Asia-Pacific Supramax and Panamax rates fall on weak commodity demand and weak recovery in China

Asia-Pacific Supramax and Panamax time charter rates have more than halved so far in the second quarter of 2023 from the second quarter of 2022, driven by weak Chinese commodity demand and less congestion at ports, dry bulk market participants said on March 9. June.

The Platts APSI 5 Index, a ton-mile weighted average index of five Supramax routes in the Asia-Pacific region, plunged to $10,230/day from April 1 to June 8, from an average of $25,814/day for the entire second quarter 2022, S&P Global Commodity Insights data showed.

The Platts KMAX9 index, a global ton-mile weighted average of nine Panamax routes, fell to $12,223 per day for the period April 1 through June 8, compared to an average of $25,525 per day in the period second quarter of 2022.

Poor Chinese import and export activity
Dry bulk freight rates typically rise in the second quarter after a seasonally weaker first quarter as China, which is among the world’s largest consumers of dry bulk, resumes trading after the Lunar New Year and warmer temperatures boost demand for coal, to meet the electricity needs of South Asian countries.

Slow Chinese real estate and infrastructure development this year has weighed on demand for key commodities such as iron ore and coal, while tepid global consumption of Chinese goods has reduced export volumes, negatively impacting dry bulk shipping rates, a ship charter source with commodities traders said .

Below average temperatures in India during the quarter also caused coal demand and freight rates to fall.

Meanwhile, China’s domestic coal reserves are good. Chinese utilities have large coal reserves that can sustain coal burning for at least 20 days, a shipbroker source said, adding that domestic coal prices in China are more attractive than sea coal prices.

Favorable weather conditions in the second quarter have resulted in an adequate supply of hydroelectric power in China, making Chinese buyers less dependent on sourcing coal cargoes by sea to meet their energy needs.

“(We) need to see more coal imports into China (for a market recovery),” said a source at a Singapore-based ship operator. A sustained recovery in China’s economy is seen as crucial for a recovery in dry bulk freight rates, as this would lead to higher energy demand and potentially higher demand for sea coal.

Global economic growth is slowing
Shipping market participants said the slowdown in global economic growth was another factor that weighed on the recovery in demand for commodities in the second quarter. However, recent unusual climatic conditions in parts of Asia could potentially pave the way for an increase in coal demand to meet higher electricity consumption.

“Weather conditions appear to be unpredictable and uncertain and this could lead to higher electricity demand,” said a second ship operator source. Continued warmer temperatures in the coming weeks could lead to higher coal demand and support dry bulk freight rates, the ship operator’s source said.

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