(Resource News International) — Ocean freight rates have come off their recent highs seen back in November, helping Canada overcome the freight disadvantage it has into some markets compared to other exporters, according to an official with the Canadian Wheat Board.
However, he added that there are other factors aside from the cost of freight that also come into play in the landed value of grain.
The Baltic Dry Index, which tracks global shipping prices, is currently around 2,700 points, which compares with the recent highs set in November of around 4,600 points.
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David Przednowek, senior manager of ocean freight and terminal logistics with the CWB, said the general decline in freight rates has largely been due to concerns that actions being taken in the Chinese economy will slow the import demand in the country. The approaching Chinese New Year has added to the slowdown in freight demand.
Canada is generally at a freight disadvantage into South East Asia compared to competing grain exporters Australia and Ukraine, said Przednowek. When the cost of freight is softer, as it is currently, that freight disadvantage becomes less of an issue, he added.
One factor possibly providing some unanticipated side benefits for Canadian grain shipments is the Somalian pirate situation in the Gulf of Aden.
Some grain traders have pointed out pirates are dissuading some vessels from making the trip through the Suez Canal from Ukraine, leading to increased costs for exporting Ukrainian grain.
“It’s certainly a more perilous trip,” said Przednowek, noting that increased insurance costs do have an influence on rates. However, he added, if the right precautions are taken, there are still ways to mitigate risk.
Przednowek couldn’t comment specifically on whether or not Canadian grain shipments were seeing any side benefits from the pirate issue, and pointed out that there is more than the freight to consider when calculating landed value.
