Baltic coal dominating Panamax routes
Time：2015-04-10
Browse：130
A mild winter in Europe has hit demand for thermal coal, leading to a sharp drop in CIF ARA physical prices in the first quarter and leaving South African and US producers high and dry as lower-cost rivals in Colombia and Russia meet end-user requirements.
Russian thermal coal is being offered across the Atlantic and Asia-Pacific markets, with trading sources saying producers were taking advantage of the dollar’s strength against the ruble.
That has given Russia dominance in coal supply to Europe. However, the freight rate, basis 70,00 mt, from Ventspils, Latvia, to Rotterdam — a typical voyage for Russian coal being sent to Europe — has changed little.
It has been rangebound this year between a $7/mt high on January 2 and a low of $4.25/mt on February 3.
“Russian coal is the only stuff moving right now on Panamaxes, but the [freight] numbers being seen are still weak,” a UK-based shipbroker said.
Also, vessels operating in the northern Baltic would also normally see a premium of $2-$3/mt when sea ice forms, because extra insurance is required and only ice class vessels can operate in certain conditions.
However, with so many vessels seeking employment, premiums have been virtually non-existent this winter, shipbroking sources said.
Meanwhile, coal shipments from Colombia have yet to be affected by a recent ban on night-time movements of material by rail to export terminals, sources said, adding Capesize cargoes were still being moved to the Amsterdam-Rotterdam-Antwerp region.
ALTERNATIVE SUPPLIERS
South African thermal coal, which saw a resurgence of shipments to ARA late late last year, has become too costly to place into northern Europe and shipments have been focused on India, its largest buyer, and smaller niche markets in the Mediterranean, mostly northern Africa and Turkey.
Scorpion was heard working a 75,000 mt (plus/minus 10%) coal stem from Richards Bay, South Africa to Toros for April 15-30 loading dates, with bids heard at $8.50/mt against offers of $9.50/mt.
Elsewhere, US coal, historically the most expensive coal in the Atlantic Basin, has also been priced out of the European market with the small trickle of export material that still comes into ARA being part of long-term supply contracts in place since it priced profitably as far back as 2012.
That lack of demand has led to low prices on the US east coast trans-Atlantic coal route to UK Continent.
In the three months to Monday, the coal route from Hampton Roads, Virginia, to Rotterdam, basis 70,000 mt, averaged $7.7/mt, compared with $12.2/mt a year ago.
With European coal demand weak and high stocks at ARA, the CIF ARA price is unlikely to rise significantly near term and will continue to exclude South African and US suppliers, meaning freight rates may remain rangebound on trans-Atlantic mineral routes, shipping sources said.