Strengthening China Coal Demand Lifts Largest Shipping Costs

Jun22,2011
By Alaric Nightingale

Strengthening Chinese demand for power station coal helped bolster charter rates for capesize vessels that can carry the fuel.

Charter rates for the vessels, which also transport iron ore, rose 2 percent to $10,453 a day, according to the Baltic Exchange in London. That was the biggest gain of the four vessel sizes tracked by the bourse’s Baltic Dry Index, which fell 0.2 percent to 1,406 points. Coal used by power stations is also called thermal coal.

“You still have unbelievable strength in the thermal coal market,” Jeffrey Landsberg, president of New York-based shipping analysts Commodore Research & Consultancy, said by phone. That has helped demand for capesize ships the most because they are cheaper than other vessels, he said.

Owners are contending with a fleet that’s growing faster than seaborne trade in raw materials. Seaborne trade in bulk commodities will expand 3.9 percent to 3.4 billion metric tons this year while the fleet’s transportation capacity will swell 13 percent to 612.9 million deadweight tons, estimates the research unit of Clarkson Plc (CKN), the world’s largest shipbroker.

Panamax vessels, the largest to pass through the Panama Canal, declined 1.7 percent to $14,580 a day. Supramax and handysize ships carry grains, coal and ore. Supramaxes rose 0.04 percent to $13,789 a day; while handysizes fell 0.5 percent to $10,738, the 23rd consecutive decline.

Demolition of aging capesizes rose to a record in the year’s first five months as rental rates for the vessel slumped, said Braemar Shipping Services Plc, the U.K.’s second-largest publicly traded shipbroker. Rising metal prices enabled some owners to get as much as $10 million, an amount it would take three years to earn in the current charter market, by selling capesizes for scrap this year, Braemar estimated. (By Bloomberg)