The Hindu Business Line : Vessel shortage pushes up bulk cargo freight cost

Chennai April 23 Bulk cargo freight cost has increased significantly due to shortage of panamax and handymax size vessels in the market. The vessel shortage is mainly attributed to congestion at the Australian coal port Newcastle, according to industry sources.

The freight for bulk cargo increased to around $21 a tonne from $14 prevailing six months ago, said a Chennai-based iron ore agent.

Iron ore, which has been affected by the Rs 300-per tonne export levy in the Union Budget, has been further burdened with the increase in freight cost.

"There is a huge shortage of panamax (ships classified of the maximum dimensions that will fit through the locks of the Panama Canal) and handymax (35,000-60,000 dead weight tonnes) in the market. We do not know how far this situation would continue," said an industry source.

Costly wait

More than 70 ships are waiting at Newcastle, the world's biggest coal export terminal, which handles over 85 million tonnes of coal a year, with the waiting time for ships being around 30 days.

The delay due to infrastructure constraints and maintenance work has affected export of coal even as demand soars in the markets, especially China.

Australia is the world's largest producer of thermal coal and the delays cost the industry more than A$1 million a day in fees paid to compensate shipping firms, sources said quoting various reports.

Coal import

The country's coal import was not much from Australia, and was more from Indonesia and China. However, most of the global panamax and handymax vessels were held up in Australia, creating a huge demand and supply problem. This in turn has led to increase in freight rates for bulk cargo, said the source.

A recent Baltic Dry Cargo Market Report says that more ships were coming on to the market in the Pacific suggesting that charterers may shortly have more opportunity to `haggle,' but the demand from Indian importers is pushing up rates on this inbound route.

In the handymax handysize market, the Far East market has been strengthening and owners are calling the shots. Hire levels have increased substantially over the week, for four to six months charter the market has lifted from mid to upper $18,000 per day at the end of last week to around $20,000 per day for modern 45,000 dead weight tonne vessels.

"This has been driven by a shortage of early tonnage and an abundance of stems from China," the report said.