Viewpoint: Weak Chinese demand to weigh on Supramaxes

: Agriculture, Coal, Coking coal, Freight, Metals, Petroleum coke
19/12/31

Supramax rates will likely come under pressure in 2020 amid expected lower Chinese demand for grain imports and high dry bulk fleet growth.

Supramaxes primarily transport grains, coal and minor bulk commodities, such as steel, nickel ore, forest products and bauxite.

Chinese demand for grain is expected to be subdued in 2020, as the country's hog herd recovers from an African swine fever outbreak that led to the destruction of 32pc of the herd this year.

"It will take years for the Chinese pig population to return to the same size as before the cull, and even then, lowering the soya content in pig's feed will have lasting consequences on these trades," shipping association Bimco said.

This uncertainty surrounding China's pig population has caused Brazilian farmers to hesitate to expand planting, according to the US Department of Agriculture's foreign agricultural service report from October, as there likely would not be enough demand to meet increased supply.

Muted Chinese demand for grains because of the swine fever outbreak played a role in pulling Supramax rates down this year. The US Gulf coast-east coast India Supramax petroleum coke freight rate has averaged $36.46/metric tonne so far in 2019, compared with $37.07/t in 2018, according to Argus assessments. Chinese soybean imports fell by roughly 11pc in the first seven months of the year compared with the same period in 2018, shipping agency Biehl said.

Supply outpacing demand

On the supply side, dry bulk newbuild deliveries hit a five-year high in 2019, with 36mn dwt of new bulkers being delivered, according to Bimco. This above-average fleet growth will likely put downward pressure on bulker rates in 2020, as demand growth is not expected to be as high.

Although the vast majority of the dry bulk fleet expansion will not occur in the Supramax segment, increased tonnage supply of larger bulkers, such as Capesizes, puts downward pressure on Supramax rates. This was evident following the 25 January Brumadinho dam collapse, which shut down large portions of Brazilian iron ore producer Vale's production capacity, limiting iron ore exports from the region. This, in turn, led to a surplus of available Capesize tonnage and pulled dry bulk rates across the market to depressed levels. On 6 February, the US Gulf coast-east coast India Supramax petroleum coke freight rate fell to a 2019 low of $29.75/t, the lowest since 19 June 2017, according to Argus assessments.

The International Maritime Organization 0.5pc sulphur cap will provide some support for rates early in 2020, as bulkers will see a short-term tightening of supply because of ships having scrubbers installed into the first quarter of 2020.

Trade war progress

One potential source of upward pressure for Supramax rates is that Chinese demand for US bulker shipments is expected to rise because of recent progress made toward a trade deal between the two countries. The US and China announced an interim agreement on 13 December, and Beijing has said it will increase its imports of US soybeans and other farm products, although the exact volumes are unknown and the deal is not finalized.

The trade dispute between the two countries weighed on dry bulk rates and shipment volumes from the US to China. Total US-China Supramax shipments fell to roughly 3.08mn deadweight tonnes (dwt) in the first 11 months of 2019 from roughly 5.45mn dwt in the same period in 2018, according to research firm VesselsValue.

Decreased US-China grain shipments, which fell to 12mn t in 2018 from 55mn t in 2015, according to shipping advisory firm Marsoft, were largely replaced by shipments from east coast South America, primarily Brazil. South America-China grain shipments rose to 70mn t in 2018 from 30mn t in 2015, and this altered trade pattern is likely to be permanent.

