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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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Thursday, 25 March 21
'OMNIBUS LAW' REGULATION ON INDONESIA’S ENERGY AND MINING SECTORS TO BOOST COAL PROCESSING BUT ALSO RAISES QUESTIONS - ABNR
February 2021 saw the issuance of a raft of new government regulations to give effect to the reformist Job Creation Law (colloquially known as the ...
Thursday, 25 March 21
PROPOSED SWITCH FROM COAL TO LNG THREATENS RENEWABLE ENERGY DEVELOPMENT IN ASIA - IEEFA
Renewables offer an ever cheaper, financially sustainable and energy secure alternative, better able to support developing nations
A ...
Thursday, 25 March 21
MAJOR INVESTMENT ADVISORS BLACKROCK AND MEKETA PROVIDE A FIDUCIARY PATH THROUGH THE ENERGY TRANSITION - IEEFA
BlackRock and Meketa say divestment from fossil fuels improves, not weakens, investment returns
Two major financial management firms ...
Thursday, 25 March 21
EUROPE PASSES MILESTONE WITH HALF OF COAL PLANTS CLOSED OR SET TO RETIRE BY 2030 - EURACTIV
Half of Europe’s 324 coal-fueled power plants have either closed or announced a retirement date before 2030, it emerged on Monday (22 March) ...
Wednesday, 24 March 21
MARKET INSIGHT - INTERMODAL
Since the start of the pandemic, the shipping industry has efficiently responded to ensure the continuity of operations and hence the security of s ...
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- Ministry of Mines - Canada
- Siam City Cement - Thailand
- Altura Mining Limited, Indonesia
- Kobexindo Tractors - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Indian Energy Exchange, India
- Bukit Asam (Persero) Tbk - Indonesia
- Cement Manufacturers Association - India
- Petron Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Holcim Trading Pte Ltd - Singapore
- Edison Trading Spa - Italy
- Riau Bara Harum - Indonesia
- Vedanta Resources Plc - India
- Kohat Cement Company Ltd. - Pakistan
- Bangladesh Power Developement Board
- PTC India Limited - India
- Rio Tinto Coal - Australia
- Asmin Koalindo Tuhup - Indonesia
- Leighton Contractors Pty Ltd - Australia
- CNBM International Corporation - China
- Global Green Power PLC Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Borneo Indobara - Indonesia
- Indonesian Coal Mining Association
- Thai Mozambique Logistica
- Essar Steel Hazira Ltd - India
- Mjunction Services Limited - India
- PetroVietnam Power Coal Import and Supply Company
- ASAPP Information Group - India
- Kapuas Tunggal Persada - Indonesia
- Tata Chemicals Ltd - India
- Kideco Jaya Agung - Indonesia
- Pendopo Energi Batubara - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Baramulti Group, Indonesia
- Central Java Power - Indonesia
- Thiess Contractors Indonesia
- PNOC Exploration Corporation - Philippines
- Africa Commodities Group - South Africa
- Sarangani Energy Corporation, Philippines
- Merrill Lynch Commodities Europe
- ICICI Bank Limited - India
- Eastern Energy - Thailand
- South Luzon Thermal Energy Corporation
- Salva Resources Pvt Ltd - India
- Romanian Commodities Exchange
- Deloitte Consulting - India
- Jorong Barutama Greston.PT - Indonesia
- Sojitz Corporation - Japan
- Chettinad Cement Corporation Ltd - India
- Kepco SPC Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Mercuria Energy - Indonesia
- Central Electricity Authority - India
- Meenaskhi Energy Private Limited - India
- Coal and Oil Company - UAE
- Rashtriya Ispat Nigam Limited - India
- Dalmia Cement Bharat India
- Jaiprakash Power Ventures ltd
- Planning Commission, India
- PowerSource Philippines DevCo
- Ambuja Cements Ltd - India
- Posco Energy - South Korea
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- Kartika Selabumi Mining - Indonesia
- Kaltim Prima Coal - Indonesia
- Intertek Mineral Services - Indonesia
- Eastern Coal Council - USA
- VISA Power Limited - India
- Gujarat Electricity Regulatory Commission - India
- Alfred C Toepfer International GmbH - Germany
- Xindia Steels Limited - India
- Energy Link Ltd, New Zealand
- Power Finance Corporation Ltd., India
- Electricity Authority, New Zealand
- Wilmar Investment Holdings
- Straits Asia Resources Limited - Singapore
- Iligan Light & Power Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- IEA Clean Coal Centre - UK
- Bukit Makmur.PT - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- The State Trading Corporation of India Ltd
- Jindal Steel & Power Ltd - India
- Renaissance Capital - South Africa
- Goldman Sachs - Singapore
- Indogreen Group - Indonesia
