US Gulf Supramax demand outstrips larger bulkers

: Agriculture, Petroleum coke
23/03/21

Freight rates for US Gulf coast Supramax vessels are pushing higher on grain demand and tight vessel supply while larger Panamax and Capesize bulker rates decline in the Atlantic basin.

Rates for Supramax petroleum coke voyages from the US Gulf coast to Rotterdam are at $19.45/t today, up over 8pc from $17.95/t on 14 March. In comparison, coal voyages from the US east coast to Rotterdam on Capesize and Panamax bulkers are at $12.35/t and $12.55/t today, down by 4pc and 2pc, respectively, over the same period.

The recent gains in Supramax rates have been driven by demand for smaller grain cargoes and tight tonnage in the region. Supramax bulkers specialize in carrying many different "minor bulks", such as fertilizers and petroleum coke, affording the smaller bulkers more cargo versatility compared with the larger, Panamax and Capesize bulkers.

Capesize bulker rates in particular are susceptible to dipping when their primary commodity, iron ore, faces headwinds, such as the landslide in Brazil that cut railway capacity to iron ore mines last week.

Atlantic Panamax rates have also dropped as the Chinese demand for Panamax-sized grain cargoes that helped to clear tonnage in the region over the last two weeks may now be shifting back to Ukrainian product following the renewal of the Black Sea grain corridor deal with Russia.

Petroleum coke demand

Petroleum coke demand, a major driver for the US Gulf coast Supramax market, remains muted in comparison with the strong grain demand in the region, according to shipbroker Banchero Costa.

"Should the usual flow of coke materialize, we could expect a strong increase of rates in the area," the shipbroker said.

Petroleum coke, a byproduct created by oil refiners, is commonly used in the production of cement, especially by major importer India. But cement producers in the country can swap thermal fuels for their kilns depending on the market, leading to situations like cheaper South African coal supplanting US gulf petroleum coke in February.

Supramax tonnage along the Southwest Pass, one of the main routes to open water at the mouth of the Mississippi, is heavier than elsewhere in the Gulf with 15 Supramax bulkers navigating the waterway, according to AIS data, with many likely to load grain cargoes in Louisiana.

In comparison, only two Supramax bulkers can be seen loading petroleum coke near Port Arthur, and only three Supramax bulkers are currently transiting the Houston ship channel.

By Ross Griffith

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24/12/23

Viewpoint: Brazil ethanol demand to remain strong

Sao Paulo, 23 December (Argus) — Demand for ethanol in Brazil is expected to remain strong in 2025, as increasing corn ethanol output and less-than-expected crop damage from fires in 2024 should allow retail prices for the biofuel to remain competitive with gasoline. Production of corn-based ethanol in Brazil's center-south rose to 5.25bn l (100,200 b/d) in January-November, a 30pc increase from the same period in 2023, according to regional industry association Unica. The volume accounts for 17pc of the 31.17bn l of ethanol produced in the region during the period. Greater supply of corn-based ethanol should add downward pressure to prices, making ethanol more attractive at retail pumps. The country has 41 corn ethanol plants in operation, according to a survey by agronomist and researcher Rafael Vieira, with more under construction. Dryer weather and wildfires that hit sugarcane fields in 2024 do not appear to be as devastating as initially expected, so biofuel production from sugarcane could be higher than initially expected. Recent data support this outlook. Sugarcane crushing in the center-south surpassed 600mn metric tonnes (t) in April-November, on the high end of the 585mn-605mm t analysts estimated for the full 2023-24 cycle because of the fires and drought. Crushed volumes in the next harvest will depend heavily on the weather in December-January. Rains in this period are crucial for the development of sugarcane plants, as they are in their early growing stages. The more it rains in these two months, the higher the volume processed in 2025-26 should be. Sugar production Rains should also influence sugarcane quality, which affects the production mix, one of the vectors that can sway ethanol prices. The drought made sugarcane less fit for sugar production in 2024. But if the next two months are more humid, producers will be able to achieve a more sugary mix as desired, which tends to boost biofuel prices. Investments in crystallization capacity in recent years are expected to finally translate into greater sugar production in 2025. This is what producers want, as the sweetener currently trades at a premium to ethanol. This trend is supported by India's growing appetite for Brazilian sugar. The Asian country will increase its ethanol blending mandate in 2025, a change that will shift the sugarcane processing profile of the country and create room for Brazilian sugar to fill the resulting supply gap . Hedgepoint Global Markets analyst Livea Coda expects the sugar mix at 51.9c in 2025-26, with room for a revision if summer rains are confirmed. Hedgepoint projects sugarcane crushing at 600mn t in the next harvest, with the possibility of reaching 620mn t if rains "excel". Based on weather forecasts, she expects sugarcane quality to improve. Coda considers it unlikely that ethanol production will pay more than sugar in Brazil, considering that slower growth in the Brazilian economy next year should keep motor fuel demand below 2024 volumes. Analyst Arnaldo Correa, founder of Archer Consulting, predicts the sugar mix at 51.5pc in the next cycle. He expects strong crushing after an increase in sugarcane cultivation area this year, but Correa is not yet ready to make a volume prediction. In his analysis, US president-elect Donald Trump's protectionist policies are also a point of concern for 2025, Correa said. At the start of Trump's second four-year term, the US is expected to impose higher tariffs on products from China , a move that could lead the Asian giant to replace US grains with Brazilian grains. That could lead to higher corn ethanol prices in Brazil, Correa said. By Maria Ligia Barros Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Syrian rebuilding may boost Turkish cement

