Freight in the Asian palm market has risen in the past two months, underpinned by expectations of stronger exports to India in March and April and heightened intra-Asia activity in the specialty chemicals market, according to sources.
“Freight started rising from mid-February, Straits [of Malacca] to India is up almost $10/mt from then. It is likely to be temporary, but owners are using the opportunity to cash in,” a source told.
The source added that freight indications for May were still relatively high, suggesting optimism on the part of vessel owners, with 12,000 mt of palm oil from the Straits of Malacca to East Coast India quoted as high as $30s/mt compared with mid-$20s/mt a month ago, while cargo loaded from East Malaysia to ECI is was quoted as high as mid-$30s/mt.
“Charterers paid up last week, but we see a bit more resistance to these prices this week,” said a shipbroker.
Another shipbroker said: “The charterers were suddenly out in the market and are paying what are unthinkable amounts in my opinion. 12,000 mt palms from Straits to East Coast India was $25/mt up to last Thursday — we heard it fixed at $29/mt the very next day.”
A third shipbroker added that some owners were able to charge freight in the mid $30s/mt for full-range ECI for the same volume. A Malaysian producer reportedly fixed a vessel in the low-$30s/mt for 30,000 mt from two ports, one in the Straits and one in East Malaysia, to West Coast India, which was $5-$7.50/mt lower the week earlier.
“Charterers have been able to fix the same route in the $20s barely two weeks ago. I was quoted $27-$28/mt for 18,000 mt then for this voyage, so this should give you an indication of how tight tonnage is,” the shipbroker said.
The second shipbroker added: “Demand for specialty chemicals in both India and China as well as Southeast Asia is also strong and these cargoes typically pay higher freight and have lesser laytime. Thus palm oil charterers have no option but to pay up, the owners are not lacking for cargo at the moment.”
Shipbrokers said some charterers were expecting Indonesian export duty to be raised further to $144/mt in May which had led to the surge in shipments in April. April exports were also expected to be higher due to lower arrivals in February and March, especially from key buyer India.
“Indian buyers had bought forward due to the steep inverse in the market, and those who had not bought would have had to cover their requirements as destination stocks were low already,” said a trader.
Market participants expect April imports to India to range from 600,000-650,000 mt, while the Solvent Extractor’s Association of India said Indian imports were 526,463 mt in March. According to export data from cargo surveyors Intertek Testing Services, Malaysian palm exports for the first half of April are 15.4% higher on the month.
A vessel owner told S&P Global Platts that cargo inquiries were slower this week after the “rush” last week and said cargo parcels were smaller at 4,000-5,000 mt compared with 10,000-12,000 mt. “I would quote low $30s/mt for 12,000 mt straits to ECI for the laytime of 125/100 mt/hour, and very high 20s for 150/100 mt/hour,” said the source.