Supramax and Panamax markets in the Pacific region are expected to face disruption with Indonesia, one of the world’s largest thermal coal exporters, banning exports in January to ensure sufficient supply for its state-owned electricity companies, according to shipping industry executives.
Bulkers, which were partially or even fully loaded with coal for exports, have not been able to sail out of Indonesian ports, market sources said Jan. 3, while adding that there could be a further evaluation on Jan. 5.
The Southeast Asian nation exports around 400 million mt of thermal coal to countries including China, India, Japan, South Korea, and Vietnam.
On average, about 400 Supramax and Panamax ships load coal out of Indonesia a month to head to various destinations, according to S&P Global Platts Cflow trade-flow analytics software.
Many shipping market watchers expect the strict enforcement of the export ban to possibly result in a drastic decline in shipping rates, along with a tonnage surfeit in the Asia Pacific.
According to a Singapore-based ship-operating source, lots of ships ballasting towards Indonesia, or those that were already there but were yet to load, would potentially consider fixing cargoes elsewhere.
“I don’t think Australia and the North Pacific can absorb all these ships, but shipowners are not left with many choices. This could translate into a long list of ballasters [heading] towards east coast South America (ECSA),” the ship-operating source said, suggesting that many shipowners might ballast their ships out of the Pacific.
Another ship-operator source echoed similar thoughts and pointed out that more ships would ballast towards the Indian Ocean region. “[Shipping] rates will crash in the Indian Ocean too,” the source added.
With more ships ballasting towards ECSA and the Indian Ocean, this might subsequently result in depressed rates for ships seeking employment in these regions as a result of over-supply.
Meanwhile, with ships ballasting towards ECSA, fewer tonnages would be available in Southeast Asia and the Pacific. In case the export ban is lifted, freight rates in the Pacific could increase sharply due to a dearth of tonnage.
Sources also indicated that miners and shippers were very likely to declare force majeure and would not be liable for demurrage, which could put ship-operators in a tricky situation.
“The operators who have ships [taken] in on time charter will have to absorb the losses from this,” a ship-owning source said, adding that it would be tough to pass on the additional costs to the head-owner.
Source: Platts
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