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Freight and charter costs could fall if port congestion eases, World Grain reported a trade source as saying.

“In the four years since 2018, the dry bulk fleet has expanded by 15%, but the volume of cargo has only expanded by 2.9%,” Will Fray, director at Maritime Strategies International (MSI), was quoted as saying.

This was because port congestion caused by COVID supply chain disruptions had held up freight rates in 2021 and 2022, Fray said.

By tying up large chunks of the global bulk carrier fleet, port congestion had helped offset slow demand growth by taking effective capacity out of the market, which had inflated returns for ship owners but increased freight and charter costs for shippers, the 19 January report said.

However, any reduction in port congestion could lead to a reduction in freight and charter costs.

“When this support is removed as COVID-related inefficiencies subside, the freight market will come under pressure,” Fray said.

This process was already underway, World Grain wrote, with port congestion at Chinese ports falling for most ship categories during 2022, although the numbers still in queues remained substantial.

At least 800 ships have been tied up at Chinese ports every week during 2022 and, in some weeks, that number has surpassed 1,000 vessels, according to Breakwave Advisors. In late November, in the less-than-Capesize fleet segments used for shipping grains, a total of 239 Panamax, 280 Supramax and 171 Handysize vessels were caught up in congestion in China.

If port congestion continues to ease, as many expect it will this year – and particularly if China loosens its zero-COVID policies – bulk carrier freight rates could fall, particularly as dry bulk volumes are expected to grow by just 1.6% in 2023, according to MSI.

Rates had already dropped significantly from the highs of 2021, the report said. The Baltic Dry Index (BDI) reached 5,650 points in October 2021, a two-year high, but had dropped to just 1,323 on 5 December 2022. The Baltic Panamax Index (BPI) was down to 1,638 on 5 December compared to a two-year peak of 4,328 in October 2021, while the Baltic Handysize Index (BHI) reached 732 in the first week of December, down from a two-year high of 2,062 in October 2021.

Similar declines were seen in grain shipping costs. On 29 November, the International Grains Council’s (IGC) Grains and Oilseed Freight Index (GOFI) fell to 148 compared to an annual high of 243 points recorded in May. Year-on-year drops of between -27% and -32% were apparent across the IGC’s sub-indices in the last week of November.