Houston, 8 February (Argus) — Demand for container-sized shipments of dry bulk fertilizer is increasing, prompting some large suppliers to seek backhaul options to mitigate the costs of shipping smaller quantities.
Buyers like the flexibility provided by fertilizer arriving in small quantities while suppliers are enjoying very competitive freight rates from container owners who would otherwise face an empty backhaul. Containers typically hold 25-40 tonnes of product, as opposed to a full vessels which typically carries 30,000-50,000 tonnes, depending on the vessel size.
“We don't always want to buy large vessels and group together with others,” said one South American-based purchaser responsible for supplying sugar plantations. “We want the independence to source it on our own, when we need it.”
While container-size shipments of bulk fertilizer is not new, usage of containers is increasing, according to market participants. This is especially true for NPK varieties, particularly those with added sulfur, and products like ammonium nitrate (AN) and ammonium sulfate (amsul) that are needed in small quantities by niche crops. These fertilizers are rarely traded globally in the quantities that major products like urea and DAP trade.
“The customer is always right in this business, and it forces you to offer what they're wanting,” said one trader who supplies Latin America. China began talking more business by shipping containers and “that forced the Russians to adapt and start moving product in the smaller quantities,” the trader said.
Russian producers have been sending more container shipments of NPKs to China and east Asia, including Acron's increased shipments of 16-16-16 NPK blends to the region. Fertilizer containers sent there will often reload with manufactured goods for Europe, benefitting from low backhaul rates.
Freight rates for containers ex-China to Latin America have been priced at around $85/tonne, according to the trader. However, rates increased in recent weeks to $105-110/tonne, effectively making it unworkable for some traders to supply via this transport method. Increasing costs for fuel bunkers and decreased shipping activity prompting steam vessels to slow transit times are the reasons behind the recent price hikes.
Shipping containers remain the least preferred option for many suppliers who look for freight advantages by shipping in large quantities. For comparison, China to west coast Mexico handysize vessel freight is about $25/t and China to Brazil for two ports discharge is around $40-42/t. In order to make supply feasible and capture margins, traders say they keep an eye on key products that could be used in the back haul of containers to make up for additional costs in shipping containers.
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