China's coastal coal freight rates extended the upward trend last week as demand burgeoned and shipping capacity shrank, notching a new high since late October 2022.

 

The China Coastal Coal Freight Composite index, tracking rates for vessels carrying coal from northern China ports to the east and south, climbed 21.0% from the previous week to 975.71 points on December 14, according to the Shanghai Shipping Exchange. It was 40.19% higher than the month-ago level and 15.55% higher than the previous year.

 

 

During the week, intensified cold snaps brought snowfall and a rapid drop in temperatures in northern China. However, the southern regions continued to experience a warming trend, with some areas at even 30 degrees Celsius.

 

This led to an increase in residential electricity demand for heating and cooling, coupled with a slight rise in coal prices, stimulating market procurement needs.

 

Meanwhile, demand for bulk cargo transportation remained resilient near the year-end, adding support to the freight rates.

 

The contracted shipping capacity also injected upbeat momentum notably. Strong wind and dense fog over coastal seas impacted by cold air resulted in prolonged closures at most ports throughout the week, with some ports experiencing closures lasting over 60 hours. This significantly restricted cargo vessel transport.

 

Additionally, with a large number of ships entering the ports, the availability of shipping capacity tightened in the market, pushing up the freight rates.

 

Looking at specific routes, all freight rates experienced notable rises last week, ranging 5.8-8.8 yuan/t compared to the previous week.

 

On December 14, the freight rates for the 50,000-60,000 DWT vessels carrying coal from Qinhuangdao to Guangzhou port increased 6.9 yuan/t week on week and 15.3 yuan/t month on month to 54.1 yuan/t, while the 60,000-70,000 DWT vessels on the same route rose 7.0 yuan/t from last week to 48.8 yuan/t, which was 14.7 yuan/t higher than the previous month.

 

 

The coastal coal shipping rates may gain sustained support in the short term as increased coal consumption at power plants will inevitably strengthen the efforts for long-term contract coal shipment despite limited spot procurement.

 

However, whether freight rates will continue to rise and the extent of the growth will depend on weather conditions in the coming days.

 

Internationally, the Baltic Dry Index, tracking rates for ships carrying dry bulk commodities, decreased 135 points or 5.44% on the week to 2,348 points on December 15. The index shed for the second straight week as rates declined across all vessel segments.

 

The coal freight rate for Panamax vessels from Indonesia to China was $8.95/t on December 15, down $0.44/t from a week ago, while that for Supramax vessels from Indonesia to China at $10.38/t, also a $0.44/t fall on the week. However, the rate of Capesize vessels from Australia to China increased $2.92/t from the week prior to $19.99/t on the same day.