Fertilizer freight rates jump to new highs

A basket of freight rates across key trade routes of dry bulk fertilizers hit new highs this week, with a jump in shipping costs from Baltic ports the main driver.

Argus' selected basket of fertilizer freight rates, including urea from Algeria to Brazil, Russian MAP to Brazil, potash from the Red Sea to India, and sulphur from the Black Sea to north Africa, jumped by an average of $5.50/t on last week. The average rate hit $31.83/t, marking the highest level since the basket has been collectively assessed from mid-September 2015. The average rate is up by almost $10/t — a jump of 45pc — since the start of December.

Freight rates have risen sharply in recent weeks, with market participants attributing the surge to a combination of factors, including ice in Russian Baltic ports, surging demand from China for agricultural commodities, coal and metals, as well as a rise in grain and soybean shipments from the Americas.

Baltic rates up sharply

The cost of freight from Russian Baltic ports has surged in recent months. The assessment for shipping 25,000-35,000t of MAP from the Baltic to Brazil hit $42-44/t this week, the highest assessment on record, surpassing the average rate of $42.50/t previously reached in 2013.

Weather conditions in the Baltic are set to worsen, with the Russian ports of Vyborg, Vysotsk and St Petersburg expanding restrictions on vessels because of a build-up of ice from the start of March onwards.

St Petersburg has ordered that, from 1 March, only ships with an ice-class rating are allowed to enter the port area and any ship without an ice rating will only be allowed entry under the guidance of ice-breaking vessels. The restrictions will be implemented if the ice thickness reaches 15-30cm. It is currently 10-20cm thick across most of the region, including at the major fertilizer export hub of Ust-Luga, and up to 30-40cm in some places around St Petersburg, according to the Swedish meteorological and hydrological institute.

The weekly average price of bunker fuel, with a 0.5pc sulphur content, in Singapore — widely viewed as a benchmark of marine fuel prices — has also returned to similar levels last assessed a year ago, following a sharp drop at the end of April.

By Harry Minihan

Selected fertilizer freight rates