European coal imports support dry bulk freight rates
Increased European coal imports are providing support for dry bulker freight rates as heightened demand for alternative sources of thermal fuel amid western sanctions on Russia is partially offsetting downward pressure from diminished iron ore demand globally.
Since the onset of the war in Ukraine in late February, coal imports by some European countries have jumped by as much as 20pc, according to a shipbroker. The increase in thermal fuel demand comes as France, Germany, the Netherlands, Italy, and the UK consider re-opening previously shuttered coal plants or otherwise boosting coal-fired generation ahead of winter.
A “greater share” of this European-bound coal is coming from Atlantic producers despite logistical constraints, according to a second shipbroker. South African, Colombian, and US coal exports to Europe have increased considerably, it said.
In April 2022 coal exports to Europe from South Africa increased to 1.5mt from “negligible volumes” a year earlier, while shipments from Colombia to Europe nearly doubled to 2.7mt, and from the US they hit an almost three-year high of 7.1mt in the same month, according to the second shipbroker.
Additional “backhaul” coal into Europe from Indonesia and a previously inactive Capesize route from Australia may also be increasing ton-mile demand for the thermal fuel, further boosting rates.
The rate for a coal-carrying Capesize bulker from the US east coast to Rotterdam was $19.45/t yesterday, up nearly 30pc since the onset of the war in Ukraine even as heavy rains in Brazil and reduced Chinese steelmaking output negatively affected supply and demand for iron ore, the primary cargo carried by the larger bulker segment.
The rate gains come despite weak dry cargo shipments to China, traditionally the global driver of dry bulk demand.
China’s combined imports for its top three dry bulk imports: coal, iron ore, and soybeans between January-May 2022 are at the lowest point in six years, according to the second shipbroker, describing the return of key industrial steel production bases following the lifting of Covid-19 lockdowns as “slow”, keeping demand for iron ore and the metallurgical coal used for steelmaking muted in Asia-Pacific.
Despite the downturn in Chinese demand for iron ore so far this year, dry bulk shipowners are hopeful that economic stimulus from Beijing will increase steel production in the second half of 2022 as the country looks to subsidize steelmaking to boost its weakened property sector.
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- On July 5, 2022