The panamax market saw big advances on Tuesday on the back of supply-demand imbalances in the Atlantic, a couple of six-figure fixtures and red-hot sentiment in freight derivatives.

Arrow Shipbroking Group's research team told TradeWinds it has been an "impressive" start to the year for the segment, with the Baltic Panamax Index's weighted time charter average reaching its strongest seasonal level since 2010.

The panamax 5TC weighted average rate was assessed on Tuesday at $19,549 per day, up by $1,573 since Monday.

"A pick up in coal demand in Europe coupled with tight thermal coal supplies in the Atlantic are partly fuelling the rally," Arrow told TradeWinds.

Breaking the ice

"Robust grain shipments out of the US Gulf are attracting an increased number of ballasters into the area.

"With the soybean season upon us, the situation is similar in ECSA [east coast South America] with around 103 panamaxes currently waiting to load compared to 66 at the same period in 2020."

This has left the North Atlantic region with a shortage of panamax tonnage at a time of healthy demand for coal exports from the Baltic, Arrow said.

But it was sea-ice conditions that really set the panamax market ablaze on Tuesday, with two NYK Line bulkers reportedly fixed at day rates of $100,000 or more for 20-day trips.

"Rates are being pushed up even higher as sea ice conditions in the Gulf of Finland have deteriorated over the past week, leading to hefty premiums being paid for the few available ice-classed vessels or those willing to breach IWL [Institute Warranties Limits]," Arrow told TradeWinds.

"Whilst the sea-ice situation has a limited impact on the overall panamax market, it is providing a welcome boost to sentiment."

The 82,100-dwt kamsarmax NBA Magritte (built 2013) was reported fixed at $110,000 per day for a trip from Liverpool, north-western England, loading from 23 February.

The 95,500-dwt NBA Van Dyck (built 2014) will reportedly be earning $100,000 per day for a voyage from Ijmuiden in the Netherlands, loading from 23 February.

The super-sized day rates are because the two bulkers will be breaching IWL, the geographical regions within which vessels can operate without incurring additional hull-and-machinery insurance premiums.

The two vessels, which are not ice-classed, will redeliver in Skaw-Gibraltar or Brazil.

Ice in the west of the Gulf of Finland is up to 25cm thick and in the east up to 35cm thick, according to Baltic Sea Ice Services on Tuesday.

Futures market heats up

The huge numbers reported for the IWL-breaching bulkers, as well as tight tonnage in the North Atlantic, have driven up sentiment in the market for panamax forward freight agreements (FFAs), according to Freight Investor Services (FIS), the world's biggest FFA broker.

Sentiment has been improving over the past couple of trading days, but Tuesday's freight derivatives market saw this translated into big gains in contract pricing.

"On the physical market we see tonnage tight in both basins, with the North Atlantic in particular driving sentiment up due to some huge numbers being fixed for breachers [of IWL] for Baltic ice trades," Kerry Deal, FIS' head of business development, told TradeWinds.

The key 5TC panamax contract for March was the day's big winner, settling $4,119 higher than Monday's level, at $22,586 per day.

The April contract likewise settled $2,934 higher at $21,064 per day, with notable gains seen across all the other traded panamax contracts.

Deal said panamaxes have been "in the driving seat" in the physical and paper markets over the past week.

"Panamaxes are seasonally bullish anyway at this time of year, and with little prospect of a sudden reversal in the physical market, we’ve seen sentiment on the paper shift and something of a short squeeze develop in the rush to cover exposure, with the market gaping up on high trading volumes," he explained.