By December 20, 2017 0 Comments Read More →

Chinese, Australian ports jammed as demand for coal, iron ore soar

coal

There are a number of capesize and panamax vessels waiting to load coal at Australia’s Dalrymple Bay facility. aurecongroup.com photo.

Chinese coal demand up 10 per cent in 2017

Rising demand in China for coal and iron ore have caused bottlenecks in China’s commodity supply chain. Placed end-to-end, there are enough cargo ships waiting outside Chinese and Australian ports to stretch more than 40 miles.

Outside some Australian ports, some vessels are waiting to load coal and iron ore for over a month, according to a report by Reuters.

In October, the National Congress of China’s communist party boosted their purchases of coal and iron ore.

Ralph Leszczynski, head of research at ship broker Banchero Costa in Singapore says China’s coal imports are expected to hit 28 million tonnes in December, their highest since December, 2013.

Along with rising natural gas and oil imports, in 2017, Chinese coal imports are on expected to rise to 220.2 million tonnes, up 10 per cent over 2016, according to Clarkson, a shipping services firm.

Clarkson adds iron ore imports will also rise 6 per cent in 2017 over last year, to 1.07 billion tonnes.

The increases are a boon for the shipping industry, struggling to recover from one of its worst downturns.

“There has been an abundance of cargo in the market since November after import controls were imposed during the 19th National Congress Meeting,” Ong Choo-Kiat, president of Taiwan’s dry cargo shipper U-Ming Marine Transport told Reuters.

“Bad weather, substitution of domestic ore with better quality imported ore caused by the anti-pollution policy, and strong steel prices…have all helped to push freight rates up,” Ong said.

Key charter rates have increased and now sit at their highest in over three years.  The shipping sector is facing higher costs due to the delays.

Fixture data from the Reuters Eikon terminal says charterers of capesize ships, which are the largest bulk dry cargo carriers, may end up paying an extra $1 million per vessel should they be forced to wait 45 days.

Port maintenance and ongoing disruption caused by Cyclone Debbie are blamed for the delays, according to Ian Macfarlane, chief executive of the Queensland Resources Council.

Once the ships are loaded at Australian ports, most of them travel to China, where some vessels wait over two weeks to be unloaded, according to shipping data.

“There have been several incidents where ports in China have been closed for two or three days at a time,” one Singapore-based capesize ship broker told Reuters. “Changjiangkou (or CJK, the anchorage outside Zhoushan-Ningbo) and Bayuquan were all closed at one stage, although CJK was the worst affected.”

These maritime traffic jams impact ship owners as they cannot hire out their vessels at the higher rates caused by the congestion.

As well, an oversupply in ships is tempering a recovery for the shipping industry.

“The return to permanent profitable freight rates is still way off,” Peter Sand, chief shipping analyst at shipping industry lobby group, Bimco told Reuters.

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