EXPECTATIONS ARE HIGH AS PORTS HANDLING DRY BULK SURVIVE AND EVEN GROW DESPITE PANDEMIC
Charting trade waters brought to a turbulent boil by a raging global pandemic would be difficult to do in the best of times. But these aren’t the best of times.
COVID-19, an uncertain global economy, and challenges to commodity demands and supply chains have all contributed, at least in part, to variances in trade trends.
Those trends have been very evident in the volatile dry bulk trade.
“The turbulence of the past year has in many ways clouded the underlying fundamentals in the dry bulk shipping market, but with 2020 now behind us, we are in a better position to establish an overview of expectations for 2021,” says Peter Sand, chief shipping analyst with the Baltic International Maritime Council (BIMCO), the world’s largest organization for shipowners, charterers, shipbrokers, and agents.
“For dry bulk shipping, the year (2020) can be divided in two with lower volumes and earnings in the first half followed by a recovery in the second as China split from the rest of the world, boosting tonne [metric ton] and tonne-mile demand and sending freight rates to profitable levels,” Sand says. “June was the turning point as volumes reached their highest point of the year and earnings jumped, especially for capesize ships.”
The BIMCO analyst points to these statistics: In the first 20 days of 2021, there were 1,427 capesize trips, up 10.4 percent over the same period in 2020. That strong start was reflected in earnings that, after high volatility in 2019 and 2020, have averaged $22,015 per day since the start of the year, comfortably above the $15,300 per day needed for an average capesize ship to break even. Rates peaked at $26,489 per day on Jan. 13 and stood at $24,148 per day on Jan. 19.
A sampling of U.S. ports involved in the dry bulk trade brought varied reactions to evolving trends and changing markets.
“The dry bulk sector is an important backbone of Port Tampa Bay’s activities and a major factor contributing to its status as Florida’s largest cargo tonnage port, as well as being one of the most diversified ports in the country,” says Wade Elliott, the port’s vice president of Business Development.
Elliott pointed to 38 percent—or 12.4 million tons—of Port Tampa Bay’s total cargo volume in 2020 having consisted of dry bulk cargo. Among the major dry bulk commodities handled at the port are phosphate fertilizer products, limestone, cement, granite, gypsum, coal, grain, sulfur, fly ash, salt, slag, pumice and bauxite.
Despite the pandemic, Port Tampa Bay’s total dry bulk cargo volume increased by 3 percent last year, and,” the VP says, “we are expecting that trend to continue. The demand for building materials remains very strong driven by Florida’s continued strong population growth, which is fueling the real estate construction market. The outlook for Port Tampa Bay fertilizer exports is also positive as Florida phosphate products are shipped around the world helping farmers meet expanding demand.”
As the port’s dry bulk sector grows, the port is working closely with its dry bulk tenants to support their expansion of terminal facilities to keep pace with the demand by adding additional berths and storage.
Port Milwaukee has also managed to stay the course in the dry-bulk trade by keeping up on new trends and market conditions, working closely and regularly with port tenants and key stakeholders and leveraging opportunities collaboratively, according to Maria Cartier, the Market Development manager at the Great Lakes port.
An example of taking advantage of market conditions, Cartier says, “is our partnership with the DeLong Company in the planned development of a new $31-million agricultural marine export facility. This new facility addresses the increased global demand for dry distilled grain solubles, a by-product of ethanol used in animal feed.”
The port also “participates in conferences, events and various forums that allow us to network with industry partners and helps keep us up-to-date on new market conditions and developments,” she added.
Port Milwaukee is optimistic that by staying in tune with trends and markets, it will promote cargo growth.
“A strong demand for Wisconsin-based agriculture, investments in infrastructure and our role as a major supplier of road salt to the region will continue to support our position as a primary handler of dry bulk materials on the Great Lakes,” Cartier says.
Dry bulk commodities—salt, cement, bottom ash and grain—account for approximately 80 percent of Port Milwaukee’s overall commodity throughput, according to the marketing manager.
“COVID-19 has not affected our cargo throughput thanks to Port Milwaukee’s team of expert staff and long-term tenants,” Cartier says. “Through their collaborative efforts, we have maintained safe, efficient and healthful operations without commercial interruption.”
Dry bulk cargoes comprise about 7 percent of the Port of Corpus Christi’s (PCC) overall volumes that include a variety of commodities such as barite, iron ore fines, DRI, pet coke, slag, sulfur, grain such as sorghum and wheat.
Unlike some ports, PCC has not escaped the pandemic.
COVID-19 “has impacted our oil and gas cargoes such as barite and some construction activity on aggregates coming in,” notes Eddie Martinez, PCC’s Trade Development manager. “Drilling activity has slowed down, in part due to COVID, as has a slowdown in construction overall,”
Although COVID is a constant these days, it hasn’t stopped the Texas port on the Gulf of Mexico from moving forward with growth in mind.
“PCC continues to make investments in our terminals to improve overall logistics for dry bulk cargo,” says Martinez. “The port acquired a new Liebherr crane in late 2019 to improve our overall discharge rate. Bulk grains are active and should continue to remain active in 2021.”
The expectation, he said, is that dry bulk cargo will remain steady with nominal gains. Amid unpredictable market changes in the trade sector, PCC’s strategy is to work “hand-in-hand daily within our departments for capital project planning to improve overall facilities for our current and new customers to include planning, operations, engineering and trade development,” Martinez says. “We are actively engaged with our customers on their annual expectations and trends affecting them and offer possible solutions where we might be able to support them with logistic and infrastructure that may require capital on rail or waterfront.”
Even without a global pandemic, building dry bulk markets brings challenges, he notes. “PCC has to analyze where our strengths lie when being approached on new dry bulk opportunities. Some of our facilities are showing their age, and PCC is making necessary investments to get them up to standard.
“Further, not every cargo is suitable for our port. The commodity itself, destination or origin, air permit limits, rail and dock infrastructure all play a role in the selection of new dry bulk market development. The port reviews each opportunity and tries to identify if it’s a good fit for both the customer and the port. We want to create a relationship where the client can really grow their business model here in our area and region for years to come.”