By Michael Connolly

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25/04/10

New tariffs could upend US tallow imports: Correction

Corrects description of options for avoiding feedstock tariffs in 12th paragraph. Story originally published 3 April. New York, 10 April (Argus) — New US tariffs on nearly all foreign products could deter further imports of beef tallow, a fast-rising biofuel feedstock and food ingredient that had until now largely evaded President Donald Trump's efforts to reshape global trade. Tallow was the most used feedstock for US biomass-based diesel production in January for the first month ever, with consumption by pound rising month to month despite sharp declines in actual biorefining and in use of competing feedstocks. The beef byproduct benefits from US policies, including a new federal tax credit known as "45Z", that offer greater subsidies to fuel derived from waste than fuel derived from first-generation crops. Much of that tallow is sourced domestically, but the US also imported more than 880,000t of tallow last year, up 29pc from just two years earlier. The majority of those imports last year came from Brazil, which until now has faced a small 0.43¢/kg (19.5¢/lb) tariff, and from Australia, which was exempt from any tallow-specific tariffs under a free trade agreement with US. But starting on 5 April, both countries will be subject to at least the new 10pc charge on foreign imports. There are some carveouts from tariffs for certain energy products, but animal fats are not included. Some other major suppliers — like Argentina, Uruguay, and New Zealand — will soon have new tariffs in place too, although tallow from Canada is for now unaffected because it is covered by the US-Mexico-Canada free trade agreement. Brazil tallow shipments to the US totaled around 300,000t in 2024, marking an all-time high, but tallow shipments during the fourth quarter of 2024 fell under the 2023 levels as uncertainty about future tax policy slowed buying interest. Feedstock demand in general in the US has remained muted to start this year because of poor biofuel production margins, and that has extended to global tallow flows. Tallow suppliers in Brazil for instance were already experiencing decreased interest from US producers before tariffs. Brazil tallow prices for export last closed at $1,080/t on 28 March, rising about 4pc year-to-date amid support from the 45Z guidance and aid from Brazil's growing biodiesel industry, which is paying a hefty premium for tallow compared to exports. While the large majority of Brazilian tallow exports end up in the US, Australian suppliers have more flexibility and could send more volume to Singapore instead if tariffs deter US buyers. Export prices out of Australia peaked this year at $1,185/t on 4 March but have since trended lower to last close at $1,050/t on 1 April. In general, market participants say international tallow suppliers would have to drop offers to keep trade flows intact. Other policy shifts affect flows Even as US farm groups clamored for more muscular foreign feedstock limits over much of the last year, tallow had until now largely dodged any significant restrictions. Recent US guidance around 45Z treats all tallow, whether produced in the US or shipped long distances to reach the US, the same. Other foreign feedstocks were treated more harshly, with the same guidance providing no pathway at all for road fuels from foreign used cooking oil and also pinning the carbon intensity of canola oil — largely from Canada — as generally too high to claim any subsidy. But tariffs on major suppliers of tallow to the US, and the threat of additional charges if countries retaliate, could give refiners pause. Demand could rise for domestic animal fats or alternatively for domestic vegetable oils that can also be refined into fuel, especially if retaliatory tariffs cut off global markets for US farm products like soybean oil. There is also risk if Republicans in the Trump administration or Congress reshape rules around 45Z to penalize foreign feedstocks. At the same time, a minimum 10pc charge for tallow outside North America is a more manageable price to pay compared to other feedstocks — including a far-greater collection of charges on Chinese used cooking oil. And if the US sets biofuel blend mandates as high as some oil and farm groups are pushing , strong demand could leave producers with little choice but to continue importing at least some feedstock from abroad to continue making fuel. Not all US renewable diesel producers will be equally impacted by tariffs either. Some tariffs are eligible for drawbacks, meaning that producers could potentially recover tariffs they paid on feedstocks for fuel that is ultimately exported. And multiple biofuel producers are located in foreign-trade zones, a US program that works similarly to the duty drawbacks, and have applied for permission to avoid some tariffs on imported feedstocks for fuel eventually shipped abroad. Jurisdictions like the EU and UK, where sustainable aviation fuel mandates took effect this year, are attractive destinations. And there is still strong demand from the US food sector, with edible tallow prices in Chicago up 18pc so far this year. Trump allies, including his top health official, have pushed tallow as an alternative to seed oils. By Cole Martin and Jamuna Gautam Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

US inflation eased for 2nd month in March

25/04/10

US inflation eased for 2nd month in March

Houston, 10 April (Argus) — US inflation slowed more than forecast in March, pulled lower by falling gasoline prices and slowing shelter inflation, as the new US administration's tariff policies have prompted concerns of a global economic slowdown. The consumer price index (CPI) slowed to an annual rate of 2.4pc in March, down from 2.8pc in February and the lowest rate since November 2024, the Labor Department reported Thursday. Analysts surveyed by Trading Economics had forecast a 2.6pc rate for March. Core inflation, which strips out volatile food and energy, rose at a 2.8pc annual rate, down from a 3pc annual rate the prior month and the lowest since March 2021. The deceleration in inflation came a month after President Donald Trump began to levy tariffs on imports from China and on steel, aluminum and automobiles, starting in February. Several tariff deadlines were pushed back, including a three-month pause enacted this week on much steeper tariffs for most countries. The tariffs have prompted companies and consumers to pull back on investments and some purchases while shaking up financial markets, and heightening concerns of a global recession. The energy index fell by an annual 3.3pc in March following a 0.2pc annual decline in February. Gasoline fell by 9.8pc after a 3.1pc decline. Piped natural gas rose by 9.4pc. Food rose by an annual 3pc, accelerating from 2.6pc. Eggs surged by an annual 60.4pc, as avian flu has slashed supply. Shelter rose by an annual 4pc in March, slowing from 4.2pc in February and the smallest increase since November 2021. Services less energy services rose by 3.7pc, slowing from 4.1pc in February. New vehicles were unchanged after an annual 0.3pc drop in February. Transportation services, which includes what maintenance and repair, insurance and airfares, rose by an annual 3.1pc, slowing from 6pc in February. Car insurance was up by an annual 7.5pc and airline fares fell by 5.2pc. CPI fell by 0.1pc in March after a monthly 0.2pc gain in February. Core inflation rose by 0.1pc for the month. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Mexico inflation quickens in March

