Panamax coal freight rates tumble on oversupply, weak demand

Thursday, 31 May 2012 |
Panamax coal freight rates continued their slide Wednesday, with freight rates on established routes from South Africa's Richards Bay to India falling sharply amid weak fixture activity.
Indian consumers are refraining from buying coal as the weakness in the rupee against the US dollar continues while Chinese buyers are also staying away from the market amid high stockpiles.
"Coal shipments are expected to remain minimal next month due to high stock piles in China, while the grain market, although more promising, is not expected to be able to support a market with excessive supply of vessels available," Greece's Intermodal Shipbrokers said in its weekly note on Tuesday.
Platts assessed the daily Panamax freight rates from Richards Bay to India west coast at $15.90/mt and to east coast at $17.45/mt, both down $1.90 on-day.
Platts also assessed the daily South Kalimantan to India west coast Panamax rates at $9.75/mt, down 35 cents on-day, and to east coast at $8.90/mt, down 20 cents on-day.
"It's a charterer's market," an India-based source said, adding that prices were falling much more "drastically" than expected.
A Hong Kong-based source said prices had fallen sharply as Indian buyers are not importing coal due to the current weakness in the Indian rupee.
The Indian rupee was trading at 56.09 to the US dollar Wednesday, compared with 52.64 a month ago.
Panamaxes took a pounding this week as the lack of demand left both the Atlantic and Pacific basins heavily over supplied, Intermodal said, adding that rates tumbled considerably across all major routes.
"There is a fairly bearish sentiment amongst owners now as there is little sign of improvement," the shipbroker said in the note.
Commodity prices are falling and there are not much cargoes being shipped to India or China but there are plenty of vessels available, a Singapore-based source said.
VESSELS SLOW DOWN SPEED AMID HIGH BUNKER PRICES
The Panamax market seems weak with just not enough cargoes to lift the weak sentiment and halt the month-long decline in freight rates, RS Platou Markets analysts said Wednesday.
Higher bunker prices, coupled with weak freight rates were also forcing ships to slow down speed compared with last year.
"Higher bunker costs and weak freight rate environment this year has seen the global shipping fleet slow steaming across the segments with a massive decline in ships speeds compared to year ago," RS Platou analysts said.
The trend of widespread slow steaming is likely to continue for most shipping segments as industry overcapacity persists and bunker prices remains at elevated levels, they added.
Grain tonnage activity in the Atlantic basin had propped up prices in the recent past, but that is now declining weighing on prices, sources said.
"Very few fresh trans-Atlantic cargoes are forthcoming and we are expecting restricted support for this region for the time being," broker firm Braemar Seascope said in its weekly report on Thursday.
Owners have become less reluctant to send their tonnage to the Far East and concurrently charterers' ideas for this route have started to drop, the broker said.
Source: Platts