China port congestion crucial to dry bulk rates direction as demand slows
One in 17 bulk carriers in the global fleet remain at anchor outside the country’s ports, Lloyd’s List Intelligence data shows, with congestion up 14% since July in northern China
Port congestion that has help propel bulk carrier rates to 13-year highs appears to be unwinding as China’s demand for bulk commodities slows
THE pace and scale of unwinding port congestion in China is set to determine the rates trajectory for the dry bulk fleet into 2021, with one in 17 bulk carriers in the global fleet currently at anchor waiting to berth at the country’s grains, ore and coal terminals.
There are 696 bulk carriers over 15,000 dwt totalling 58.8m dwt tracked at anchor and waiting at ports off China, according to data compiled from Lloyd’s List Intelligence.
That comprises 6.3% of all tonnage above that size measured by deadweight. Worldwide there are 11,800 vessels trading.
Persistently high port congestion in China has helped lift bulk carrier rates to 13-year highs over past weeks, as pandemic-related quarantine and immigration restrictions combined with demand for coal, iron ore, grains and minerals lengthens delays to discharge cargo.
Congestion has been particularly acute in northern China, where 250 bulk carriers are now tracked at anchor, awaiting to discharge at coal, ore, minerals or grain terminals at Huanghua, Caofeidian, Tianjin, Tangshan, Jingjiang, Qinhuangdao, Jinzhou, Bayuquan and Yingkou.
Port congestion in China is compensating for “escalating downside demand pressures”, which indicates a slowdown in the country’s property sector, while an energy shortage has factories and production plants closing, Maritime Strategies International said in its Horizon monthly report.
Including China, there are 3,200 bulk carriers waiting for berth worldwide, the research arm of shipbroker Howe Robinson estimates. That’s 27% of the fleet and 18% higher than pre-pandemic levels, the report said.
“By the first quarter of next year, sharply slowing import demand in China will have the combined effect of reducing both fixture activity and port waiting times, leading to a sharp downwards correction in freight earnings,” the report added.
Overall congestion has gained significantly since July as delays in northern Chinese ports have cascaded through to Shanghai and Ningbo and other terminals, data shows.
The spread of the coronavirus Delta variant saw Chinese officials introduce tougher quarantine measures for incoming ships over that month, which added to queues.
Congestion in northern China gained 14% in the past three months, when 270 bulk carriers at anchor totalling 17.4m dwt were tracked at anchor in the region on July 21.
MSI said that pandemic-related restrictions were unlikely to ease, which is why their fourth-quarter forecasts for the dry bulk sector remained “cautiously optimistic” with much lower forecasts for the first three months of 2021.
The capesize market is the first to reflect Chinese economic data points, as steel production hit a 33-month low in China.
Most iron ore is shipped on these larger bulk carriers, with 70% of seaborne trade imported by China.
The average capesize time charter equivalent rate has fallen 40% since its multi-year high of nearly $87,000 daily seen on October 7, Baltic Exchange figures show.
The fall is seen even as numbers indicate 140 capesize bulk carriers of nearly 28.3m dwt remain at anchor off Chinese ports.
This is approximately 7.6% of the existing fleet’s deadweight capacity, according to Lloyd’s List Intelligence figures. The current trading capacity of the capesize fleet is put at 1, 838 ships totalling 372m dwt.
So far panamax earnings have kept climbing, as Chinese ramps up coal imports to offset a wide energy shortfall. There are 149 panamax bulk carriers at anchor off China, representing about 20% of all congestion, compared to capesizes at 48%.