China’s import restrictions on coal spoils the party for Panamaxes

Regulation on imports dents employment of Panamaxes

The more stringent regulation on coal imports is adversely impacting vessel demand.

Given that the Chinese government intends to keep annual coal imports in 2018 equal to those of 2017, a mere 42 million tonnes of coal and lignite can be imported in the last quarter of 2018.

This will employ approximately 148 vessels — a loss of 41 vessels over those employed in fourth-quarter 2017.

A bearish outlook for Chinese coal imports and a consequent fall in the demand for Panamax vessels are undoubtedly influencing freight rates. In November voyage rates on Australia-China and Indonesia-China routes dropped by 10-12% on a monthly basis, with December also not looking promising as restrictions are unlikely to ease until 2019.

Hope still exists

But we believe disruption in the Panamax market will be temporary as China’s imports should rise in the early months of 2019, as cold weather is likely to keep energy consumption high. Furthermore, low coal prices could lift imports of other major consumers such as India.