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Friday, 21 May 21
MARKET INSIGHT - INTERMODAL
 The dry bulk market’s counter seasonal surge so far into the first half of the year -in a sort of 2010 manner - and Capesize’s recent retreat from almost 11-year highs is raising the question whether a counter seasonal market drop is in the cards during the 2H of the year in the context of a broader market upcycle.
While the market is multi-factorial with fundamentals, sentiment and inter-freight correlation amongst sizes feeding one another, the current Cape market correction was exacerbated after Chinese authorities intervened to curb iron ore price speculation. A subsequent sharp reversal of iron ore and steel prices from record highs and FFAs selling off contributed to pulling the Cape market lower, while the smaller segments were unaffected. It is well known that Capesize is characterized by the highest freight volatility and even though that we expect volatility to keep up, we are not convinced that this is the turning point for a prolonged market correction. Fundamentals are likely to outlast volatility and we cannot exclude that the next leg higher will find a much higher peak over the next two quarters with cargo export seasonality emerging stronger across all commodities and particularly iron ore.
Iron Ore exports to accelerate in 2H2021; the urge for higher quality iron ore is likely to intensify: China’s iron ore inventories have been destocked by more than 8.0 million tons over the past month amid elevated demand and major iron ore miners running behind their export guidance, likely to trigger a new restocking wave. Forward iron ore prices on the curve, even if spot iron ore prices softened from here, incentivize iron ore miners to accelerate exports during the 2H2021.
So far, China’s emissions regulations on steel production were unsuccessful in containing it. Record high steel mills margins incentivized higher steel production ex. strictly regulated Tangshan with YTD Jan-Apr crude steel production up +15.6% y-o-y. If steel production controls intensify during the second half, this will further increase demand for high quality iron ore, in order to optimize the steel process. In addition, the scrap scramble from steel mills outside China could put a lid on China’s increasing scrap usage in the steel mix in the short term.
Macro indicators continue to be bullish for dry bulk demand in the next quarters: China’s Property new starts - a leading indicator of steel demand – have increased +19.0% YTD in 2021, while April’s y-o-y growth slowed down at +9.3% y-o-y. Any slow down in the growth of new floor space under construction will not immediately translate into lower steel and iron ore demand; developers are likely to accelerate property completions from now on continuing to drive demand.
Other than China, global steel production and demand conditions are robust, reflected by record high steel prices both in the US and Europe. Spot and forward steel prices have surged, giving steel mills the opportunity to hedge at profitable levels, therefore global steel production will continue to expand.
Global manufacturing PMIs are at 10 year cycle highs, despite having softened during April and lead demand for commodities. Oil prices have been lagging the rise in other commodities and are projected to increase significantly over the next two quarters, which could provide further support to the dry bulk market via - and not limited to - the bunker-$ per ton freight- speed relation. Fundamentals of other dry bulk commodities are also robust, with electricity generation set to accelerate over the summer in addition to increased industrial production, while China’s domestic coal production is underperforming amid mine safety checks.
Early signs of credit tightening: Following a record high stimulus over the previous year, latest credit growth figures in China indicate a slow-down in credit supply during April, however as long as inflation at the producers level accelerates the tightening impact is muted in our view. China’s potential deleveraging from here should not be expected to have a negative effect on dry bulk commodities demand, until credit tightening starts to interfere with producers’ profit margins.
Last but not least, China’s political tension with Australia is more likely to translate into higher ton-miles in the medium term, with Atlantic production of high-quality iron ore and coal substituting for any potential loss of Australia’s market share. In the longer term, China’s 14th year plan that calls for an increase of electric arc furnaces (scrap) in steel production to 15-20% by 2025 and self sufficiency share of iron ore above 45% will certainly have an impact in the way iron ore is procured with China having higher control over both supply and iron ore prices.
by Tamara Apostolou,
Research Analyst
Compiled by:
Intermodal Research & Valuations
Analysts:
Ms Eva Tzima
Mr.George Panagopoulos
Disclaimer and legal disclosure: For any further queries please do not hesitate to contact our Research & Valuations Department. The information contained in this report has been obtained from various sources, as reported in the market. Intermodal Shipbrokers Co. believes such information to be factual and reliable without making guarantees regarding its accuracy or completeness. Whilst every care has been taken in the production of the above review, no liability can be accepted for any loss or damage incurred in any way whatsoever by any person who may seek to rely on the information and views contained in this material. This report is being produced for the internal use of the intended recipients only and no reproducing is allowed, without the prior written authorization of Intermodal Shipbrokers Co.
