There is little doubt that dry bulk carriers are drawing strength from the box shipping boom, effectively marking a sudden reversal of the long-term process of containerization in place since the 1960s. The chronic physical shortage of containers as well as soaring freight rates over the past year is accelerating the process of many bagged, and typically containerized, commodities finding their way into the conventional bulker market.

Cosco Shipping Logistics, the logistics arm of the state conglomerate, for example, said it had recently arranged a shipment of steel bars for its client Jiangsu TG Tools on a dry bulker. It not only helped to save the manufacturer the trouble of securing scarce slots, but also “cut the shipping costs by about 50%”, said the Cosco unit. And this is not the first time the company has done such a thing. Earlier this year, it shipped 2,000 tonnes steel coils for another customer using the same method. There are more cases. Its sister company Cosco Shipping Specialized Carriers used the 27,300 dwt bulker Feng Huang Song (IMO: 9416757) to haul 2,166 tonnes of bagged walnuts and sunflower seeds from China to the Red Sea in March to avoid the container logistics turmoil.

While the extra workload and risks for changing the shipping mode have led to resistance from ship operators, many dry bulk owners have spread their wings into these commodity segments, resulting in a significant increase in bagged commodities being hauled by bulker carriers. There was a 130% increase in grains and oil seeds shipments from the US in bulk carriers over the first seven months of 2021 when compared with the same period in 2019, or pre-pandemic levels, according to Ocean Analytics citing Oceanbolt data.

Similarly, steel shipped in bulkers surged by 97% year on year during the January-July period, scrap cargoes by 110% and fertilizers by 102% when compared with the corresponding period in 2019. The assessment suggests that this shift in approach has been a contributing factor for the rise in ultramaxes and handysize rates, now hovering around $35,000 a day. Precious Shipping managing director Khalid Hashim accepted that the recent trend is assisting demand for the dry bulk market and boosting freight rates. Lloyd’s List previously reported that several other cargoes including chemicals in bags, semi-finished steel parcels, bagged rice and lumber have been spilling to bulkers.

The fact that US lawmakers and federal authorities are getting involved probably serves as good circumstantial evidence of US exporters facing reliability issues with the container sector, Ocean Analytics founder Ulf Bergman said. “For agri-commodities, a shift appears to be mostly US-centric, with the year-on-year growth of grains exports on board bulkers out of US ports being in a different league compared with the global trade during the past 14 months.” The Phase One trade deal between Washington and Beijing, in combination with strong demand for grains and oilseeds, has seen Chinese buyers purchasing record volumes from US farmers as they have depleted their stockpiles. And that momentum will likely ramp up the use of dry bulkers, even without the disruption in the container shipping sector, said Mr Bergman. But he reckoned that the urge by container carriers to rapidly reposition their empty equipment to the more lucrative fronthaul trades have played an important role in facilitating the 130% surge.

The Shanghai Containerized Freight Index, published by Shanghai Shipping Exchange, shows that average spot rates on the China-US west coast trade, using Shanghai as a base departure port, stood at $4,433 per feu for the first seven months of 2021, up from $1,616 during the 2019 period. As for steel and scrap shipments on bulkers, in addition to soaring rates, some of the growth is likely to be attributed to other factors, Mr Bergman added. These include the global economic recovery and a change in Chinese taxation on imports of scrap metal. He expected the trend to continue if the container freight rates remain high and port congestion keeps building. “Low-value cargoes, such as basic steel products, already facing elevated production costs due to high commodity prices, could see rising container rates as prohibitive despite increasing demand and accentuate the trend.”