Freight rates of dry bulk fertilizers on certain routes have continued to rise following a steady slide since mid-March, adding to the pressure on some suppliers' fob levels.
Selected freight rates to ship fertilizers rose again this week, marking the fifth successive weekly rise, supported by strengthening fuel oil bunker prices since hitting lows at the end of April. Rates for the freight basket now have risen by $3.25/t since the end of April, returning to levels previously seen at the end of March.
Argus has examined the cost of shipping in four fertilizer trade routes to key destination markets east and west of Suez — namely, Saudi phosphates and Red Sea potash to India, as well as Middle Eastern sulphur and Algerian urea to Brazil. The average cost of freight rose by $1.25/t this week, Argus calculates, up from an increase of $0.25/t last week.
Some fertilizer suppliers' fob netbacks — the price of a commodity at the port of origin — had benefited from the Covid-19 outbreak because of the ensuing slowdown in global trade, the collapse of energy prices and the accompanying drop in the cost of shipping.
Rates across these four routes fell on average for six weeks in a row from 19 March towards the end of April. The cost of shipping fell by an average of $5.75/t in that period, hitting an average rate of $11.875/t for the basket of routes by 23 April.
But freight rates began to reverse this trend at the start of May, as marine fuel prices accordingly ticked up.
The weekly average price of bunker fuel, with a 0.5pc sulphur content, in Singapore — widely viewed as a benchmark of marine fuel prices (see chart) — began to rise from the end of April, supporting freight rates.
And there are signs that the momentum behind the rise in freight rates will continue into next week, with the bunker fuel dob Singapore price hitting its weekly high today, supported by rising fuel oil paper and crude prices. Levels now have returned to those previously recorded in mid-March.
