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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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- Orica Mining Services - Indonesia
- Sindya Power Generating Company Private Ltd
- Iligan Light & Power Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- ASAPP Information Group - India
- Karaikal Port Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Deloitte Consulting - India
- IEA Clean Coal Centre - UK
- Indogreen Group - Indonesia
- Standard Chartered Bank - UAE
- Kohat Cement Company Ltd. - Pakistan
- Ceylon Electricity Board - Sri Lanka
- Sree Jayajothi Cements Limited - India
- Jorong Barutama Greston.PT - Indonesia
- SMG Consultants - Indonesia
- Minerals Council of Australia
- CNBM International Corporation - China
- Eastern Energy - Thailand
- Wilmar Investment Holdings
- IHS Mccloskey Coal Group - USA
- Formosa Plastics Group - Taiwan
- Australian Commodity Traders Exchange
- Therma Luzon, Inc, Philippines
- Orica Australia Pty. Ltd.
- Asmin Koalindo Tuhup - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Makmur.PT - Indonesia
- Singapore Mercantile Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- Malabar Cements Ltd - India
- Manunggal Multi Energi - Indonesia
- Salva Resources Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- New Zealand Coal & Carbon
- Meenaskhi Energy Private Limited - India
- Global Green Power PLC Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Wood Mackenzie - Singapore
- CIMB Investment Bank - Malaysia
- ICICI Bank Limited - India
- Energy Link Ltd, New Zealand
- Directorate Of Revenue Intelligence - India
- Central Electricity Authority - India
- Kalimantan Lumbung Energi - Indonesia
- South Luzon Thermal Energy Corporation
- Xindia Steels Limited - India
- Videocon Industries ltd - India
- Banpu Public Company Limited - Thailand
- Sojitz Corporation - Japan
- The University of Queensland
- Thiess Contractors Indonesia
- Ministry of Transport, Egypt
- Aboitiz Power Corporation - Philippines
- TeaM Sual Corporation - Philippines
- Carbofer General Trading SA - India
- Karbindo Abesyapradhi - Indoneisa
- GAC Shipping (India) Pvt Ltd
- Indonesian Coal Mining Association
- Eastern Coal Council - USA
- Krishnapatnam Port Company Ltd. - India
- GN Power Mariveles Coal Plant, Philippines
- Semirara Mining Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- Merrill Lynch Commodities Europe
- Cigading International Bulk Terminal - Indonesia
- Australian Coal Association
- Leighton Contractors Pty Ltd - Australia
- Interocean Group of Companies - India
- Kartika Selabumi Mining - Indonesia
- London Commodity Brokers - England
- Straits Asia Resources Limited - Singapore
- Miang Besar Coal Terminal - Indonesia
- Metalloyd Limited - United Kingdom
- Ministry of Finance - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Renaissance Capital - South Africa
- Neyveli Lignite Corporation Ltd, - India
- Commonwealth Bank - Australia
- GVK Power & Infra Limited - India
- Samtan Co., Ltd - South Korea
- Bukit Baiduri Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Sakthi Sugars Limited - India
- Billiton Holdings Pty Ltd - Australia
- Borneo Indobara - Indonesia
- Chettinad Cement Corporation Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Savvy Resources Ltd - HongKong
- Bhushan Steel Limited - India
- GMR Energy Limited - India
- Electricity Authority, New Zealand
- Mercator Lines Limited - India
- Edison Trading Spa - Italy
- Barasentosa Lestari - Indonesia
- Star Paper Mills Limited - India
- Parliament of New Zealand
- Gujarat Sidhee Cement - India
- Georgia Ports Authority, United States
- Kumho Petrochemical, South Korea
- Larsen & Toubro Limited - India
- Bulk Trading Sa - Switzerland
- Vedanta Resources Plc - India
- San Jose City I Power Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- International Coal Ventures Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- PowerSource Philippines DevCo
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Makarim & Taira - Indonesia
- Mjunction Services Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Port Waratah Coal Services - Australia
- Rashtriya Ispat Nigam Limited - India
- Indian Energy Exchange, India
- Alfred C Toepfer International GmbH - Germany
- Agrawal Coal Company - India
- Global Business Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cement Manufacturers Association - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Lanco Infratech Ltd - India
- Madhucon Powers Ltd - India
- The State Trading Corporation of India Ltd
- Antam Resourcindo - Indonesia
- Sarangani Energy Corporation, Philippines
- Siam City Cement PLC, Thailand
- PNOC Exploration Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- Ministry of Mines - Canada
- White Energy Company Limited
- Bharathi Cement Corporation - India
- Petrochimia International Co. Ltd.- Taiwan
- Thai Mozambique Logistica
- Africa Commodities Group - South Africa
- Rio Tinto Coal - Australia
- Independent Power Producers Association of India
- Bangladesh Power Developement Board
- Gujarat Electricity Regulatory Commission - India
- VISA Power Limited - India
- Sical Logistics Limited - India
- Essar Steel Hazira Ltd - India
- Coastal Gujarat Power Limited - India
- Pendopo Energi Batubara - Indonesia
- Binh Thuan Hamico - Vietnam
- Posco Energy - South Korea
- Chamber of Mines of South Africa
- Bayan Resources Tbk. - Indonesia
- Power Finance Corporation Ltd., India
- Bhatia International Limited - India
- Bhoruka Overseas - Indonesia
- Kideco Jaya Agung - Indonesia
- Central Java Power - Indonesia
- Indian Oil Corporation Limited
- Meralco Power Generation, Philippines
- Mercuria Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Riau Bara Harum - Indonesia
- SMC Global Power, Philippines
- India Bulls Power Limited - India
- LBH Netherlands Bv - Netherlands
- Altura Mining Limited, Indonesia
- Petron Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Uttam Galva Steels Limited - India
- Vizag Seaport Private Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Romanian Commodities Exchange
- Trasteel International SA, Italy
- Grasim Industreis Ltd - India
- Marubeni Corporation - India
- McConnell Dowell - Australia
- Ind-Barath Power Infra Limited - India
- Kobexindo Tractors - Indoneisa
- Latin American Coal - Colombia
- Parry Sugars Refinery, India
- Tata Chemicals Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Dalmia Cement Bharat India
- Electricity Generating Authority of Thailand
- Globalindo Alam Lestari - Indonesia
- Siam City Cement - Thailand
- European Bulk Services B.V. - Netherlands
- Indika Energy - Indonesia
- Goldman Sachs - Singapore
- SN Aboitiz Power Inc, Philippines
- Anglo American - United Kingdom
- Intertek Mineral Services - Indonesia
- Planning Commission, India
- Medco Energi Mining Internasional
- Heidelberg Cement - Germany
- Attock Cement Pakistan Limited
- Global Coal Blending Company Limited - Australia
- Kepco SPC Power Corporation, Philippines
- Tamil Nadu electricity Board
- Coalindo Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Aditya Birla Group - India
- Mintek Dendrill Indonesia
- Price Waterhouse Coopers - Russia
- Kaltim Prima Coal - Indonesia
- Economic Council, Georgia
- Oldendorff Carriers - Singapore
- Ambuja Cements Ltd - India
- Coal and Oil Company - UAE
- The Treasury - Australian Government
- Baramulti Group, Indonesia
- PTC India Limited - India
- Kapuas Tunggal Persada - Indonesia
- MS Steel International - UAE
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