Chinese demand for coal supports ocean freight market

The global ocean freight market is seen as generally good this year, with strong demand for coal from China providing support.

“China is importing more coal and rebuilding stockpiles, which is giving strength to freight markets,” Christopher Nolan of Summit Maritime Corp. said during a presentation at the Cereals North America global grain conference in Winnipeg.

About 50 per cent of the market is used by the coal market, with only about 10 per cent grains, Nolan said.

It’s difficult to predict what the market is going to look like in 2014, he added, but noted there are a number of factors to which to pay attention that could impact the market.

Nolan noted demand won’t be an issue in 2014, as there will be plenty to go around — but there could be a problem with being able to handle the demand due to possible congestion and infrastructure problems.

There could be infrastructure-related problems in Brazil again, as there was in 2013, due to a lack of transportation options, Nolan added.

He noted some infrastructure problems being improved around the world, including the widening of the Panama Canal, which should be complete by early 2015.

It will also be important to pay attention to emerging countries which could start to increase their demand for ocean freight, Nolan said.

There is some opportunity in Southeast Asia and India, he added, though it could be halted by “red tape and bureaucracy.”

Fuel prices, one of the biggest factors in the ocean freight market, will also still be important to monitor.

With higher prices for fuel now, Nolan said, ships are travelling at economic, slower speeds, which means they are out of the market for longer periods of time.

But that may change if prices move lower or engines on new ships become more fuel-efficient.

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

Related story:
Lower ocean freight costs support grain exports, Feb. 13, 2012

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