Asia coal demand drives panamax rates up 7.5%

1-Oct-2018

Panamax dry vessel rates have risen 7.5% over the past week, as tight domestic Chinese coal supply spurs import demand and Indian buyers also look to replenish stocks, participants said on Wednesday.

The Baltic Panamax Index (BPI), which reflects the 60,000-80,000 deadweight tonne segment, was assessed last at 1,639 points, only marginally below 28 August’s eight-month high of 1,643 points.

As a result, the Baltic Dry Index, which tracks all dry bulk markets, was 7% higher on the week, at 1,450 points.

Domestic shipments in China had been hampered by stringent inspections at the nation’s largest coal port of Qinhuangdao, said a dry bulk analyst with a large shipbroking firm.

“As a result, generators are having to buy more from other countries,” he said.

He noted that through the inspections – which largely focus on coal quality, including sulphur and ash content – the government was attempting to show producers, and the wider global market, that it was “on the ball” with regards to environmental issues.

Indian tightness

Vessel rates were also buoyed by “devastating Indian coal market tightness”, said Hans Gunnar Nåvik, senior analyst with Oslo-based StormGeo Nena Analysis.

Stocks at 117 Indian coal-fired plants, monitored by the Central Electricity Authority, were seen last at 11.1m tonnes – which is sufficient for just seven days’ generation and the lowest level since December last year.

“It is likely that import demand is very strong, but due to the weak currency, India is turning to as much ‘bad coal’ as possible, meaning Indonesian low-calorific coal,” he said.

The Indian rupee was last seen at 72.65 versus the US dollar, compared with 70 a month ago and 66 at the same time last year, making dollar-linked coal less attractive for the country’s buyers.

“Increased coal demand from India supported the [panamax] market, with bad weather disrupting vessel schedules and enhancing rates further,” said shipbroker Allied in a note.

Trade war

Analysts also attributed the rise in panamax rates to buoyant soybean exports from Brazil.

“The Brazilians are running down inventories, and the Chinese are just grabbing it,” said the first analyst, noting this was in place of US soybean purchases, which have been hampered by the ongoing trade war between the two countries.

China has placed 25% import tariff on US soybeans, in retaliation to president Donald Trump’s tariff hikes on Chinese goods.

“[East coast South America] is emerging as the main provider of business in the Atlantic,” said shipbroker Intermodal in a note.

Source: MONTEL