24/12/23

Viewpoint: Syrian rebuilding may boost Turkish cement

London, 23 December (Argus) — Turkey's cement production and sales may rise in 2025 because of potential reconstruction projects in neighbouring Syria, potentially boosting petroleum coke consumption by those producers. The fall of the Bashar al-Assad government in early December may lead to a surge in Syrian demand for construction materials, including cement. Turkey is likely to be a major cement supplier to Syria given Turkey's close ties with Hayat Tahir al-Sham (HTS), the main militant group behind the armed revolt to topple Assad. Turkey's foreign minister Hakan Fidan and intelligence chief Ibrahim Kalin visited Damascus on 12 December , becoming the first foreign officials to meet with HTS leader Ahmed al-Sharaa, even though Ankara — a Nato member — does not openly support HTS. HTS remains a designated terrorist organisation by the UN Security Council. While it could take several months for Syrian cement demand to increase, the market was quick to react to the possibility, with Turkish cement prices rising by 10pc in the week following the Syrian regime's fall. A possible tripling of volumes Turkey could export up to 3mn t/year of cement to Syria in upcoming years, according to one cement maker, compared with the 1mn t supplied last year and 1.1mn t in the first 11 months of this year, customs data compiled by Global Trade Tracker (GTT) show. Turkey's exports to Syria reached a record high of 2.67mn t in 2009. Turkey's cement production and sales are expected to be about 85mn t this year and may increase by at least 10-15pc in 2025, following the developments in Syria, a second cement producer said. If this happens, cement plant capacity utilisation rates could rise further in 2025 from over 60pc in 2024 and 58pc in 2023, according to data from the Turkish Cement Manufacturers' Association (TCMA). Turkey's cement industry has a total production capacity of over 148mn t/year, TCMA data show. Egypt and Algeria are also among possible cement suppliers to Syria given their location as well as production and port capacity. The relatively low price of cement means that transportation costs factor heavily into the profitability of the building material. But inland shipments by trucks will be more cost-effective than seaborne shipments from Africa, giving Turkish cement companies in border areas a significant advantage. "Transportation via trucks is likely to dominate due to its cost efficiency and flexibility for smaller, on-demand shipments," a third cement maker said. "However, seaborne deliveries might play a role in reaching coastal areas like Latakia or Tartus, especially for bulk shipments and regions further from the Turkish border." No quick rebound expected Although some Turkish producers are preparing production and logistics to meet this new demand, it is not expected to materialise immediately because of the unstable political environment in Syria. A trader estimated a minimum of six months before Turkish cement exports to Syria significantly increase. And some Turkish cement plants are less optimistic about the prospects for increased demand, expecting minor production and sales changes because of Syria. This year has been challenging so far for Turkish plants as they faced high inflation, a weaker lira against the US dollar and a ban on exports to Israel , as well as tough competition in major external markets. Certain cement operations — particularly inland plants located far from ports with limited export sales — were likely to reduce output or even halt production lines in the second half of this year. Furthermore, a destructive earthquake in early 2023 hit the area closest to the country's border with Syria. Plants there are operating at full capacity to cover domestic demand to rebuild from the earthquake and are unlikely to have extra production to sell to Syria for at least 2-3 years, another cement maker said. But if Turkey benefits from a boost in Syrian cement demand, Turkey's full-year 2025 coke imports may increase to a historical record of 4.7mn-5mn t, especially since prices are expected to remain low compared with coal, a market participant said. Cement producers received 3.75mn t of coke during the first 10 months of 2024, with full-year imports likely exceeding 4.5mn t, the highest since 4.64mn t in 2018, GTT data show. By Alexander Makhlay Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US tax fight next year crucial for 45Z

