keywords :
A raft of new export tax measures imposed by India on steel and raw materials used for its production is expected to pressure the Supramax as well as Handysize dry bulk freight rates out of the east and west coast of the country, shipping market participants told S&P Global Commodity Insights.
India announced on May 21 a 45% export tax on iron ore pellets and 15% on steel exports, which is expected to dampen the bulker freight rates for outbound cargoes.
Indian steel export volumes stood at around 3.9 million mt during January-April, up 14% on the year, according to data from S&P Global.
“There’s a lot of confusion at the moment but [iron ore] cargoes are not going through as customs informed buyers to pay higher duties,” a ship-operating source told S&P Global, adding that there were no Indian iron ore export cargoes as charterers held off from moving these cargoes after the new levies came into effect.
The new duties may also see shipowners being reluctant to fix cargoes destined for India or raise their offers for inbound freight significantly as they face potential risks of outbound cargoes drying up.
“East coast India could become a graveyard for ships to sail into,” said a Singapore-based ship-operator source.
With India also banning the export of wheat and sugar, Supramax and Handysize bulkers looking for fresh employment out of the Indian coasts are expected to struggle in the short-term, market participants said.
Given the current scenario, Supramax ships available for employment out of east coast India may have to ballast to other regions such as Indonesia or South Africa in search of coal cargoes from these countries. The first ship-operator source also added that many Supramax ships opening in India were ballasting towards Singapore after the announcement.
The bigger Panamax ships are less adversely affected than Supramax vessels from the higher iron ore export duties. “I think that [higher duties] will affect Supramax since Panamax ships are mostly fixing east coast South American grain from there [after discharging cargoes in India],” said an India-based shipbroker.
Some market participants said the higher export duties have had limited impact on shipping rates since Indian iron ore export volumes to China were disappointing in the past few months.
Indian iron ore export volumes to China stood at around 5.3 million mt in January-April, down 71% from around 18.4 million mt during January-April 2021, according to China customs data, which has resulted in activity drying up on the key India-China iron ore route.
“[Indian] Iron ore exports [to China] have been negligible over the last six months, and [higher duties] will kill the export market but the impact on shipping might not be significant,” said a third ship-operating source.
Source: Platts