Coal freights offered by handymax and panamax bulk carriers carrying the commodity from Indonesia to China have slumped to far below the ideal level.
In early July 2010, coal freight from Indonesia to Southern China slumped US$3 per ton from US$20 per ton in June 2010 to US$17 per ton, while coal freight from Indonesia to Northern China dropped by 15% from US$27 per ton in June to US$22 per ton-US$23 per ton in July 2010.
Co-Chairperson of Maritime Industry Empowerment at the Indonesian National Shipowners' Association (INSA) Ibnu Wibowo said, as reported by Bisnis.com today, the freights to China had not yet changed until August 2010.
"Freights in August are still low, not too far different from July," he said yesterday.
Ibnu, President Director of PT PANN Multifinance, explained the freights could further drop after China got alternative coal supply from South Africa.
However, it could not yet be determined whether freights would continue to slump until the yearend.
Ideal freights Co-Chairperson for International Partnership and Relations at the INSA Djoni Sutji explained the ideal coal freights from Indonesia to Northern and Southern China were US$30 per ton and US$25 per ton, respectively."The current freights are far lower than the ideal freights."
He suspected the delivery of 2,000 bulk carriers of handymax and panamax types from 2010 to 2012 from China, South Korea, and Japan, affected the freights. "Besides, China has also started reducing coal and iron ore supplies."
Despite the slumping freights, the export coal transportation sector was still attractive since the volume might reach 220 million tons per annum, raising a total freight revenue of US$6.6 billion. Currently, 90% of Indonesia's coal export is carried by foreign-flagged carriers.
In the meantime, the number of national bulk carriers catering to the domestic market is only 34 units consisting of 13 units of handymax carrier (an average carrying capacity of more than 40,000 tons), 15 units of panamax carriers (80,000 tons), and six handysize carriers.
Ibnu argued the government needed to implement the domestic transporter obligation (DTO) policy, which required end users to allocate export transportation to domestic transportation companies to prevent foreign exchange from flowing overseas.
"The policy will stimulate the shipping sector after the cabotage principle program. According to him, the DTO policy requiring 30% of the total coal export be carried by domestic shippers could save US$1.98 billion in foreign exchange."
He added the policy would also stimulate the national shipyard industry since it would force the shipping industry to procure handymax carriers.
Disclosure: No position at the stock mentioned above.
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