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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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Wednesday, 28 April 21
MARKET INSIGHT - INTERMODAL
Despite the current challenges as a result of the global pandemic, 2021 is turning out to be a landmark year for the iron ore market with spot pric ...
Monday, 26 April 21
CHINA TO FURTHER CUT COAL USE IN 2021 - XINHUA
China aims to reduce the share of coal in its energy mix to less than 56% this year, according to a guideline released by the National Energy Admin ...
Wednesday, 21 April 21
COAL FINANCING COSTS HAVE SURGED IN PAST 10 YEARS - UNIVERSITY OF OXFORD - THE GUARDIAN
Coal financing costs have surged over the last decade as investors demand returns four times as high as the payoff required from renewable energy p ...
Tuesday, 20 April 21
US DOLLAR LIBOR TRANSITION IN ASSET FINANCE - WHERE ARE WE NOW? - WATSON FARLEY & WILLIAMS
Since our last article, there has been a raft of regulatory and market body announcements relating to the transition away from LIBOR and the follow ...
Sunday, 18 April 21
INDONESIA LIKELY TO WITNESS 119 OIL AND GAS PROJECTS STARTS ACROSS VALUE CHAIN BY 2025, SAYS GLOBALDATA
Indonesia is expected to witness 119 oil and gas projects commencing their operations across value chain during 2021-2025, accounting for 6% of the ...
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- Mjunction Services Limited - India
- South Luzon Thermal Energy Corporation
- Bharathi Cement Corporation - India
- Siam City Cement PLC, Thailand
- Attock Cement Pakistan Limited
- Kapuas Tunggal Persada - Indonesia
- The Treasury - Australian Government
- Thai Mozambique Logistica
- Vedanta Resources Plc - India
- Tata Chemicals Ltd - India
- Barasentosa Lestari - Indonesia
- Electricity Authority, New Zealand
- Carbofer General Trading SA - India
- Directorate Of Revenue Intelligence - India
- Pendopo Energi Batubara - Indonesia
- Mintek Dendrill Indonesia
- Uttam Galva Steels Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Sarangani Energy Corporation, Philippines
- Economic Council, Georgia
- PNOC Exploration Corporation - Philippines
- Bhatia International Limited - India
- Central Java Power - Indonesia
- Trasteel International SA, Italy
- Holcim Trading Pte Ltd - Singapore
- Formosa Plastics Group - Taiwan
- Bulk Trading Sa - Switzerland
- Sree Jayajothi Cements Limited - India
- Electricity Generating Authority of Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Medco Energi Mining Internasional
- Latin American Coal - Colombia
- Marubeni Corporation - India
- Bukit Makmur.PT - Indonesia
- Cement Manufacturers Association - India
- Billiton Holdings Pty Ltd - Australia
- CIMB Investment Bank - Malaysia
- Edison Trading Spa - Italy
- Vijayanagar Sugar Pvt Ltd - India
- Wilmar Investment Holdings
- Bukit Baiduri Energy - Indonesia
- Africa Commodities Group - South Africa
- Karbindo Abesyapradhi - Indoneisa
- Asmin Koalindo Tuhup - Indonesia
- CNBM International Corporation - China
- Goldman Sachs - Singapore
- Simpson Spence & Young - Indonesia
- Georgia Ports Authority, United States
- Kobexindo Tractors - Indoneisa
- MS Steel International - UAE
- Binh Thuan Hamico - Vietnam
- Central Electricity Authority - India
- Sojitz Corporation - Japan
- New Zealand Coal & Carbon
- Eastern Energy - Thailand
- Energy Development Corp, Philippines
- Cigading International Bulk Terminal - Indonesia
- Ambuja Cements Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sakthi Sugars Limited - India
- OPG Power Generation Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- LBH Netherlands Bv - Netherlands
- Rashtriya Ispat Nigam Limited - India
- Orica Australia Pty. Ltd.
