China's coastal coal freight rates extended gains early last week amid released vessel demand and elevated operating costs. However, limited demand gradually weakened the upward momentum, leading to slight corrections later in the week.

The China Coastal Coal Freight Composite index, which tracks rates for vessels carrying coal from northern China ports to ports in the east and south, climbed 12.44% from the week before to 1,094.6 points on July 24, according to the Shanghai Shipping Exchange. It jumped 36.48% compared to month-ago levels and 51.86% from a year ago.

Last week, high temperatures significantly boosted air-conditioning demand, supporting thermal power generation. Meanwhile, hydropower output declined as reservoirs prioritized flood control, reducing substitution from hydropower and jointly driving higher coal consumption at power plants.

The earlier typhoon-led disruptions held up vessel arrivals at northern ports, while downstream demand saw a concentrated release once transport links resumed. Coupled with prolonged demurrage caused by tight stockyard capacity at southern China ports, vessel turnover was affected and availability tightened, pushing up freight rates across most routes.

Meanwhile, rising global oil prices, driven by escalating Middle East tensions, further increased operating costs and provided additional support to freight rates.

However, power plant demand remained limited. High downstream inventories and signs of coal price declines at northern ports discouraged end-user purchases and slowed shipping activity. Loose supply-demand fundamentals weighed on freight rates, resulting in mild corrections later in the week.

In contrast, freight rates on routes to southern China rebounded after brief declines, supported by delayed unloading caused by high inventories at southern ports and vessel disruptions from Typhoon Noul.

During the week, all shipping routes increased 3.3-7.0 yuan/t compared to week-ago levels. The freight rate for the 50,000-60,000 DWT vessels carrying coal from Qinhuangdao to Guangzhou port rose 6.0 yuan/t from a week ago to 58.4 yuan/t on July 24, while that for 60,000-70,000 DWT vessels on the same route advanced 7.0 yuan/t to 54.2 yuan/t.

Internationally, the Baltic Dry Index (BDI), tracking rates for ships carrying dry bulk commodities, stood at 2,743 points on July 24, edging down 0.33% compared to 2,752 points a week ago.

The Asian market remained subdued amid weak buying interest. Panamax vessels from Indonesia to China retreated $0.36/t from the previous week to $9.06/t on July 24. Supramax freight rates on the route hit $12.64/t, ticking up $0.05/t compared to a week earlier, while Capesize vessels from Australia to China decreased $0.34/t week on week to $17.63/t.

Looking ahead, coastal coal freight rates are expected to continue rising in the near term, supported by peak season coal demand, adverse weather disruptions and shipowners' preference for overseas routes.