An 'Ultra' popular vessel for coal trading

A fairly new breed of bulk carrier is turning to be the darling of the Asian dry cargo market by promising more savings for charterers and shipowners thanks to higher carrying capacity and fuel efficiency, according to trade and industry sources this week. Launched in 2011, the Ultramax class bulker carrier -- designed to carry bulk cargoes including coal, iron ore, grain and cement -- is now preferred by coal traders and shipowners for its low hire and operating costs.
Many dry market watchers feel the Ultramax vessels would make a good choice for coal trading over Supramax vessels due to a number of reasons. For one, Asia's burgeoning coal trade led by strong import appetite from China, India and Thailand would see a greater call for vessels with the capacity to carry the incremental volumes.
Among Asian countries, China imported as much as 158 million mt of coal in total over January-June 2013, up 13% from the same period last year, the latest data from the General Administration of Customs showed.
India's coal imports this year is estimated to touch 165 million in 2013, up from imports of close to 135 million mt in 2012, according to Indian coal ministry sources.
Thailand, which imported 18.5 million mt of coal in 2012, is expected to import 20 million mt. About 60% of its estimated imports this year are fixed on a FOB basis which could provide contract of affreightment deals for the Ultramax service, according to a recent Fearnley's research report.
The larger capacity of Ultramax vessels -- of 57,000-66,000 dwt in size compared with Supramax ships which are 52,000-59,000 dwt -- will enable it to load up to the maximum 10% operational tolerance on a 55,000-mt dry bulk cargo.
In contrast, the Supramax's maximum loading capacity of 58,000-59,000 mt falls short of the 60,000-mt maximum size on a 55,000-mt cargo after factoring in the 10% tolerance.
"So here comes an Ultramax with 61,000-63,000 dwt, which can take the full load of 55,000 mt at plus or minus 10%... that is a 60,000 mt cargo," a Mumbai-based broker said.
"So you see on a 60,000 dwt versus an Supramax, there is a difference of almost 1,000 mt of cargo."
The higher cargo intake and lower fuel consumption of Ultramaxes -- about 20% lower than that of the standard Supramaxes -- makes the former more economical in coal trading where the margins are thin.
The fuel efficiency of these vessels is the result of slower or "economical" steaming speed by slightly sacrificing the power of the engines, a Singapore-based sales and purchase (SnP) shipbroker said.
"Coal traders would be better off having a ship which is slightly slower in current market conditions. Since dry bulk market is not a time bound market like the container sector, [a slower vessel] would help in the stock and sell approach in trading," the SnP broker said.
He also noted that for coal traders, "it is easy to get letters of credit for 50,000-60,000 mt size cargoes and get trades done. Thus, using an Ultramax helps in better cash flow than in the case of a Capesize vessel."
"The time charterer equivalent on the Ultramax vessels is in the $10,000-10,500/day levels while a three- to five-year time charter rate is between $12,000 and $12,500/day," the SnP broker said, adding that a newly-delivered 61,000 dwt Ultramax was fixed last week at $11,500/day for one-year time charter.
"This entry cost is very cheap and the returns are higher compared with a Handymax or a Capesize (150,000 dwt) dry bulk vessel," he noted.
IDEAL FOR ASIAN TRADE
The technical and design features introduced on the Ultramaxes make them ideal for Asian trade. With the ship's overall length also called LOA at 199 meters Ultramax, it is slightly smaller than the Panamaxes that come under the 60,000-80,000 dwt class and comes with on board gears or cranes.
All ports that can handle 60,000-70,000 mt vessels can easily handle Ultramaxes, whose draft ranges between 13-14 meters, according to an Indian shipbroker based in Chennai.
In coal transportation, charterers only give cargo specifications and do not emphasize on what type of ship they want while the shipowners would try to match the ships based on the range of the charterer's cargo quantity.
"With no draft restrictions, freight rates will benefit as the vessel can load higher quantity than a Supramax," the Chennai-based broker said.
"In Indonesia, most of them are anchorage ports -- where draft should not be a problem but exceptions exist."
While the charterer's interest in the Ultramax bulkers are burgeoning, not many vessels belonging to this class are currently available in the spot market, market sources say.
There would be around 300 Ultramax bulkers in the market by 2014, or close to 9% of the global Handymax or Supramax fleet, a source tracking the dry bulk market said.
Shipping analysts consider Ultramax vessels as up-sized Handymax or Supramax (between 40,000 dwt to 59,000 dwt) class vessels.
However, with these vessels gaining popularity, some Ultramax owners were looking for "ridiculous numbers" as freight rates, a Singapore-based shipbroker said, adding at time these vessels are more expensive than hiring a gearless Panamax with floating crane charges.
There have been fixtures for Supramax at around $13.50/mt from South Kalimantan in Indonesia to Mundra port on the west coast of India, with a discharge rate of $25,000/day.
In comparison, Ultramaxes should be around $12.80/mt, according to the Singapore-based shipbroker, but on a time charter basis, some owners demand a premium of $2,000-3,000/day over that of a Supramax.
Source: Platts