazil lately.
Ships shifting crops have confronted wait occasions of as much as three weeks to move by means of the canal as container vessels and others that sail on extra common schedules are scooping up the few transit slots obtainable.
The restrictions might proceed to impede grain shipments effectively into 2024 when the area’s moist season might start to recharge reservoirs and normalize delivery in April or Could, analysts stated.
“It is inflicting fairly a disruption each in expense and delay,” stated Jay O’Neil, proprietor of HJ O’Neil Commodity Consulting, including that the disruption is not like any he is seen in his 50 years of monitoring world delivery.
The Panama Canal Authority restricted vessel transits this autumn as a extreme drought restricted provides of water wanted to function its lock system. The Authority didn’t reply to request for touch upon grain cargo delays.
Solely 22 each day transits are at present allowed, down from round 35 in regular situations. By February, transits will shrink additional to 18 a day.
Grain ships are sometimes in the back of the road as they normally search transit slots only some days earlier than arriving, whereas others like cruise and container ships e book months prematurely.
The Authority additionally affords the uncommon obtainable slots to its prime clients first, none of that are bulk grain haulers, O’Neil stated.
Any scheduled slots that come obtainable are auctioned off, however demand is exceptionally excessive. Some slots have gone for $1 million or extra, untenable prices for the historically thin-margin grain buying and selling enterprise.
“The grain trades and the majority service phase are going to be the final clients to undergo the Panama Canal. I might not depend on the Panama Canal any time quickly,” stated Mark Thompson, senior dealer at Olam Agri.
Wait occasions for bulk grain vessels ballooned from round 5 to seven days in October to round 20 days by late November, O’Neil stated, prompting extra grain carriers to reroute.
Choices embody crusing south round South America or Africa, or transiting the Suez Canal. However these longer routes can add as much as two weeks to delivery occasions, elevating prices for gas, crews and freight leases.
The benchmark Baltic Dry Index, thought of a benchmark for bulk grain freight, spiked to a 1-1/2 12 months peak on Dec. 4, greater than doubling from a month earlier.
Whereas grain costs have fallen from 2020 peaks, increased freight prices can be handed on to grain and oilseed importers who purchase for human meals and livestock feed.
“Business corporations have been discovering methods to navigate round the issue. However undoubtedly it prices the end-user more cash,” stated Dan Basse, president of Chicago-based consultancy AgResource Co.
Within the second half of October, solely 5 U.S. Gulf grain vessels sure for east Asia transited the Panama Canal, whereas 33 sailed east to make use of the Suez Canal as a substitute, in keeping with a U.S. Division of Agriculture (USDA) report. In the identical interval final 12 months, 34 vessels used the Panama Canal whereas solely seven used the Suez.
Some U.S. exporters have additionally been rerouting crop shipments to Asia to load from Pacific Northwest ports as a substitute.
However that, too, comes at a better price as these amenities supply grain largely through rail versus the cheaper barge-delivered hundreds supplying Gulf Coast exporters.
Solely 56.8% of all U.S. corn exports in October have been shipped from Gulf Coast ports this 12 months, down from 64.9% in October 2022 and 72.1% in October 2021, in keeping with USDA weekly export inspections information.
(Reporting by Karl Plume in Chicago, further reporting by Gus Trompiz in Paris; Enhancing by Josie Kao)
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