Has the tide turned?

Six months of exceptionally high levels of ocean freight rates have finally brought the trading market back to the conditions that we regarded as normal, prior to 1997. Those who believed that cement trading had become a "global market" have been forced to accept that this is in fact a regional business, when average freight rates and FOB prices hold sway.

The result of this adjustment, has been that importers have been forced to seek supply closer to home. In the Mediterranean/Black Sea areas this has led to sharply increased demand for export supply, which in turn, has created the first real tightness in availability that has been seen for seven years. There is now very limited availability on the spot market in the region, with limited quantities left in Turkey and Egypt, but very little elsewhere. As a result, FOB prices have been rising accordingly, with type1 being offered at $35/t and clinker at $29-30/t.

There also seems to be a scarcity of Type 2 cement in Florida, with several major importers searching for additional supplies with some difficulty. While it is too early to suggest that the market is moving towards a sellers game, this is the first time since the start of the Asian crisis that supply has been this tight. This may give producers encouragement to seek enhanced prices in the coming buying season.

However, freight rates are beginning to level out, from the unsustainable levels of past months, as greedy owners bring on new tonnage to take advantage of the boom: although continued demand from China for raw materials and fuel should ensure that rates remain high for the foreseeable future. It is comforting that the shipping industry is even more demand driven than our own!

One of the effects of this period of high shipping rates has been a reminder as to just how unpopular the carriage of cement and clinker is to ship-owners. In the past year, the high quality owners have been increasingly reluctant to fix for cement business, regardless how rapid the loading and discharge.