- Metalloyd Limited - United Kingdom
- Maheswari Brothers Coal Limited - India
- Kideco Jaya Agung - Indonesia
- GVK Power & Infra Limited - India
- PowerSource Philippines DevCo
- Independent Power Producers Association of India
- International Coal Ventures Pvt Ltd - India
- SMC Global Power, Philippines
- Manunggal Multi Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- Eastern Coal Council - USA
- Power Finance Corporation Ltd., India
- Anglo American - United Kingdom
- Malabar Cements Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Australian Coal Association
- Bhushan Steel Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kaltim Prima Coal - Indonesia
- Coastal Gujarat Power Limited - India
- Rio Tinto Coal - Australia
- White Energy Company Limited
- Minerals Council of Australia
- Ministry of Transport, Egypt
- Kumho Petrochemical, South Korea
- Australian Commodity Traders Exchange
- SN Aboitiz Power Inc, Philippines
- India Bulls Power Limited - India
- Gujarat Sidhee Cement - India
- Thiess Contractors Indonesia
- Jorong Barutama Greston.PT - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Wood Mackenzie - Singapore
- Indo Tambangraya Megah - Indonesia
- Coalindo Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Banpu Public Company Limited - Thailand
- Krishnapatnam Port Company Ltd. - India
- Madhucon Powers Ltd - India
- Riau Bara Harum - Indonesia
- The State Trading Corporation of India Ltd
- Savvy Resources Ltd - HongKong
- VISA Power Limited - India
- Bhoruka Overseas - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Antam Resourcindo - Indonesia
- Bangladesh Power Developement Board
- Xindia Steels Limited - India
- Kartika Selabumi Mining - Indonesia
- Samtan Co., Ltd - South Korea
- Interocean Group of Companies - India
- Petrochimia International Co. Ltd.- Taiwan
- Directorate General of MIneral and Coal - Indonesia
- Global Green Power PLC Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Meralco Power Generation, Philippines
- Port Waratah Coal Services - Australia
- Planning Commission, India
- Salva Resources Pvt Ltd - India
- Ministry of Mines - Canada
- Orica Mining Services - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- The University of Queensland
- Indogreen Group - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Indonesian Coal Mining Association
- ASAPP Information Group - India
- Merrill Lynch Commodities Europe
- Coal and Oil Company - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kepco SPC Power Corporation, Philippines
- Makarim & Taira - Indonesia
- Mercator Lines Limited - India
- Parliament of New Zealand
- Offshore Bulk Terminal Pte Ltd, Singapore
- AsiaOL BioFuels Corp., Philippines
- Borneo Indobara - Indonesia
- Therma Luzon, Inc, Philippines
- Indian Energy Exchange, India
- Aboitiz Power Corporation - Philippines
- Larsen & Toubro Limited - India
- Globalindo Alam Lestari - Indonesia
- McConnell Dowell - Australia
- Kalimantan Lumbung Energi - Indonesia
- Jindal Steel & Power Ltd - India
- Essar Steel Hazira Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Grasim Industreis Ltd - India
- Parry Sugars Refinery, India
- TeaM Sual Corporation - Philippines
- Lanco Infratech Ltd - India
- Renaissance Capital - South Africa
- Price Waterhouse Coopers - Russia
- Jaiprakash Power Ventures ltd
- Sinarmas Energy and Mining - Indonesia
- Chettinad Cement Corporation Ltd - India
- Oldendorff Carriers - Singapore
- Romanian Commodities Exchange
- Indika Energy - Indonesia
- Intertek Mineral Services - Indonesia
- European Bulk Services B.V. - Netherlands
- Bayan Resources Tbk. - Indonesia
- GAC Shipping (India) Pvt Ltd
- Heidelberg Cement - Germany
- Aditya Birla Group - India
- Straits Asia Resources Limited - Singapore
- Energy Link Ltd, New Zealand
- Agrawal Coal Company - India
- Petron Corporation, Philippines
- Baramulti Group, Indonesia
- SMG Consultants - Indonesia
- London Commodity Brokers - England
- Timah Investasi Mineral - Indoneisa
- IHS Mccloskey Coal Group - USA
- Sical Logistics Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Commonwealth Bank - Australia
- Semirara Mining Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PTC India Limited - India
- Dalmia Cement Bharat India
- GMR Energy Limited - India
- Karaikal Port Pvt Ltd - India
- Tamil Nadu electricity Board
- Global Business Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Indian Oil Corporation Limited
- ICICI Bank Limited - India
- Deloitte Consulting - India
- Ministry of Finance - Indonesia
- San Jose City I Power Corp, Philippines
- Posco Energy - South Korea
- Star Paper Mills Limited - India
- Altura Mining Limited, Indonesia
- IEA Clean Coal Centre - UK
- Gujarat Mineral Development Corp Ltd - India
- Videocon Industries ltd - India
- Vizag Seaport Private Limited - India
- Standard Chartered Bank - UAE
- Siam City Cement - Thailand
- Sindya Power Generating Company Private Ltd
- Mercuria Energy - Indonesia
- Singapore Mercantile Exchange
- Meenaskhi Energy Private Limited - India
- Ind-Barath Power Infra Limited - India
- Semirara Mining and Power Corporation, Philippines
- Chamber of Mines of South Africa
- Toyota Tsusho Corporation, Japan
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