Shipping prices for refrigerated containers, key to transporting many agricultural products, may sidestep the weakness seen in rates for bulk vessels used to carry the likes of grains, and even outperform other container types too, Rabobank said.
World economic slowdown “will continue to impact global trade”, and thus prices for both bulk and container shipping, the bank said, amid a correction in shipping rates.
The benchmark Baltic Dry shipping index, undermined by “challenging economic conditions”, on Thursday fell for a 12th successive session, a losing run during which it has shed 31%.
World container rates, as measured by the Freightos Baltic index, fell to $3,340 last week, down by 68% year on year to their lowest since December 2020.
‘Might soften freight costs’
With the market facing pressure too from extra ocean liner container capacity, which is expected to increase by 9.4% next year, container rates overall appear poised to continue struggling.
“The partial rearrangement of global flows and new vessels might soften freight costs” for the likes of agrichemicals, which are carried in conventional containers, the bank said.
Sprays and seeds giant Corteva on Thursday, reporting a 15% year-on-year rise in prices of its crop protection products in the July-to-September quarter, said that the increase reflected “higher… logistical costs”, as well as swelling raw material bills.
‘Shortages will remain an issue’
However, prices of refrigerated, or “reefer”, containers used to carry the likes of meat, dairy and vegetables will remain relatively resilient, thanks to a squeeze on supplies, and the recession-proof credentials of the foodstuffs they are largely used to carry.
“Reefer container rates are likely to decrease through 2023, yet at a significantly slower pace compared to the steep declines of dry container rates we have seen in recent months,” Rabobank said.
“Whereas freight demand for dry cargo (mostly non-food) has experienced strong declines, freight demand for reefer cargo (mostly food) is expected to stay resilient through the current economic downturn.”
Indeed, reefer container “shortages… will remain an issue in major food- and ag-exporting regions including Central America, South America, Southern Africa, as well as Oceania, as a result of their high imbalances between low-volume reefer import versus high-volume reefer export”.
The comments came as the bank also underlined the weakening in potash prices, as highlighted by Canadian producer Nutrien this week, sending its shares tumbling.
“High levels of potash stocks are causing price reductions,” the bank said, adding that “high stocks in the Americas, especially in Brazil, might lead to further price reductions globally”.
Meanwhile, prices of phosphate fertilizers “show a steady and slow reduction caused by high levels of stocks”, although the market remains shrouded in uncertainty over prospects for Chinese exports.
Nitrogen prices “are beginning to reflect” the pullback in European prices of natural gas, a key raw material, although “some regions show minimal price reductions”, Rabobank said, reporting Black Sea urea values down by some 3% during October.