China's coastal coal freight rates continued its downward trend last week, due to sufficient coal stocks and a surplus of shipping capacity, while the decline narrowed as the coal market remained stable or even rebounded.

The China Coastal Coal Freight Composite index, which tracks rates for vessels carrying coal from northern China ports to ports in the east and south, dropped 3.21% from the week before to 661.29 points on December 27, according to the Shanghai Shipping Exchange. It was 27.25% lower than the previous month and 28.39% lower than the year-ago level.

In the reported week, coal demand remained sluggish, and there were few concluded trades amid low coal prices and high stock levels. Non-power clients just remained their essential demand due to a gradual decline in operating rates.

In addition, due to the Christmas holiday and challenging foreign trade conditions, many vessel owners involved in overseas operations shifted to the domestic market, further exacerbating the oversupply situation.

However, as coal prices dropped below the long-term contract prices, downstream buyers shifted their focus to spot coal. The narrowing price gap between domestic and imported coal, along with restocking activity and a slight increase in ship chartering demand, significantly reduced the decrease in freight rates.

Most shipping routes fell 0.5-1.8 yuan/t compared to week-ago levels. Rates for the 50,000-60,000 DWT vessels carrying coal from Qinhuangdao to Guangzhou port decreased by 1.8 yuan/t week on week to 37.6 yuan/t on average, while those for 60,000-70,000 DWT vessels on the same route reached 28.6 yuan/t, falling 1.7 yuan/t from a week ago.

Internationally, the coal freight rate for Panamax vessels from Indonesia to China was $5.39/t on December 27, down $0.43/t on the week, while that for Supramax vessels from Indonesia to China stood at $8.65/t, $0.36/t lower than that on December 20. The rate of Capesize vessels from Australia to China fell $0.10/t to $10.54/t on the same day.

Despite favorable factors, limited cold weather and stable power plant coal consumption are expected to constrain further growth in freight demand. Future trends of the shipping market will depend on weather conditions and the overall bulk market.