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Dry bulk shipping: Supramax TCE on PG-EC India at 2-year low on dismal demand

The Supramax freight rate for hauling dry bulk commodities from the Persian Gulf to east coast India has dropped to a two-year low in February on dismal demand for products coupled with competition from the Panamax segment.

The time charter equivalent rate for a Supramax vessel opening in west coast India to do a trip with limestone via the Persian Gulf (PG) to east coast India averaged $4,996/day in February, the lowest since S&P Global Platts launched the assessment in January 2017.

The lowest daily print for this route was February 19 at $4,459/d, down 70% from the high of $14,931/d seen on October 24 last year, based on Platts data.

Supramax

The dwindling appetite for Supramaxes to ship limestone, clinker and pet coke cargoes are touted as the main reasons for the low rates, according to market participants.

IMPACTED BY DOMESTIC LIMESTONE SOURCING

The demand from limestone cargoes that typically get shipped on Supramaxes have fallen with Indian steelmakers starting to source a portion of their requirement domestically.

“Earlier, hinterland logistics was an issue. Now there is better support from Indian Railways,” a chartering source with a steelmaker said.

“Sea-borne [limestone] requirement has reduced due to the usage of indigenous material. On the balance requirement, too, the demand is split between Panamaxes and Supramaxes,” a second chartering source with another steelmaker said.

With deeper draft available at UAE’s Mina Saqr port since November, the bigger Panamax vessels are being favored to ship limestone.

According to market fixtures recorded by Platts, only 15 spot Supramax fixtures were concluded on voyage basis for loading during January and February compared to the 21 fixtures that were heard in the same period for 2018.

In 2019, five fixtures have already been concluded to move limestone on Panamaxes from PG to India so far, based on the market fixtures recorded by Platts.

The Indian import of pet coke from the PG and Red Sea regions have dropped 20% from 2.5 million mt seen in 2017 to 2 million mt in 2018.

In August last year, India restricted the use of pet coke due to pollution concerns. While industries were allowed to use it as a feedstock, using pet coke as a fuel for power generation was banned.

The drop in clinker demand was also cited as a reason for the weak Supramax rates.

“China started importing a lot of clinker from Vietnam last year, which was otherwise being shipped to Bangladesh. Now, demand from Bangladesh is being met with clinker from PG and west coast India,” a ship operator said.

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“The Chinese demand now seems to have faded and therefore the clinker flows are returning to how it was a couple of years ago,” the source said while noting the significant drop in volumes of clinker from PG to Bangladesh.
WEAK PG MARKET TO INDONESIA-INDIA COAL FREIGHT

“This weakness in the PG market could alter the way shipowners and operators rate coal business into west coast India,” a ship chartering source with a commodity trader said.

“If the PG markets continues to stay weak, freight rates to move coal into west coast India could start increasing,” the source noted.

Over the past couple of years, trips into west coast India with coal from Indonesia had been discounted as compared to trips into the east. This differential averaged close to $1,000/d in 2018.

Even over February, when rates for Supramaxes opening in the Pacific Basin has more than doubled, the rate for vessels opening in west coast India-PG range barely moved.

In fact, the returns on a Supramax vessel opening in south China to do a trip with coal out of Indonesia has been higher compared to a vessel opening in west coast India to move limestone out of the Persian Gulf.

This was the case on only seven days in 2017 and on 52 days in 2018.

This gap was the widest on February 20, at $4,983/d, when the time charter equivalent rate for a vessel opening in south China was at $9,673/d compared to $4,735/d for a vessel opening on west coast India.
Source: Platts

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