Freight Trader Offers Subsidized Coal Shipping Amid Biggest Glut


A freight trader operating more than 40 vessels offered to subsidize the cost of delivering coal to Europe as the biggest glut of Panamax-class ships for at least two decades drives down rates for the carriers globally.

GMI Resources UK LLC will contribute $2,000 a day to take about 74,000 metric tons of Australian or Indonesian coal to buyers in the Atlantic region, Steve Rodley, the company’s London-based co-chairman, said by phone today. Alternatives include staying in Asia or sailing without cargo to South America to seek grain charters, he said.

The supply of Panamaxes expanded more than 50 percent since 2008, when record rates spurred unprecedented vessel ordering, according to data from Clarkson Plc, the world’s largest shipbroker. Coal trade swelled 37 percent in the same span. Ships on the Asia-to-Europe route earned $67 a day as of May 31, according to the Baltic Exchange, a London-based publisher of freight costs on more than 50 maritime routes. Owners last contributed more than $2,000 daily to the voyage in October.

“It’s a result of chronic over-ordering of ships three or four years ago,” Rodley said by phone today, adding that the vessel surplus is “comfortably” the biggest since he joined the industry in 1994. “All the ships are delivering in the market and demand has not kept pace.”

A Panamax burns 27 tons of fuel daily at 12 knots, meaning it’s unfeasible to sail without cargo to Europe from Asia, Rodley said. GMI can profit by subsidizing the voyage provided vessel earnings in the Atlantic are high enough to compensate for the money-losing shipments.

Panamax charter rates are averaging $6,329 a day globally, Baltic Exchange data show. The ships needed $6,606 daily in 2011 to cover operating costs including crew and repairs, according to the most recent data from Moore Stephens LLP, a London-based accountant that tracks industry expenses.

Source from : Bloomberg