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Firm Supramax rates force East Coast India iron ore, pellet cargoes on Capesizes: sources

Highlights

Supramax rates above $30,000/d for EC India-China iron ore

Low resupply of vessels from Pacific to Indian Ocean

Singapore — Expensive freight rates for chartering Panamax and Supramax bulk vessels have forced traders with iron ore and pellet cargoes from East Coast India to China to opt for bigger Capesize ships in a rare move, sources said.

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The East Coast India-to-China route is usually dominated by smaller bulkers given the stem sizes traded on this sector are largely 50,000-55,000 mt.

The sharp rise in hiring Supramax class ships, which are typically in the 52,000-57,000-dwt range, have seen charterers combining three 50,000-mt (plus/minus 10%) stems to ship them on a Capesize.

Time-charter rates on Supramax ships have been heard fixed around $31,000/d for a tonnage opening in Chittagong for a trip via East Coast India to China, while the voyage charter rate was heard indicated in the $20-$22/mt levels for a 55,000-mt (plus/minus 10%) iron ore cargo from Paradip to China.

Currently, small bulkers are giving better returns to shipowners compared with Capesize ships. As of March 4, the Platts KMAX 9 Index was at $20,321/d and the APSI 5 Index was at $18,898/d, while the Cape T4 Index was $11,969/d.

It was widely reported in the market that Indian-based charterer, SM Niryat, had taken a Capesize ship to move iron ore from East Coast India to China basis March 15-25 laycan and free port charges at $12/mt.

Also widely heard was that the 176,000-dwt Excel was fixed basis delivery at Mundra for a time-charter trip via Vizag on East Coast India to Pohang at $17,000/d to move a Panamax-sized cargo belonging to POSCO.

"The market is really pushing up on Panamax and Supramax ships, whereas Capesize is quite cheaper. So, [participants] are adding volume to [combine the cargoes] to take benefit of the low price [on the Capesize ships]," a shipping analyst said.

"Panamax or Ultramax cargoes have been converted into Capesize to have economy of scale," added an India-based shipbroker.

This iron ore route is the mainstay of Supramax ships as only a few ports on East Coast India can receive Capesize vessels, which typically have a size of 180,000-181,000 dwt, due to loading and discharge port restrictions.

Freight rates on Supramax ships plying out of East Coast India are primarily being driven by the high volume of iron ore exports, the lack of resupply of ships from the Pacific into this region, as well as the increasing demand for vessels from East Coast South America for grain shipments.

According to data from the Customs General Administration of China, India exported close to 3.8 million mt of iron ore to China in the month of December 2020.

According to Platts ship tracking software cFlow, no Capesize ships have made trips from East Coast India to the Far East carrying iron ore over the last six months, making the recently heard Capesize loadings indeed a rare move.

"For [participants] who have three-four lifting per month on Supramax ships, it will work out cheaper for them on Capesize if they can, rather than paying $20/mt to $22/mt for each Supramax lifting," a ship-operating source said.

Many sources are also considering Panamax ships, which are in the 74,000-82,000-dwt range, to ship iron ore or pellets from East Coast India to China.

"Two Panamaxes will still be better than three Supramaxes, so there is probably a ceiling somewhere closer, wherein it doesn't work out on Supramaxes anymore," said another ship-operating source.

The JY Lake, an 81,200-dwt Kamsarmax ship, opening from its next employment in Haldia, was heard to have been fixed to move iron ore from East Coast India to China at $32,500/d.