24/12/23

Viewpoint: US tax fight next year crucial for 45Z

New York, 23 December (Argus) — A Republican-controlled Congress will decide the fate next year of a federal incentive for low-carbon fuels, setting the stage for a lobbying battle that could make or break existing investment plans. The 45Z tax credit, which offers greater subsidies to fuels that produce fewer emissions, is poised to kick off in January. Biofuel output has boomed during President Joe Biden's term, driven in large part by west coast refiners retrofitting facilities to process lower-carbon fats and oils into renewable diesel. The 45Z tax credit, created by the 2022 Inflation Reduction Act (IRA), was designed to extend that growth. But Republicans will soon control Washington. President-elect Donald Trump has dismissed the IRA as the "Green New Scam", and Republicans on Capitol Hill, who had no role in passing Biden's signature climate legislation, are keen to cut climate spending to offset the steep cost of extending tax cuts from Trump's first term. Biofuels support is a less likely target for repeal than other climate policies, energy lobbyists say. But Republicans have already requested input on 45Z, signaling openness to changes. Republicans plan to use the reconciliation process, which enables them to avoid a Democratic filibuster in the Senate, to extend tax breaks that are scheduled to expire in 2025. "I want to place our industry in a place to make sure that the biofuels tax credit is part of reconciliation," said Kailee Tkacz Buller, president of the National Oilseed Processors Association. But lawmakers "could punt the biofuels discussion if stakeholders aren't aligned." A decade ago, biofuel policy was a simple tug-of-war between the oil and agriculture industries. Now many refiners formerly critical of the Renewable Fuel Standard produce ethanol and advanced biofuels themselves. And the increasingly diverse biofuels industry could complicate efforts to present a united front to Congress. Farm groups worry about carbon intensity scoring hurting crop demand and have lobbied to curtail record-high feedstock imports, to the chagrin of some biorefineries. Those producers are no monolith either: Biodiesel plants often rely more on local vegetable oils, while ethanol producers insist on keeping incentives that do not discriminate by fuel type and some oil majors would back subsidizing fuels co-processed with petroleum. Add airlines into the picture, which want greater incentives for aviation fuels, and marketers frustrated by 45Z shifting subsidies away from blenders — and the threat of fractious negotiations next year becomes clear. There are options for potential compromise, according to an Argus analysis of comments submitted privately to Republicans in the House of Representatives, as well as interviews with energy lobbyists and tax experts. The industry, frustrated by the Biden administration's delays in clarifying 45Z's rules, might welcome legislative changes that limit regulatory discretion regardless of what agency guidance eventually says. And lobbyists have floated various ways to appease agriculture groups without kneecapping biorefineries reliant on imports, including adding domestic content bonuses, imposing stricter requirements for Chinese-origin used cooking oil, and giving preference to close trading partners. Granted, unanimity among lobbyists is hardly a priority for Republican tax-writers. Reaching any consensus in the restive caucus, with just a handful of votes to spare in the House, will be difficult enough. "These types of bills always come to down to what's the most you can do before you start losing enough votes to pass it," said Jeff Navin, cofounder of the clean energy advocacy firm Boundary Stone Partners and a former House and Senate staffer. "Because they can only lose a couple of votes, there's not much more beyond that." And the caucus's goal of cutting spending makes an industry-wide goal — extending the 45Z credit into the 2030s — even more challenging. "It is a hard sell to get the extension right away," said Paul Winters, director of public affairs at Clean Fuels Alliance America. Climate costs Cost concerns also make less likely a simple return to the long-running blenders credit, which offered $1/USG across the board to biomass-based diesel. The US Joint Committee on Taxation in 2022 scored the two-year blenders extension at $5.5bn, while pegging three years of 45Z at less than $3bn. An inconvenient reality for Republicans skeptical of climate change is that 45Z's throttling of subsidies based on carbon intensity makes it more budget-friendly. Lawmakers have other reasons to not ignore emissions. Policies elsewhere, including California's low-carbon fuel standard and Europe's alternative jet fuel mandates, increasingly prioritize sustainability. The US deviating from that focus federally could leave producers with contradictory incentives, making it harder to turn a profit. And companies that have already sunk funds into reducing emissions — such as ethanol producers with heavy investments in carbon capture — want their reward. Incentives with bipartisan buy-in are likely more durable over the long run too. Next time Democrats control Washington, liberals may be more willing to scrap a credit they see as padding the profits of agribusiness — but less so if they see it as helping the US decarbonize. By Cole Martin Tax credit changes 40A Blenders Tax Credit 45Z Producers Tax Credit $1/USG Up to $1/USG for road fuels and up to $1.75/USG for aviation fuels depending on carbon intensity For domestic fuel blenders For domestic fuel producers Imported fuel eligible Imported fuel not eligible Exclusively for biomass-based diesel Fuels that produce no more than 50kg CO2e/mmBTU are eligible Feedstock-agnostic Carbon intensity scoring incentivizes waste over crop feedstocks Co-processed fuels ineligible Co-processed fuels ineligible Administratively simple Requires federal guidance on how to calculate carbon intensities for different feedstocks and fuel pathways Expiring after 2024 Lasts from 2025 through 2027 Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Brazil may face road bottleneck in 1Q

