DRYBULK: Panamax rates in the Pacific hit multi-year highs as Atlantic demand surges

Singapore — Panamax rates in the Pacific soared to multi-year highs on the back of icy sea conditions in the Atlantic, a spike in grain loading out of east coast South America, or ECSA, and a pick-up in European coal demand.

The firm freight rate on ships loading out of ECSA is forcing charterers to shell out more for voyages within the Pacific region. The key Hay Point, Australia, to Paradip, east coast of India, trip to move a 75,000 mt (plus/minus 10%) coal cargo was assessed at $25.40/mt on Feb. 18 -- the highest since September 2010, when this route was assessed based on a cargo size of 65,000 mt.

The S&P Global Platts weighted average Kamsarmax Index, KMAX 9, which reflects global Panamax trade, closed at $24,383/day on Feb. 18 -- the highest level since it was launched in May 2020.

The extreme cold weather which has resulted in icy sea conditions in the Baltic Sea as well as regions around east coast Canada have all impacted vessel movements, causing delays and supply dislocation, according to market sources.

Panamax rates in the Pacific have also rallied as east coast South America freight levels made huge advances, thanks to the busy soybean loading season.

Panamax class bulkers passing Singapore are quoting around $25,000/day for a trip to ship soybean from ECSA to the Far East.

The late harvest of soybean in ECSA for 2021 due to droughts in the region and a long Lunar New Year holiday period in China have done little to slow the Panamax freight rally.

Rates started to move up early this week after Kamsarmax ships, typically in the 81,000-82,000-dwt range, got fixed at $16,500/d from Southeast Asia to perform ESCA round voyages. The bullishness soon spread as charterers looked to smaller and larger vessel sizes to avoid the high rates on the Panamax ships.

A shipbroker said: "Charterers seem to be holding back, but owners are pushing the rates higher. Now in the Pacific and Indonesia, too, it's all above $20,000/d."

The increase in the freight levels is forcing some charterers to stay away for the time being. "It's tough to comment [on the freight], owners' ideas keep changing," a ship-operating source said.

The source added that fewer cargoes were seen on the Hay Point to Paradip route, consisting of stems from Indian state-owned steelmakers while the others were possibly covering quietly.

"Paper [the forward freight agreement market] keeps on spiking and everyone wants period [deals]. If it is on time charter, it's a mad number," a second shipbroker said.

Capesizes piggyback on Panamaxes

Driven by the strong sentiment in the Panamax segment, the Capesize market has witnessed a 'V' shaped rebound after the Lunar New Year holidays.

The Platts Cape T4 index for non-scrubber ships saw a 126% spike to $12,647/d on Feb. 18, compared with $5,577/d on Feb. 11.

"The market is firming up every day [this week]," a Greek shipbroker said, crediting the gains to the bullish Panamax market.

The strong push seen in the Capesize Forward Freight Agreement or freight derivatives market has strengthened owners' confidence, sources said.

"The FFA market looks much stronger than the spot because there are spread deals between Panamax and Capesize in the FFA market. The reverse ratio is getting big, so people want to sell Panamax and buy Capesize at the same time," a ship-operating source said.

Merging, splitting of Panamax-sized cargoes

With Panamax freight getting expensive, a few charterers are trying various options to cut costs.

In the Pacific market, a 75,000 mt (plus/minus 10%) coal cargo for an Indonesia to Vietnam trip was reportedly split to two 35,000 mt (plus/minus 5%) Handysize stems.

From Richards Bay in South Africa, Panamax cargoes are being combined to be shipped on Capesizes for voyages into India, as many owners prefer the longer ECSA journey.

"Big market movement on the Panamaxes offer more potential for Capesize ships," a fourth shipbroker said.

Interestingly, a handful of Capesize ships were reportedly fixed to lift Panamax cargo stems in both basins. Out of East Australia and Indonesia, a few coal Panamax cargoes were fixed on Capesize ships to South Korea, while in the Atlantic, a 75,000 mt (plus/minus 10%) iron ore cargo belonging to Tata Steel was widely reported to be shipped on a CCL Capesize ship from Brazil's Ponta Ubu to Ijmuiden in the Netherlands for a March 8-12 laycan at $14.70/wmt.