Dry Bulk Market: Chinese Coal Imports on the Rise

In its latest weekly report, shipbroker Xclusiv noted that “economists still warn about a global economic recession, but economic figures show that the global economy still resists, despite the inflationary wave that swept many countries. The Eurozone economy grew slightly by 0.1 % in the first quarter of 2023 after a flat fourth quarter in 2022. The surge in consumer prices due to the higher cost of energy and food, alongside the fastest pace of policy tightening by the European Central Bank in over 20 years and weakening confidence, have taken a toll on the bloc’s economy but recession has been avoided until now. The US economy missed market expectations of a 2% growth, but it grew by 1.1% in Q1 2023 also avoiding recession despite the high interest rate increase from the FED”.

Meanwhile, coal imports from China have began surging once more. According to Xclusiv, “as China is trying to find ways to steam up its economic recovery from the COVID-19 lockdowns, it has made a turn towards coal, having coal imports to increase during the first quarter, moving away from costly LNG as the demand for it has declined. China dampened the LNG demand while the global gas prices skyrocketed within 2022 and bolstered domestic coal production and global imports in order to be supported by coal fired power generation. China’s coal imports jumped 63.1% y-o-y in the first three months of 2023 while the domestic coal production rose about 6% in the same period, from 1.08 billion mt to 1.15 billion mt.

At the same time gas pipeline imports from Russia and LNG imports dropped more than 4.5% y-o-y showing that China is focusing on energy security and low cost as it prepares to support with the most efficient way its (most anticipated) economic recovery. China’s focus on economic recovery hasn’t been imprinted to the dry market rates yet but the average 5 T/C Routes rate for Cape is already 40% higher than the start of the year at USD 19,080 per day and the average T/C Routes rates for Panamax, Supramax and Handysize are 10%, 20% and 8% higher for the same period respectively at USD 14,274, 12,811 and 11,934 per day. Analysts expect that the return of China to economic growth will start showing within Q3 of 2023 and most likely it will boost the dry market freight market into higher levels”.

Xclusiv added that “in the wet market, energy analysts and brokers forecast that demand for oil products like gasoline, diesel and jet fuel will become stronger ahead of the summer travel season despite the tight supply and the low inventories. This is boosting clean wet market freight rates with time charter rates touching or in some cases surpassing the record highs of 2008 like in MR2 and LR2 segments (average 1Y TC USD 31,000 and USD 46,700 per day respectively). In the dirty freight rates Aframax 1 year TC are also above 2008 record highs (average USD 50,000 per day), while in VLCC and Suezmax segments, their peak was within December 2022”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide