Spurred by robust demand for commodities along with port congestions and fleet inefficiencies, the smaller bulker carriers — Supramax and Handysize class ships — are commanding hefty rates not seen in the recent times.
All the S&P Global Platts Asia Pacific Supramax and Handysize dollar per ton voyage freight assessments and time charter equivalent rates have registered their peak since its launches. Supramax vessels are typically 52,000 dwt-58,000 dwt in size and majorly move coal and grain cargoes within the Asia Pacific region. Handysize vessels range between 28,000 dwt and 39,000 dwt and move various minor bulk commodities like concentrates, steel, alumina, etc., in addition to some coal and grain cargoes. Given their size, these class of ships tend to ply mostly within the region and to less mechanized ports.
The key Asia Pacific Supramax Index (APSI) 5, a weighted average index composed of key routes within the Asia Pacific, reached $38,711/d on Aug. 27, the highest since its launch on Feb. 1, 2021.
“The rates being discussed are touching new highs,” said a ship-operator source.
“The market is being driven by congestion and not by demand alone. We will only get to know [the real market only] once the congestion eases,” the source added.
The peak rates have forced ship-operators to take in tonnage on short-period business, where ships are locked in for a set duration.
“As an operator, one cannot fix any cargoes without a ship behind. [I] took two Supramax vessels three weeks ago at $30,000/d for 4-7 months and another at $32,000/d for 6-8 months. Current rates for these vessels are in the low-$40,000s/d,” a second ship-operator said.
China ports congestion
According to market participants, around 5% of dry bulk tonnage supply is currently caught up in congestion at Chinese ports, mostly due to COVID-19-related protocols being implemented by the authorities.
Vessels are required to wait at the discharge port to complete the 14 to 21 days mandatory quarantine period since the last port of call. Vessels were also being delayed by limited availability of personnel like pilots, stevedores and surveyors who are all instrumental in efficiently turning around a ship.
Given the quick spike in the Supramax rates, there were some discussions to move these cargoes on Panamax vessels.
“Even a [partly loaded] Panamax is [offering a] better [freight rate] than a Supramax on some of the routes,” a third ship-operator said, alluding that Panamax ships were earning lower time charter rates compared with Supramaxes.
“Panamax dipping into Supramax cargoes might be possible for now. But that will quickly come to a stop when US grain demand starts pushing up in late Q3-early Q4,” a shipowner said while adding that freight derivative rates for later dates seems to be undervalued. “I would think Q4 will have to be stronger than today as usual seasonal demand puts Q4 higher than Q3.”
Market sources concurred that demand for dry bulk shipping was quite likely to stay intact as governments across the globe continue to embark on various monetary easing plans to stimulate their respective economies.
“Asia in general is behind rest of the world in terms of recovering from COVID-19. And, they will have to rebuild their economies too,” said the shipowner, pointing out that fewer newbuildings were expected over the next two years.
Handysize segment not behind
Also, the freight rates for Handysize vessels have hit a decade high. While the flow of minor bulk commodities has shown strength, extremely high rates to move containers, too, have contributed to the Handysize demand.
The freight rate to move 30,000 mt of alumina Bunbury/Kwinana to Lianyungang was assessed Aug. 27 at $53.80/mt, the highest since the assessment was launched on Aug. 16, 2010.
“We and many others are loading containers on our 37,000 dwt – 38,000 dwt log carriers,” the shipowner said. “These ships have box shaped holds which are also strengthened and is paying about $6,000/d to $7,000/d better than doing bulk or logs.”
While returns were better, market sources point out that there were technical challenges for moving containers on dry bulk ships, such as safely stowing the containers and securing them, managing insurance for the cargo and also the ship to cover risk and liabilities arising from this.
“This will only be done by head owners who also have the technical people to look at securing and safely stowing the containers,” the shipowner said.