Panamax freight spikes in Pacific on Atlantic grain demand, US-China deal
Panamax freight rates on leading Pacific routes surged on Thursday on the back of Atlantic grain demand as well as on expectations of this segment benefiting from the signing of the US-China Phase 1 trade deal.
S&P Global Platts assessed the key 75,000-mt (plus/minus 10%) metallurgical coal route from Hay Point on Australia’s east coast to Paradip on India’s east coast at $13.80/mt on Thursday, up $1.35/mt from Wednesday. This 10% spike is the highest single day jump since early January 2016.
The corresponding time charter equivalent (TCE) rate for an 81,000-dwt Kamsarmax vessel opening in North China moved from $3,011/day to $5,727/day, a 90.2% increase day on day.
The rise in activity since last week due to a flurry of grain cargoes coming out of east coast South America has been lending some support to Panamax ships, which are the first choice carriers for this commodity.
“South American grain demand is pushing [the rates] right now. I wonder how many February [loadings] are there,” a ship-operator source said on Friday.
“Brazil will perhaps be trying to export as much [soybeans] as they can before the US enters the market. This is a good sign for ships opening in the south [Pacific],” the ship operator added.
“Ballasting to South America has become a more attractive option,” a shipbroker said Friday, adding that demand is starting to pick up.
The market is anticipating an increase in the flow of grain cargoes during second-half February and March, which is helping push up rates on the Pacific round voyages, sources said.
“But Indonesian coal demand is still lacking and so there is pressure on spot and prompt ships,” the shipbroker said.
Meanwhile, the market has also seen a fair share of volatility. On the east coast Australia to east coast India 75,000-mt (plus/minus 10%) metallurgical coal route, fixtures done by India’s state-owned steel maker SAIL showed the freight rate was done at a lower level despite the market climbing.
“It seems to be more a question of who is more desperate on that day,” the ship-operator source said.
Meanwhile, other dry bulk segments such as the Capesize and Supramax sectors have fallen during the last few trading days.
More US grain cargoes
The market is assuming that the US East Coast grains could soon enter the fray vying for tonnage, with the US-China trade pact expected to boost Beijing’s purchase of US grains.
Based on the agreement, China is expected to buy US agricultural goods worth $80 billion in the next two years, according to the US Grains Council.
A pick-up in freight levels was reflected in recent fixtures, basis time-charter trips. A 2017-built, 82,215-dwt vessel, opening around Singapore between January 27 and February 4, was heard fixed close to $12,000/d for a trip with grains via the east coast of South America to Singapore-Japan range.
According to another ship-operator source, the particular vessel is of “good design” as well as economical to operate, thus commanding a premium to other ships. The source also said that the time charter rates have jumped up substantially during the last few days.
The shift in the market’s tone is also reflected in the fact that most of the time charter discussions are now being held on a delivered outward pilot station, or DOP basis, in contrast with the very low arrival pilot station, or APS levels, seen two weeks ago.