24/12/23

Viewpoint: Brazil may face road bottleneck in 1Q

Sao Paulo, 23 December (Argus) — The Brazilian soybean harvest and fertilizer deliveries for the country's 2024-25 second corn crop will likely drive first-quarter grain and fertilizer road freight rates higher. Grain freight rates have been unusually low in 2024 because lower international soybean prices discouraged producers from doing business in most months. But market participants expect greater demand for transportation services in export corridors in 2025, as an expected record 2024-25 harvest combines with a US dollar that has strengthening against the Brazilian real, driving export demand. Brazil will produce 166.2mn metric tonnes (t) of soybeans in the 2024-25 cycle, an increase of almost 13pc from the previous season, according to national supply company Conab's third official estimate for the cycle. The 2024-25 soybean harvest in Mato Grosso state — Brazil's largest producer — will total 44mn t, also 13pc above 2023-24 production, according to the state's institute of agricultural economics Imea. Mato Grosso's soybean planting pace for 2024-25 has fluctuated significantly over the growing season, initially advancing slowly because of dry weather, and then speeding up once rains returned. Planting was complete on only 25pc of the almost 12.7mn hectares (ha) expected for the cycle by 18 October, less than the 60pc reached at the same time in 2023 for the 2023-24 cycle. But planting increased by 68.6 percentage points in the following three weeks, totaling 93.7pc by 8 November. As a result, more than half of the soybean planted area in Mato Grosso was carried out in the same three week period. That raises concerns among market participants about high competition for export transportation and available vehicles when all those crops become ready for harvest at the same time, resulting in a logistical bottleneck. Market participants expect lower freight rates for exports during the 2024-25 second corn harvest, set to take place in the second half of 2025. Demand from the Brazilian domestic market will remain at a consistently high level, especially from ethanol units, whose demand for corn was high in 2024, as prices carried a premium to the export market, and also contributed to lower export volumes. This should lead to lower grain freight rates during the second half of 2025, with a significant portion of grain destined to meet the Brazilian industry's needs. Corn ethanol production in Brazil is expected to total 7.2bn liters (124,865 b/d) in the 2024-25 cycle, a 22pc increase from 5.9bn l in the previous cycle, according to Conab. The company projects that 1t of corn can produce around 400l of ethanol, which means that approximately 18mn t of corn will be consumed by the ethanol industry. Brazil is expected to produce around 86.2mn t of animal feed in 2024, 2.3pc more than it did in 2023, according to the sector's national union Sindiracoes. This should stimulate demand for about 55mn t of corn for all animal feed production expected this year. Animal feed production is expected to grow further in 2025 to 87.8mn t. Ferts freight rates may also increase Fertilizer transportation may face logistical bottlenecks to move inputs from ports to crops in early 2025 because of the slow pace of fertilizer purchases, especially nitrogen, for the 2024-25 second corn harvest. With the purchase window coming to a close by the end of December, market participants estimate that these nutrients have to arrive at Brazilian ports by early January, so that they can be transported in time for application during the grain harvest. That may also increase competition for vehicles in the first quarter of 2025, especially in January, when the supply of trucks is reduced following end-of-year festivities. Under these circumstances, higher fertilizer freight rates and higher costs for road logistics are expected. By João Petrini Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US Congress passes waterways bill

24/12/19

US Congress passes waterways bill

Houston, 19 December (Argus) — The US Senate has passed a bipartisan waterways infrastructure bill, providing a framework for further investment in the country's waterways system. The waterways bill, also known as the Water Resources and Development Act (WRDA), was approved by the Senate in a 97-1 vote on 18 December after clearing the US House of Representatives on 10 December. The WRDA's next stop is the desk of President Joe Biden, who is expected to sign the bill. The WRDA has been passed every two years, authorizing the US Army Corps of Engineers (Corps) to undertake waterways infrastructure and navigation projects. Funding for individual projects must still be approved by Congress. Several agriculture-based groups voiced their support for the bill, saying it will improve transit for agricultural products on US waterways. The bill also shifts the funding of waterways projects to 75pc from the federal government and 25pc from the Inland Waterways Trust Fund instead of the previous 65-35pc split. "Increasing the general fund portion of the cost-share structure will promote much needed investment for inland navigation projects, as well as provide confidence to the industry that much needed maintenance and modernization of our inland waterway system will happen," Fertilizer Institute president Corey Rosenbusch said. The bill includes a provision to assist with the damaged Wilson Lock along the Tennessee River in Alabama. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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