25/04/09

Mexico inflation quickens in March

Houston, 9 April (Argus) — Mexico's consumer price index (CPI) quickened to an annual 3.8pc in March, with price spikes in beef, housing and tourism offsetting easing in energy and produce prices. The index increased for a second consecutive month after accelerating from 3.77pc in February off a four-year low of 3.59pc in January. It nevertheless held for a seventh consecutive month within the central bank's long-term target range of 2pc to 4pc. The result, reported by statistics agency Inegi Wednesday, was in line with the median estimate of analysts polled in Citi Research's 7 April survey. Core inflation, which excludes volatile energy and food, slowed to an annual 3.64pc in March from 3.65pc the prior month. Non-core inflation accelerated to 4.16pc from 4.08pc, driven by a 4.9pc gain in agricultural. Annual inflation for the meat, egg and fish component of CPI slowed to 9pc in March from 10.53pc in February, as egg prices began to recover from bird flu contamination. Energy inflation eased to an annual 2.72pc in March from 3.74pc in February and 6.34pc in January following an agreement between President Claudia Sheinbaum and gasoline dealers to cap low-grade fuel at Ps24 per liter ($4.49/gallon). For the month, headline CPI ticked up by 0.31pc in March after a 0.28pc gain the prior month. Core prices were up by 0.43pc for the month, and non-core prices fell by 0.08pc from the prior month. Beef was a big driver for the monthly uptick in inflation, with prices up by 3.26pc in March from the prior month. Despite the higher headline rate, Mexican bank Banorte said the inflation trend remains mostly favorable with short-term climate conditions suggesting fruit and vegetable prices likely less volatile in coming months than the same time last year. Banorte also noted stability in Mexico's core inflation, and expects the central bank to issue its third half-point cut of 2025 to its target interest rate 15 May, lowering the rate to 8.5pc from 9pc. By James Young By James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Trump coal plant bailout renews first term fight

25/04/09

Trump coal plant bailout renews first term fight

Washington, 9 April (Argus) — President Donald Trump's effort to stop the retirement of coal-fired power plants is reminiscent of a 2017 attempt that faltered in the face of widespread industry opposition. Trump, in an executive order signed on Tuesday, directed the US Department of Energy (DOE) to tap into emergency powers to stop the retirement of coal-fired plants and other large plants it believes are critical to grid reliability. The order sets a 30-day deadline for DOE to decide which plants are critical based on a new methodology that will analyze if reserve margins, or the percent of unused capacity at peak demand, are at an "acceptable" level. The initiative shares similarities to Trump's unsuccessful effort in his first term to bail out coal and nuclear plants. In the 2017 effort, Trump backed a "grid resiliency" proposal to compensate power plants with 90 days of on-site fuel. But an unusual coalition of natural gas industry groups, manufacturers, renewable producers and environmentalists united against the idea, warning it would upend power markets and cost consumers billions of dollars each year. The US Federal Energy Regulatory Commission voted 5-0 to reject the proposal. It remains unclear if a similarly sized coalition will emerge to fight Trump's latest proposal, under which DOE would use emergency powers in section 202(c) of the Federal Power Act to keep some coal plants and other large power plants operating. Industry groups have largely been avoiding taking positions that could be seen as critical of Trump. Environmentalists say they strongly oppose keeping coal plants operating using emergency powers. Doing so would mean more air pollution and greenhouse gas emissions, they say, and higher costs for consumers. Environmental groups say they are hoping other industries affected by the potential bailout will eventually speak out against the initiative. "The silence from those who know better is deafening," Center for Biological Diversity climate law institute legal director Jason Rylander said. "I hope that we will start to see more resistance to these dangerous policies before significant damage is done." DOE said it was "already hard at work" to implement Trump's executive order, which was paired with other orders that were meant to support coal mining and coal production. US energy secretary Chris Wright said today that reviving coal will increase the reliability of the electrical grid and bring down electricity costs, but he has not shared further details on the 202(c) initiative. Trying to litigate the program could be "tricky", and section 202(c) orders have never successfully been challenged in court, in part because they are usually short-term orders, Harvard Law School Electricity Law Initiative director Ari Peskoe said. But opponents could challenge them by focusing on "numerous legal problems", he said, such as not allowing public comment or running afoul of a US Supreme Court precedent that prohibits agencies from attempting to decide "major questions" without clear congressional authorization. "Here DOE would use a little-used statute explicitly written for short-term emergencies in order to PREVENT a change in the US energy mix," Peskoe said. A projected 8.1GW of coal-fired generation is set to retire this year, equivalent to nearly 5pc of the coal fleet, the US Energy Information Administration said last month. Electric utilities often decide which plants to retire years in advance, allowing them to defer maintenance and to forgo capital investments in aging facilities. Keeping coal plants running could require exemptions from environmental rules or pricey capital investments, the costs of which would likely be distributed among other ratepayers. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Delta pulls full-year forecast amid US tariffs: Update

25/04/09

Delta pulls full-year forecast amid US tariffs: Update

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