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Pacific Supramax freight rates surge as Chinese utilities receive fresh coal quotas

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Pacific Supramax freight rates surge as Chinese utilities receive fresh coal quotas

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Singapore — Supramax freight rates in Southeast Asia surged at least 25% in the trading week ended Nov. 27 as the unexpected news of China releasing an additional 20 million mt of coal import quotas rapidly drained tonnage from the region.

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Time Charter Equivalent rates for Supramaxes burning bunker fuel 0.5% opening South China for a trip via Indonesia with coal reached $11,282/d Nov. 27, up 25% from $8,974/d a week earlier, while the TCE for a Supramax opening in Singapore for a trip towards east coast India reached $13,892/d and west coast India $15,996/d, up 32% and 28%, respectively over the same period. All are at the highest levels since the assessments were launched in November 2019.

"The market is very hot -- power plants sent out many import coal orders suddenly, shipowners are asking crazy numbers," a ship-charterer source said.

A ship broker source said even those watching the market closely had not predicted the sudden influx of cargoes.

"The market is flying high -- two weeks ago we were talking $10,000/d for vessels from Singapore, and vessels from Singapore are now $17,000/d for an Indonesia to China trip," a ship-operator source said, adding: "We're in the market looking for spot ships, but it's been difficult to find vessels."

The release of coal import quotas in China coincided with the Australian grain harvest, creating a perfect storm for demand and driving time charter rates to new heights in an already tonnage-constrained market.

A ship-broker said shipowners had earlier been holding back to see if charterers would pursue them. "If the market holds this week, we will see a decent end of the year," the source added.

However, some apprehension seeped into sentiment as the trading week to Nov. 27 closed.

A second ship-operator source said: "Voyage rates are going down; charterers are claiming there is less cargo now," attributing this to the possibility that most of the cargoes sought to fulfill Chinese quotas had been fixed.

Another market source forecast Pacific Supramax freight rates would correct downwards next week due to the condensed number of cargoes seen open in Indonesia after Dec. 10 and the logistical challenge of fulfilling China's quotas before year end amid the seasonal likelihood of such issues as port delays and severe weather disruptions.