Port operations in China, South Korea and Japan are being disrupted by winds and rain from Typhoon Hinnamnor, affecting vessel operations and pushing up freight rates.
Changjiangkou port along China's east coast is closed until further notice, which has affected dry bulk vessel discharges, a market participant told Argus. The port is an important hub for coal, iron ore and grain.
The typhoon is now moving northwards from China's east coast and is expected to reach South Korea on 6 September, according to the National Meteorological Centre of the China Meteorological Administration.
Hinnamnor could force ships into storm anchorages and damage infrastructure at key South Korean base oil ports such as Onsan and Ulsan, which will hamper vessels that are discharging cargoes.
The ports of Onsan, where S-Oil has a 580,000 b/d refinery, and Ulsan, where SK operates a 840,000 b/d refinery, are shut ahead of the typhoon's arrival and plan to reopen on 7 September, the South Korean refiners said. The closures have already delayed some base oil loadings. S-Oil can produce 41,000 b/d of the Group I, Group II and Group III base oil grades, while SK Lubricants — the base oil unit of SK — can produce 26,000 b/d of the Group III premium grade.
The Onsan and Ulsan port terminals are still allowing tankers to re-enter port limits by 6 September evening to avoid sudden delays to berthing, according to shipowners.
Hinnamnor has also brought heavy rainfall and strong winds, especially to Japan's Kyushu and Okinawa regions, affecting transportation services in the wider southern and western Japan areas. The typhoon is so far discouraging Japanese bunker fuel traders from making deals for delivery in western Japan this week.
Some deliveries scheduled for western Japan have already been cancelled or postponed, with the impact expected to last at least for the rest of this week, traders said. The impact on the Tokyo bay area is limited for now. The Tokyo bay area is home to heavy industries such as petrochemical plants, steel production and refineries.
Freight rates rise
Expected delays and uncertainty over vessel schedules because of the typhoon have driven up freight rates, already supported by firmer demand and tighter ship supplies since last week.
Lump-sum rates for Medium Range (MR) 35,000t shipments from South Korea to Singapore, and to the US west coast, rose by $125,000 and $300,000 to $1.375mn and $2.95mn on 5 August from $1.25mn and $2.65mn on 29 August respectively. MR rates from South Korea to Australia also rose by WS50 to WS425 from WS375 during the same time period.
Freight rates could be volatile in the short term as delays are occurring at both loading and discharge ports because of Hinnamnor, a clean freight market participant said. This could lead to some vessel replacements, which may push rates higher.
The Indonesia-south China rate for Pacific Panamaxes increased by 60¢/t to $8.85/t on 5 September, primarily because of supply tightness caused by delivery delays and halts to port operations.
Shipowners have increased their offer levels, while charterers with prompt dates are paying up for vessels with firm schedules. Forward freight agreements and bunker prices also continue to edge up, further supporting the rise in rates.
