China's coastal coal freight rates saw a sharp increase last week to reach a new high since late April, partly due to colder weather and strong winds that increased demand and declined shipping capacity.

 

The China Coastal Coal Freight Composite index, tracking rates for vessels carrying coal from northern China ports to the east and south, climbed 7.80% from the previous week to 759.89 points on November 23, according to the Shanghai Shipping Exchange. It was 43.17% higher than the month-ago level but 25.16% lower than the previous year.

 

 

During last week, the second cold wave since November swept through southern China, resulting in record-low temperatures in some parts of the central and eastern areas. This significantly boosted coal consumption at power plants, leading to an increase in coal demand and providing support for the freight rates.

 

Strong winds caused by the cold wave led to port closures and ships seeking shelter, resulting in delays in vessel transshipment and a reduction in available shipping capacity. This also helped drive up the freight rates.

 

Meanwhile, the transportation demand for coastal bulk cargoes was relatively resilient, as various industries rushed production before the year end. Continued improvement in the international bulk market also prompted some vessel owners to shift operations to the international market.

 

Looking at specific routes, all freight rates experienced rises ranging 1.3-3.1 yuan/t compared to the previous week.

 

 

The coastal coal shipping rates are highly likely to continue the upward trend as another cold snap is forecast to affect China in late November. This may further lower temperatures and limit seaborne transportation. The non-coal cargo demand would also help shore up the freight rates.

 

Internationally, the Baltic Dry Index, tracking rates for ships carrying dry bulk commodities, posted gain for the third consecutive week, supported by stronger demand across all vessel segments. The index jumped 282 points or 15.49% on the week to 2,102 points on November 24.

 

The coal freight rate for Panamax vessels from Indonesia to China was $8.57/t on November 24, up $0.31/t from a week ago, while that for Supramax vessels from Indonesia to China at $10.35/t, a $0.05/t rise on the week. However, the rate of Capesize vessels from Australia to China fell $0.43/t from the week prior to $14.66/t on the same day.