According to S&P Global Platts’ latest report, rising freight rates and the shift away from container shipments have continued to make waves in the Asia-to-West Africa rice trade in recent weeks.
According to S&P Global Platts, “breakbulk or split breakbulk shipments are now almost the only way traders can compete into West African markets, which have notoriously small profit margins. Container freight costs from Asian origins, such as Thailand and India, are typically reported as almost twice the levels of breakbulk, with the availability of containers also a persistent issue.
A Singapore-based trader for the region said: “Container shipments are not workable so we have all switched to breakbulk shipment.” “[shipping in containers] makes no sense,” a Europe-based trader said, who historically shipped almost exclusively in containers.
However, shipping in breakbulk is not without its own set of issues, which traders are finding out as more and more breakbulk ships loaded with rice arrive in West Africa. Delays are increasingly commonplace amid clogged ports. Additionally, current Asia-to-West Africa freight rates of between $130-$150/mt are significantly higher than the cost of delivering the rice which is arriving in destination markets now.
Governments attempting to control food inflation in these destinations is an added complication. In Senegal, the government capped broken rice retail pricing at West African Franc 15,000/50kg ($543/mt) in early September. While a trader for the country viewed this as workable “on paper,” various middlemen taking cuts between the trader and the shopkeeper could hamper this.
Elsewhere in the region, local prices are also struggling to keep up with rising breakbulk freight rates, even when FOB costs have remained relatively static in recent months. One trader said that “the gap [between local prices and replacement costs] is a bit big now,” with another adding that “we are struggling” to ship to the region with a positive profit margin.
A major Singapore-based trader said “local prices are not going up” in most destination markets.
Port delays
A further issue relates to the delays breakbulk ships are facing in origin ports. In India’s Kakinada Port, wait times of 7-10 days or even longer have been typical. Monsoon rainfall has been slowing loading in recent months, with COVID-19 restrictions not helping.
