Sky-high bulk shipping rates are causing some bulk grain to be exported in containers, says the chair of the Canola Council of Canada.
“It hasn’t doubled – it might have tripled in the past 12 months,” Lach Coburn, a Cargill grain exporter from Vancouver, said in an interview during the Canada Grains Council’s annual meeting.
“It’s huge.”
China’s soaring demand for iron ore and coal has caused ocean bulk freight rates to skyrocket.
But rates for container ships are much lower, causing some importers to switch.
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“They like what they’re finding,” said Coburn.
Most export grains are shipped in bulk freight vessels, where grain is dumped into huge compartments and then pumped out at the receiving port.
Container ships that carry grain have to modify the containers so that grain doesn’t spill out, then load them onto their decks and unload them at the receiving port.
Coburn said many companies hauling freight from Asia to North America are willing to ship grain west cheaply.
“Grain and grain products going east to west are a backhaul for manufacturing products coming in,” said Coburn. “They’re saying, ‘just fill the container.’ “
Coburn said some grain buyers also prefer financing containers rather than bulk loads.
“Instead of 52,000 tonnes of canola, he can buy 10,000 tonnes and ship 1,000 tonnes a week.”
Shipping consultant Stephen Pyne told grains council members that containers could offer a way to minimize the impact of high freight rates.
“If you can rejig your business or sales to marry up with these movements, then I think you’ll be able to get some competitive freight rates,” said Pyne.
But there are signs container freight rates will also rise. Pyne said world container trade grew in 2003 by 11 percent and could grow by nine percent this year. The container fleet expanded by 10.3 percent in 2003 and is expected to expand by 8.8 percent this year. That means demand is growing slightly faster than supply.
Coburn said some of the best deals for container freight may be gone by now. Ship owners have “given us notice that they plan to increase rates.”
