The performance of Panamax

By Michalis Voutsinas


In the realm of botanical marvels, the lotus flower stands as a symbol of purity, resilience, and the triumph of beauty over adversity. Its remarkable journey from the murky depths of mud to the pristine surface of the water serves as a powerful metaphor for overcoming struggle and transformation. Yet, defining what constitutes the "murky depths" and the "pristine surface" can often be elusive. However, the performance of the Panamax segment this year offers a fitting analogy. Having been trapped in the four-digit mud for the better part of the first quarter, Panamax vessels—renowned for their role in staple grain transportation—have finally surfaced for a breath of fresh air. In fact, during the eleventh trading week, the Baltic Panamax Index surged to $12,287 daily, a level last observed in mid-October 2024. Likewise, the Baltic Capesize Index climbed to $23,697 daily, reaching a four-month high. The geared segments also enjoyed upward momentum, with the Handysize and Supramax indices closing at $11,752 and $10,298 daily, respectively, marking their highest levels for the current trading year.

On the commodity front, gold captured headlines as it breached the critical $3,000 per ounce barrier on Friday for the first time. Investors flocked to the safe-haven asset amid growing economic uncertainty, propelling gold to a 14 percent increase so far this year. Heightened geopolitical tensions and escalating trade disputes between major economies have further bolstered gold’s appeal. The U.S. consumer sentiment index, as reported by the University of Michigan, plunged to a nearly two-and-a-half-year low in March, with inflation expectations soaring due to fears that President Donald Trump’s sweeping tariffs would drive up prices and stifle economic growth. The sentiment deterioration was widespread across political affiliations, with consumers lamenting that "frequent gyrations in economic policies make it very difficult for consumers to plan for the future."

Meanwhile, the Panamax market found its own version of gold in staple grain trades. The Pacific market reported solid fixtures, while expectations of increased activity from East Coast South America further buoyed sentiment. The trade war initiated by U.S. President Donald Trump, which led countries including China to retaliate against tariffs implemented by his administration, is favorable to Brazil, the CEO of agribusiness firm SLC. Agricola SLC is one of Brazil's largest grain and cotton producers. In response to U.S. tariffs, China imposed retaliatory duties on approximately $22 billion worth of American goods, including key agricultural exports such as soybeans, pork, beef, and seafood. Soybeans, one of the largest U.S. exports to China, faced an additional 10 percent levy, while cotton, chicken, and corn saw duties of 15 percent.

During Trump's first presidency, the impact of the trade war was profound. China imposed 25 percent tariffs on U.S. soybeans in response to President Trump's 25 percent tariffs on Chinese goods in July 2018, halting imports for six months until trade negotiations resumed in December. During this period, Brazil emerged as the primary beneficiary, with soybean exports to China soaring to 32.6 million tonnes, nearly double the previous year’s volume. In contrast, U.S. soybean exports to China plummeted to 13.4 million tonnes for the 2018/19 season, leading to record-high ending stocks of 25.2 million tonnes.

Since then, China has strategically shifted away from U.S. soybeans, opting to increase imports from Brazil. According to Chinese customs data, U.S. soybeans accounted for only 24 percent of total imports in the 2023/24 season, a notable decline from 34 percent the previous year. In contrast, Brazil's share surged from 63 percent to 72 percent. This trend reflects China's willingness to deepen its reliance on Brazilian supply, provided the country can meet demand. Brazil’s soybean harvest, currently underway, is projected to reach 167.37 million tonnes, surpassing Conab's February forecast by 1.3 million tonnes and setting a new record compared to the 155.7 million tonnes produced in the 2022/23 season. Of this volume, over 105 million tonnes are expected to be exported, marking a 7 percent increase year-on-year. Meanwhile, Brazil’s total corn production is forecast to rise by 6.1 percent to 122.76 million tonnes, supported by favorable weather conditions for the first corn crop, according to Conab.

China’s aggressive stockpiling and high crush rates to meet livestock feed demand have further fueled soybean imports. In 2024, Chinese firms imported a record 105 million tonnes of soybeans. However, delays in Brazilian shipments and slow customs clearances caused supply tightness, forcing several processors to halt operations. Analysts now forecast record soybean imports of 31.3 million tonnes in the second quarter, a 4.6 percent increase from the same period last year, as freshly harvested Brazilian beans flood the Chinese market. "South American soybean prices, particularly Brazilian new crop soybeans, are more attractive than their U.S. counterparts," noted Cheang Kang Wei, assistant vice president at StoneX in Singapore.

In essence, the Panamax segment’s resurgence reflects a broader shift in global grain dynamics. While geopolitical tensions and trade disputes have disrupted traditional trade flows, they have simultaneously opened new opportunities for Brazil’s agricultural sector and provided fresh momentum for Panamax vessels. With the grain season in full swing and demand gaining momentum, the Panamax segment appears to be breaking free from the sluggish conditions of the first quarter. Whether this positive momentum will be sustained remains to be seen, but the current market dynamics suggest a more buoyant outlook for the months ahead.

Data source: Doric