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Saturday, 08 May 21
THE COAL-TO-RENEWABLES TRANSITION TAKES OFF - IEEFA
Pre-Biden changes underscore coming 10-year wave of coal plant retirements
The traditional S-curve growth exhibited by disruptive te ...
Friday, 07 May 21
CHINA'S TOTAL COAL IMPORTS FOR 2020 REACHED A VOLUME OF 304 MILLION TONS - ASSOCARBONI
Our benchmarks, manufacturing Countries like China, Germany, Japan, India, South Korea and Taiwan will continue to use a mix of coal and nuclear to ...
Friday, 07 May 21
SEABORNE WORLD COAL TRADE CLOSED 2020 IN NEGATIVE - ASSOCARBONI
Coal confirmed its leadership as leading fuel for electricity generation also in 2020, accounting for 38% of overall production. For the first time ...
Friday, 07 May 21
INDONESIA'S THERMAL COAL EXPORTS IN 2020 DECREASED BY 13%; INDIA REMAINED THE TOP DESTINATION FOR INDONESIAN COAL - ASSOCARBONI
An increase in seaborne trade is forecast for 2022, driven by markets in Southeast Asia, where growing demand for coal from Bangladesh, the Philipp ...
Friday, 30 April 21
HIGH-SULPHUR FUEL OIL SALES REBOUND AFTER PRE-IMO 2020 - BIMCO
HSFO sales are up 47.2% from Q1 2020, reaching 3.1m tonnes. This is however still less than a third of high-sulphur fuel sales in Q1 2019, before t ...
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- Bharathi Cement Corporation - India
- Ministry of Finance - Indonesia
- Orica Australia Pty. Ltd.
- Heidelberg Cement - Germany
- Bukit Makmur.PT - Indonesia
- Siam City Cement - Thailand
- Carbofer General Trading SA - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Transport, Egypt
- Edison Trading Spa - Italy
- Bangladesh Power Developement Board
- Madhucon Powers Ltd - India
- Mercuria Energy - Indonesia
- Intertek Mineral Services - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- IHS Mccloskey Coal Group - USA
- Indian Energy Exchange, India
- ICICI Bank Limited - India
- Uttam Galva Steels Limited - India
- Miang Besar Coal Terminal - Indonesia
- Meralco Power Generation, Philippines
- PTC India Limited - India
- Bulk Trading Sa - Switzerland
- Timah Investasi Mineral - Indoneisa
- Larsen & Toubro Limited - India
- Maheswari Brothers Coal Limited - India
- Siam City Cement PLC, Thailand
- MS Steel International - UAE
- Iligan Light & Power Inc, Philippines
- Energy Development Corp, Philippines
- Tamil Nadu electricity Board
- Australian Coal Association
- Maharashtra Electricity Regulatory Commission - India
- Makarim & Taira - Indonesia
- Central Java Power - Indonesia
- Goldman Sachs - Singapore
- Jaiprakash Power Ventures ltd
- Coastal Gujarat Power Limited - India
- Kideco Jaya Agung - Indonesia
- Essar Steel Hazira Ltd - India
- Thiess Contractors Indonesia
- Altura Mining Limited, Indonesia
- Rashtriya Ispat Nigam Limited - India
- Barasentosa Lestari - Indonesia
- Global Green Power PLC Corporation, Philippines
- Planning Commission, India
- Semirara Mining and Power Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Mercator Lines Limited - India
- Africa Commodities Group - South Africa
- Electricity Authority, New Zealand
- The State Trading Corporation of India Ltd
- Kepco SPC Power Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Vizag Seaport Private Limited - India
- Global Business Power Corporation, Philippines
- Ambuja Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Kumho Petrochemical, South Korea
- Dalmia Cement Bharat India
- Independent Power Producers Association of India
- Kalimantan Lumbung Energi - Indonesia
- PNOC Exploration Corporation - Philippines
- Commonwealth Bank - Australia
- New Zealand Coal & Carbon
- VISA Power Limited - India
- Indika Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- TeaM Sual Corporation - Philippines
- Vedanta Resources Plc - India
- Price Waterhouse Coopers - Russia
- Singapore Mercantile Exchange
- Malabar Cements Ltd - India
- Metalloyd Limited - United Kingdom
- Kartika Selabumi Mining - Indonesia
- Indonesian Coal Mining Association
- Kapuas Tunggal Persada - Indonesia
- Star Paper Mills Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Banpu Public Company Limited - Thailand
- SN Aboitiz Power Inc, Philippines
- Sojitz Corporation - Japan
- Toyota Tsusho Corporation, Japan
- Kobexindo Tractors - Indoneisa
- Agrawal Coal Company - India
- Sarangani Energy Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- ASAPP Information Group - India
- Australian Commodity Traders Exchange
- Jindal Steel & Power Ltd - India
