The Covid surge in Apr-May period has severely impacted the Indian exim sector. Vessels, which generally take 35 to 40 days to complete a one way voyage to India, have not sailed during this time. This has led to a situation where there are hardly any vessels available and freight rates across commodity segments are up by least 40% since April, even as cargoes are readily available for shipment.
“With scarce availability, vessel hiring charges per day are averaging $40,000/day, which are 4-5 times higher than the rates quoted in early April,” a source told SteelMint.
Iron ore, pellets exports impacted
Panamax rates for carrying iron ore are at $22-23/t, for Supramax, $24-25/t, and Capesize, $17-18/t, all east coast to North China.“These freights are at historic high levels. For instance, freights for an iron ore carrying Supramax or Panamax are quoting at $25-26/t against $15-16/t at the beginning of April,” the official added.
In case of iron ore, logistical constraints, demurrage charges and quarantine regulations for Indian cargoes at Chinese ports have pushed bids lower. Chinese ports are still not allowing vessels from India to berth immediately, making them wait for 21 to 28 days due to Covid situation in India. The wait is increasing freight and vessel hire charges.
In case of pellets, a few export tenders were concluded recently but trading companies are now hunting for bids, it is heard. One pellet producer told SteelMint that concluding export deals on CFR basis has become risky in the current scenario, despite the fact that declining port stocks in China and increasing iron ore spot prices have kept pellet export prices supported.
Steel mills absorb high freight
Where finished steel is concerned, freight for west coast to Persian Gulf are at a record $40-45/t from the earlier $20-25/t. “Vessel hiring charges of around $50,000 per day for steel for a Supramax (from the previous $30,000/day), from west coast to Persian Gulf, has been unheard of in my entire career,” exclaimed a shipping source.
Handymax and Supramax are mostly deployed for finished steel. However, even a 25,000-30,000 t Handymax is commanding $50-60/t for SE Asia from Indian ports while a Supramax is asking for $45/t. In one instance, the freight for a 20,000 t parcel of billets from an eastern port to Manila is at more than $70*/t against the previous $25/t. The trend is similar on the west coast, it is heard.
Steel mills are absorbing the freight because of elevated prices and higher realisations but the current vessel and freight situation is weighing heavily on Indian exports. “Some shipments have been heard to have been delayed. This has resulted in limited interest for Indian cargoes by traders. This was evident from the last few tenders, which hardly found any takers,” a source told SteelMint.
Visible impact of higher freight rates
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- Exporters are consolidating their cargo to book a single Capesize that can carry 150,000 t. In iron ore, two to three exporters are jointly booking a Capesize, at $17-18/t from east coast India to north China, against $25/t for a Supramax.
- The stocks have reduced at ports like Haldia that can accommodate only small-sized vessels.
- In case of coal, buyers are opting for more of domestic instead of the costlier imported material.
- Most of the Indian buyers are trying to delay the import bookings
*Correction: Manila freight corrected to $70 against $50 mentioned earlier
Prices as on 8:50 IST, 21st June. d-o-d changes indicated against closing price of 18th June
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