Supramax freight rates for moving thermal coal from Southeast Asia reached a multi-month high Friday as Chinese imports spiked and Indian coal buyers were steadily active amid tight tonnage supply.

Freight rates on the key Indonesia to India 50,000 mt (plus/minus 10%) Supramax coal routes hit their highest levels since the launch of these assessments on September 1.

The freight rate from South Kalimantan in Indonesia to Paradip on the east coast of India was assessed Friday at $9.05/mt and to Navlakhi on the west coast at $10.50/mt.

The related time charter equivalent (TCE) rates for a 57,000 dwt vessel coming from Singapore and performing a trip from South Kalimantan to east coast India was calculated at $13,051/day and at $12,982/day for a trip to west coast India, both reaching their highest since their January 3 launch.

“This is the first time in three-four years that this market is being driven by a physical shortage of ships after being in a very sentimentally edgy position for quite a few years,” said an India-based shipbroker.

the supply of ships in Southeast Asia has been strained for the past quarter as better returns in the Indian Ocean region have discouraged shipowners from ballasting back to Southeast Asia after coming open on east coast India.

“Weather issues in the region are also playing a part in keeping ships occupied,” a ship-operating source based in Singapore said.

ENCOURAGING DEMAND GROWTH

While fewer Supramax vessels were available in Southeast Asia, demand for these ships was burgeoning due to increasing requirements from the seaborne coal market.

Chinese imports of coal for the first two months of this year was estimated at around 42.5 million mt, up almost 50% from the 28.7 million mt imported during the same period last year.

Demand for coal imports into India, although flat year on year during January and February at 22 million mt, has been more active for the April loading window out of Indonesia.

“The Indonesia-India route is pretty busy. All the usual traders who were quiet during most of Q1 are having orders for early April laycan,” a second ship-operating source based in Singapore said.

The source added that the increase in volumes was partly due to the monsoon on west coast India that starts in late May, but a lot of these cargoes were going to new ports, which have berths and can work throughout the year.

“There is still a dearth of Panamaxes to do coal trips within the Pacific and so Ultramax and Supramaxes would continue to find favor,” said the second ship-operating source.

Demand for vessels in the Pacific was also heard to be coming in from nickel ore exports out of the Philippines.

“Probably there is a rush from charterers to move the cargoes as quickly as possible given that the commodity prices are pretty good,” said a ship chartering source with a commodity trader.

According to two shipbrokers, there has been increasing demand to do trips along the Indian coast and this was taking ships out of the international market.

Similarly, the cabotage business along the Chinese coast has been giving good returns for the Chinese shipowners, which has resulted in fewer Chinese-flagged ships competing on the international businesses.

Market sources noted that the rates have held so far this year despite the fact that more than 50 Supramaxes have been delivered during the first two months, while only nine were scrapped over the same period.

CAUTIOUS OPTIMISM

Although the rates for single time charter trips have been on the rise, market sources pointed out that rates for fixing vessels on period business have stayed relatively flat.

This, sources said, probably indicates that current rates may not sustain for too long.

“There is a lot of potential for period ships to be fixed in the Far East and then be used for Indonesia-India and then subsequently for a trip in the Indian Ocean,” the second ship-operating source said.

For the first time in a long time, ship-operators were getting positive returns on the first laden leg after taking in a vessel on period.

“We are in the perfect condition of three regions being firm at the same time in quite a while now,” the first ship-operating source said.

The strength in the Supramax market was summed up by one shipbroker, who said it was getting extremely hard to get a fixture concluded.

“Charterers are slow to digest the increase in the freight rates and gaps are becoming large between the bids and offers,” the shipbroker said.

Source: Platts