- Directorate Of Revenue Intelligence - India
- Gujarat Mineral Development Corp Ltd - India
- CIMB Investment Bank - Malaysia
- CNBM International Corporation - China
- Port Waratah Coal Services - Australia
- Baramulti Group, Indonesia
- Coal and Oil Company - UAE
- Oldendorff Carriers - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- The University of Queensland
- Wood Mackenzie - Singapore
- GVK Power & Infra Limited - India
- Karaikal Port Pvt Ltd - India
- Orica Mining Services - Indonesia
- Formosa Plastics Group - Taiwan
- White Energy Company Limited
- South Luzon Thermal Energy Corporation
- Cigading International Bulk Terminal - Indonesia
- Minerals Council of Australia
- Bukit Baiduri Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Posco Energy - South Korea
- Holcim Trading Pte Ltd - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Economic Council, Georgia
- Aboitiz Power Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- Aditya Birla Group - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- PowerSource Philippines DevCo
- Thai Mozambique Logistica
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ind-Barath Power Infra Limited - India
- India Bulls Power Limited - India
- Ministry of Mines - Canada
- Medco Energi Mining Internasional
- Chamber of Mines of South Africa
- Therma Luzon, Inc, Philippines
- San Jose City I Power Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Wilmar Investment Holdings
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sical Logistics Limited - India
- SMG Consultants - Indonesia
- LBH Netherlands Bv - Netherlands
- Petron Corporation, Philippines
- SMC Global Power, Philippines
- Indian Oil Corporation Limited
- Ceylon Electricity Board - Sri Lanka
- GMR Energy Limited - India
- Sindya Power Generating Company Private Ltd
- OPG Power Generation Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Latin American Coal - Colombia
- Leighton Contractors Pty Ltd - Australia
- London Commodity Brokers - England
- International Coal Ventures Pvt Ltd - India
- Central Electricity Authority - India
- McConnell Dowell - Australia
- Global Coal Blending Company Limited - Australia
- Power Finance Corporation Ltd., India
- Energy Link Ltd, New Zealand
- Mjunction Services Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Rio Tinto Coal - Australia
- Georgia Ports Authority, United States
- Attock Cement Pakistan Limited
- Sakthi Sugars Limited - India
- Indogreen Group - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Sree Jayajothi Cements Limited - India
- Krishnapatnam Port Company Ltd. - India
- Parliament of New Zealand
- Asmin Koalindo Tuhup - Indonesia
- Romanian Commodities Exchange
- Indo Tambangraya Megah - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Marubeni Corporation - India
- Bhushan Steel Limited - India
- Eastern Coal Council - USA
- Merrill Lynch Commodities Europe
- Antam Resourcindo - Indonesia
- Standard Chartered Bank - UAE
- Binh Thuan Hamico - Vietnam
- Mintek Dendrill Indonesia
- Simpson Spence & Young - Indonesia
- Salva Resources Pvt Ltd - India
- Coalindo Energy - Indonesia
- Deloitte Consulting - India
- Interocean Group of Companies - India
- Xindia Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- Semirara Mining Corp, Philippines
- Manunggal Multi Energi - Indonesia
- Pendopo Energi Batubara - Indonesia
- Tata Chemicals Ltd - India
- Samtan Co., Ltd - South Korea
- Eastern Energy - Thailand
- IEA Clean Coal Centre - UK
- Kohat Cement Company Ltd. - Pakistan
- Savvy Resources Ltd - HongKong
- Riau Bara Harum - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Grasim Industreis Ltd - India
- Lanco Infratech Ltd - India
- Trasteel International SA, Italy
- Borneo Indobara - Indonesia
- Straits Asia Resources Limited - Singapore
- Anglo American - United Kingdom
- Cement Manufacturers Association - India
- Electricity Generating Authority of Thailand
- Chettinad Cement Corporation Ltd - India
- Bhoruka Overseas - Indonesia
- Renaissance Capital - South Africa
- Kaltim Prima Coal - Indonesia
- Parry Sugars Refinery, India
- Directorate General of MIneral and Coal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Videocon Industries ltd - India
- Gujarat Sidhee Cement - India
- Bhatia International Limited - India
- The Treasury - Australian Government
- PetroVietnam Power Coal Import and Supply Company
- Sinarmas Energy and Mining - Indonesia
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