Buyers in China purchased 1.13 million tonnes of U.S. soybeans on December 12, lifting the freeze on U.S. soyabeans imports imposed earlier this year amid faltered trade relations between the two economic super powers.
The resumption of China’s imports of US soyabeans comes in the wake of a 90-day truce between the two countries as the duo negotiates terms of their bilateral trade deals.
Announcing that the U.S. President would not raise the tariffs on USD 200 billion worth of product to 25% for the time being, the White House said at the beginning of December that China has agreed to start purchasing agricultural product from U.S. farmers immediately.
“China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries,” the statement further added.
Welcoming the sale, Davie Stephens, American Soybean Association (ASA) President, said it was vital the 90-day process results in lifting the current 25 percent tariff that China continues to impose on U.S. soybean imports.
“Without removal of this tariff, it is improbable that sales of U.S. soybeans to China can be sustained,” he added.
While ASA is hopeful that soy farmers will be able to resume delivery of soy to China, Tuesday’s sale announcement is only the first step in rebuilding soybean exports to China and will not fix the prolonged period of low prices soybean farmers have faced since the trade war began.
Good Sign for Bulker Owners?
The dry bulk market’s earnings have been affected considerably by the brewing trade war which saw U.S. soybean exports drop 43 percent year-on-year during the first twelve weeks of the 2018/19 marketing year, which started in September 2018.
In particular Panamax and Supramax vessels are affected given their reliance on the high volumes of U.S. soybeans usually being sent to China at this time of year.
Panamax earnings fell from 14,385 USD/day on October 17, 2018, to 10,996 USD/day on November 23, 2018.
“The weaknesses in Panamax and Supramax earnings in recent weeks is likely to be linked to the lower demand for seaborne transportation of U.S. soybean exports as compared to previous seasons,” Peter Sand, BIMCO’s Chief Shipping Analyst, said.
The drop in the demand has been one of the factors behind the lack of seasonal upswing in earnings which has been seen in previous fourth quarters, BIMCO said.
As explained, tonne mile demand is further hurt as not only are the volumes of US soybean exports lower than last year, the distances sailed are also much shorter as the new destinations where U.S. soyabeans was sold, mainly Argentina and Mexico, are closer to the US than China.
Now it remains to be seen whether the resumption of the U.S. soybean sale to China would be enough to raise Panamax and Supramax rates.
World Maritime News Staff