Higher shipping costs were likely for grain traders in 2021, according to a World Grain report on 12 February.

The shipping sector had been volatile in 2020 due to the global effects of the COVID-19 pandemic on demand for commodities and this had affected freight rates, World Grain said.

The Baltic Exchange Dry Index (BDI) had been particularly volatile this year, World Grain wrote. The BDI was at 1,230 points on 27 November, down from over 2,000 points in October but far above the low of 393 recorded in May when bulk carrier demand, particularly for Capesize carriers, had collapsed due to the pandemic’s effect on global economic output.

Meanwhile, the Baltic Exchange Handysize Index (BHSI), had remained below 500 points from 1 January to 17 August, World Grain said, and had then risen to a peak of 649 on 27 November.

The Baltic Exchange Panamax Index had reached 1,429 points on 27 November, down from a 2020 peak of 1,824 recorded on 14 August, World Grain wrote, but well above the 500 to 900-point range that ship owners had faced in both January-February and May-June.

In terms of grain shipping costs, the International Grains Council (IGC) Grains and Oilseeds Freight Index had reached 117 on 24 November, an increase of 17 points compared to the previous year and far higher than the 72 points recorded in May at the height of global lockdowns.

It was likely that 2021 would bring more volatility for grain shippers, World Grain said, with an improving global economy, COVID-19 vaccines, Chinese trade policy and a new US president all forecast to have an impact on dry bulk trades and US grain and soyabean exports.

Regarding the general strength of bulk carrier demand in 2021, World Grain said the focus would be on China.

The grain trade would also be influential in bulk shipping markets in 2021 and Rahul Sharan, lead research analyst at Drewry, told World Grain that grain volumes had “been a good support” for dry bulk shipping in 2020 and “we are expecting growth in the grain trade to continue for the next five years.”

“In the previous five years, the grain trade has expanded 2.3% each year and we expect that to continue,” Sharan said. “It’s a necessity commodity and trade still happens even if there has been a wider negative economic impact (such as COVID-19 in 2020).”

In terms of overall demand for dry bulk carriage, Sharan expected the dry bulk market to recover in 2021 with a 4.8% expansion in shipping volumes. He predicted the bulk carrier fleet would only expand by 2.3% next year, which would be the lowest increase in capacity since the turn of the century, World Grain said.