China's coastal coal freight rates extended the increase earlier last week but moved downward later the week, ending a four-week straight rise. Overall, the freight rates remained at a high level.

 

The China Coastal Coal Freight Composite index, tracking rates for vessels carrying coal from northern China ports to the east and south, climbed 0.31% from the previous week to 762.26 points on November 30, according to the Shanghai Shipping Exchange. It was 43.38% higher than the month-ago level but 1.55% lower than the previous year.

 

 

Earlier last week, continued low temperatures buoyed coal demand, supporting the shipping rates of coastal bulk vessels. Weather conditions and the international dry bulk market contributed to the outflow of vessels to international market, somewhat reducing shipping capacity at the domestic market.

 

Only prompt vessels were offered at higher prices, while the market primarily relied on long-term contract and normal-priced cargoes, leading to further increase in the freight rates.

 

However, limited growth in coal consumption and high inventories restricted the demand for coal shipment. The impact of weather conditions also weakened compared to earlier periods, significantly narrowing the freight rate growth.

 

Subsequently, inactive transactions and decreased coal prices led to more prudent sentiment among downstream users. The large gap between acceptable prices and offer prices made buyers intend to force prices down, making it more challenging to close deals, thus reducing the shipping demand. Moreover, the expiration of long-term contracts near the year-end also was not in favor of further freight rate increases.

 

Given this backdrop, the shipping rates declined even though the international dry bulk market still had some positive influence on the domestic market.

 

Looking at specific routes, freight rates experienced mixed trends last week, with rises mostly on southern routes and falls mainly on northern routes, ranging 0.1-2.8 yuan/t compared to the previous week.

 

On November 30, the freight rates for the 50,000-60,000 DWT vessels carrying coal from Qinhuangdao to Guangzhou port increased 2.8 yuan/t week on week and 13.8 yuan/t month on month to 44.7 yuan/t, while the 30,000-40,000 DWT vessels on Huanghua-Shanghai route decreased 1.2 yuan/t from last week to 29.6 yuan/t, which was 9.4 yuan/t higher than the previous month.

 

 

The near-term outlook for the coastal coal shipping rates remains uncertain. The demand side is expected to change little with diminishing cold air and expected warmer temperatures in early December. The coastal coal market will depend more on changes in shipping capacity.

 

Internationally, the Baltic Dry Index, tracking rates for ships carrying dry bulk commodities, soared 1,090 points or 51.86% on the week to 3,192 points on December 1. It was the fourth consecutive week of rise and the best week since late-February, as rates across vessel segments hit multi-month highs. 

 

The coal freight rate for Panamax vessels from Indonesia to China was $9.47/t on December 1, up $0.9/t from a week ago, while that for Supramax vessels from Indonesia to China at $10.72/t, a $0.37/t rise on the week. Furthermore, the rate of Capesize vessels from Australia to China increased $4.33/t from the week prior to $18.99/t on the same day.