- Parry Sugars Refinery, India
- Kumho Petrochemical, South Korea
- Indian Oil Corporation Limited
- The Treasury - Australian Government
- Ind-Barath Power Infra Limited - India
- Larsen & Toubro Limited - India
- Trasteel International SA, Italy
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Port Waratah Coal Services - Australia
- London Commodity Brokers - England
- Star Paper Mills Limited - India
- McConnell Dowell - Australia
- AsiaOL BioFuels Corp., Philippines
- Ceylon Electricity Board - Sri Lanka
- Krishnapatnam Port Company Ltd. - India
- Ministry of Transport, Egypt
- Formosa Plastics Group - Taiwan
- Bharathi Cement Corporation - India
- Commonwealth Bank - Australia
- Wood Mackenzie - Singapore
- Sindya Power Generating Company Private Ltd
- SMC Global Power, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Toyota Tsusho Corporation, Japan
- Independent Power Producers Association of India
- Directorate General of MIneral and Coal - Indonesia
- Latin American Coal - Colombia
- Metalloyd Limited - United Kingdom
- TNB Fuel Sdn Bhd - Malaysia
- Sakthi Sugars Limited - India
- Karbindo Abesyapradhi - Indoneisa
- CIMB Investment Bank - Malaysia
- Meralco Power Generation, Philippines
- Antam Resourcindo - Indonesia
- Australian Commodity Traders Exchange
- SMG Consultants - Indonesia
- Marubeni Corporation - India
- Sical Logistics Limited - India
- Parliament of New Zealand
- Maheswari Brothers Coal Limited - India
- Indika Energy - Indonesia
- Bhushan Steel Limited - India
- Interocean Group of Companies - India
- Gujarat Mineral Development Corp Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Neyveli Lignite Corporation Ltd, - India
- Carbofer General Trading SA - India
- Semirara Mining and Power Corporation, Philippines
- The University of Queensland
- GN Power Mariveles Coal Plant, Philippines
- Indo Tambangraya Megah - Indonesia
- Anglo American - United Kingdom
- Standard Chartered Bank - UAE
- Semirara Mining Corp, Philippines
- Mintek Dendrill Indonesia
- Cigading International Bulk Terminal - Indonesia
- Gujarat Sidhee Cement - India
- Bhatia International Limited - India
- Aditya Birla Group - India
- LBH Netherlands Bv - Netherlands
- Sinarmas Energy and Mining - Indonesia
- Price Waterhouse Coopers - Russia
- GMR Energy Limited - India
- Bulk Trading Sa - Switzerland
- International Coal Ventures Pvt Ltd - India
- Georgia Ports Authority, United States
- Bayan Resources Tbk. - Indonesia
- European Bulk Services B.V. - Netherlands
- Binh Thuan Hamico - Vietnam
- Savvy Resources Ltd - HongKong
- Minerals Council of Australia
- Mercator Lines Limited - India
- Global Business Power Corporation, Philippines
- Chamber of Mines of South Africa
- Maharashtra Electricity Regulatory Commission - India
- Grasim Industreis Ltd - India
- Attock Cement Pakistan Limited
- Electricity Generating Authority of Thailand
- Coastal Gujarat Power Limited - India
- Global Coal Blending Company Limited - Australia
- White Energy Company Limited
- Globalindo Alam Lestari - Indonesia
- Karaikal Port Pvt Ltd - India
- Coalindo Energy - Indonesia
- Uttam Galva Steels Limited - India
- SN Aboitiz Power Inc, Philippines
- Australian Coal Association
- Medco Energi Mining Internasional
- Timah Investasi Mineral - Indoneisa
- India Bulls Power Limited - India
- New Zealand Coal & Carbon
- Oldendorff Carriers - Singapore
- Ministry of Finance - Indonesia
- Singapore Mercantile Exchange
- Heidelberg Cement - Germany
- Lanco Infratech Ltd - India
- Energy Development Corp, Philippines
- Directorate Of Revenue Intelligence - India
- MS Steel International - UAE
- Simpson Spence & Young - Indonesia
- Sree Jayajothi Cements Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Barasentosa Lestari - Indonesia
- OPG Power Generation Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- GAC Shipping (India) Pvt Ltd
- Manunggal Multi Energi - Indonesia
- Economic Council, Georgia
- Madhucon Powers Ltd - India
- TeaM Sual Corporation - Philippines
- Videocon Industries ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Orica Australia Pty. Ltd.
- Bhoruka Overseas - Indonesia
- Makarim & Taira - Indonesia
- Malabar Cements Ltd - India
- Siam City Cement PLC, Thailand
- Orica Mining Services - Indonesia
- Bukit Baiduri Energy - Indonesia
- Therma Luzon, Inc, Philippines
- GVK Power & Infra Limited - India
- Vizag Seaport Private Limited - India
- Agrawal Coal Company - India
- Tamil Nadu electricity Board
- Aboitiz Power Corporation - Philippines
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