By Paul Bartlett
Mixed signals in dry bulk market Bulk carrier rates usually ease off in the run-up to Chinese New Year as demand for raw materials weakens ahead of the festivities. Capesize earnings followed the usual pattern, falling sharply late in January and early February, but both panamax and smaller rates have held up well. Analysts believe that at least some of this unusual resilience is a result of Chinese Government policy towards the Chinese New Year on February 12. Chinese authorities discouraged the travel arrangements of many millions of citizens as it tried to control the pandemic and prevent surges in regional infections. The country’s strategy has been to extend the holiday over a longer period, allowing people more flexibility over travel schedules. Meanwhile, some industries were not planning to shut down operations over the holiday period as usual, preventing some workers from taking their usual New Year break in any case. With industrial production set to continue, there was unlikely to be any of the usual dip in demand for basic raw materials including iron ore, coal and grains. Other factors have also affected the market this year, helping to offset the usual dip in bulker rates, at least to some extent. These included unseasonably cold January weather in large parts of Asia, coinciding with a spell of sky-high LNG prices. For some, coal was the next best option to ward off the cold. Not necessarily in China, though, which is in the middle of a trade dispute with Australia.
Geopolitical disruption The geopolitical row centring on Australian coal follows that country’s move to prevent Huawei Technologies from involvement in the development of its 5G cellular communications network, and a separate request to investigate the outbreak of COVID-19 in Wuhan, the capital of Hubei Province, where the virus is thought to have originated. In
Bulk Carriers retaliation, Chinese authorities have blocked the import of Australian coal, a usually constant trade that provides steady bulker employment across a range of ship size categories. The row showed few signs of easing as mid-February approached. Despite reports of a small resumption of Australian imports early in the year, figures from Oceanbolt, a Norwegian dry bulk research outfit, indicate that China has imported no coal from Australia so far this year. Oceanbolt data suggests that around 60 bulk carriers – ranging from kamsarmax units to capesize – are currently laden with about six million tonnes of coal, waiting off the Chinese coast to unload their cargoes. Some vessels have been there since May last year and the volume of blocked coal is equivalent to about 2% of normal annual imports, Oceanbolt said. Some vessel owners have been fortunate enough to be able to divert ships and possibly also cargoes to other Asian destination where demand for coal is high. But for others, the Chinese coal import ban has caused a major headache, with laden ships delayed for weeks or months. While these ships have been effectively removed from the market in terms of supply capacity, other vessels which would have been deployed in the Australia-China coal trade have become available for other business. No surprise, then, that the Capesize market, which had remained steady through most of January and despite the different approach to Chinese New Year, still fell over the last ten days of January and early in February. Rates dropped sharply across the board for big bulkers, according to Clarkson figures, with Capesize average earnings plunging from close to $18,600 a day during week ending January 22nd, to just under $12,000 a day seven days later. The Baltic’s Capesize Index (BCI), which had peaked most recently at 3082 on January 20th, lost more than half its value by the end of February’s first week, closing at 1,527 on February 5th. However, to put this in context, on the same day one year ago, the BCI had fallen for 39 consecutive sessions and was deep into red figures. On February 5th last year, it sank to minus 183.
Chinese authorities have blocked the import of Australian coal
Volume 17 Issue 5 – Page 59
