Steel, then iron ore and now coal… this week has been widely animated by the coal sector with the disclosure of the long term Chinese government program to shut-down 70 per cent of small-sized mines by 2010 and 100 per cent by 2015. Official figures reported state that there are about 24,000 small coal production sites in China that have an individual output ranging from 10,000 to 30,000t per year.
But on the shorter term and perhaps more significant for this year are the coal supply price negotiations which progressively reveal a retreat of the producers’ dominant position. This week Posco said that they’ve completed their coal price negos for the year ending March 2007, with an eight per cent rebate on hard coking coal prices from last year levels and even more for semi-soft. This downward trend shows that after prices more than doubled last year, the pressure is progressively falling again on the back of a slower progression of the Chinese steel output for 2006 and the reorganisation of its entire coal supply logistic chain.
The Panamax market continued to climb last week and watching the substantial gains made on Cape (albeit a more modest increase - the BPI rose 171 points during the week) the effect will no doubt continue in the coming weeks. Iron ore price negotiations are allegedly close to fruition, but in the meantime, it would appear that those charterers who have stayed away from the market for so long now have little choice but to ship cargo.
The rapidly rising Cape market encouraged some Cape cargo splitting in the Atlantic. The period market was also active, which helped drive the BPI upwards with modern index units on early Pacific positions being taken for short period at around US$18,500 per day.
The Atlantic market eventually improved dramatically both for Handies and Handymax in nearly all areas, save perhaps the US Gulf. Undoubtedly, the ECSA showed the sharpest increase, dragging West Africa and South Africa. In just over three weeks, sugar stems improved by US$2-3/tonne. Grain houses are already trying to fix tonnage ahead of the March soya rally. The Continent is seeing more grain and fertilizers quoted, and trips to West Africa for Handies are being fixed in the low teens. The Pacific continues along a firm trend, although less so than during the previous weeks. Supramax are getting in the mid US$17,000’s, either for period or Pacific rounds. Iron ore exports from India to China are still high and are leading to fixtures being concluded in the very high teens.
Source: Barry Rogliano Salles, Shipbrokers, Paris