Ocean freight pricing favors U.S. Export Market

February 9, 2006 by SwizStick  
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Possible good news for U.S. exporters, this article from Grainnet, which focuses on wheat/grain exports, highlights the recent environment that has led to a favorable outlook for the export market:

Ocean freight rates from North American origins have fallen on the order of 15 – 40%, while rates from exporters in the Southern Hemisphere have climbed by as much as 19 percent.

The swing in freight costs favors U.S. wheat export prices over southern competitors by as much as $13 per metric ton (MT).
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For shipments to the Persian Gulf, rates from the St. Lawrence Seaway declined from $46/MT in November 2005 to $40/MT in January 2006, while rates from Australia rose from $29 to $32/MT.

For shipments to Egypt, rates from the U.S. Gulf fell from $36 to $28/MT while climbing $1 for wheat exported from Australia to $34/MT.

For China, rates from the U.S. Gulf fell by $8/MT while rising from Australia by $3/MMT.

The primary reason for the diverging price movement is the large number of vessels needed to supply the U.S. import market, which results in additional empty vessels available to export cargo.
Meanwhile, wheat exporters in the Southern Hemisphere must compete for vessel space with various raw materials, such as mining products and coal, requiring significant export vessel capacity.

While this article points out the difference in ocean export pricing from a grain industry perspective, the same could be said of container line pricing. The lopsided oceanfreight costs from container lines to and from the U.S. have reflected this for many years now, where an import container from China could easily cost 3-4 times as much as the same container being exported from the U.S. back to China. Ever increasing imports from around the world have led to an increase in the size and number of vessels calling on U.S. ports. Due to the weak export market in the U.S., those same container ships are leaving far below capacity, leading to low ocean export prices.
It appears that the grain industry in the U.S. could enjoy the same situation.

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