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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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Tuesday, 26 October 21
CHINA'S COAL-RICH SHANXI BEEFS UP COAL PRODUCTION - XINHUA
Major coal producers in north China’s Shanxi Province, a leading coal-producing region of the country, have beefed up production to ensure en ...
Tuesday, 26 October 21
ENERGY CRISIS SHOWS COAL IS AN EXPENSIVE AND UNRELIABLE SOURCE OF ELECTRICITY GENERATION - IEEFA
Any knee-jerk reaction that urges more investment in coal completely misses the point
India is teetering on the brink of joining a growing glo ...
Tuesday, 26 October 21
CHINA TO INVESTIGATE ENERGY INDEX PROVIDERS IN BID TO TAME COAL PRICES - REUTERS
China said on Monday it will investigate energy price index providers as it urged coal industry participants to “strictly” meet contrac ...
Tuesday, 26 October 21
THERE IS PLENTY OF COAL AND GAS IN THE WORLD BUT A VOLATILE MARKET IS NOBODY'S FRIEND - IEEFA
Gas will be winding its way out of the energy system
Gas prices are continuing to surge around the world. The cost of gas is at unpr ...
Tuesday, 26 October 21
AUSTRALIA EXPORTED 51.6 MLN TONNES OF COAL TO INDIA IN FIRST 10 MONTHS, 19% OF ALL AUSTRALIAN COAL EXPORTS; CHINA WAS THE DESTINATION FOR JUST 0.7% - BANCHERO COSTA
2020 proved to be a truly terrible year for global seaborne coal trade. In 2021 things started pretty badly, but we are seeing increasing signs of ...
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- CNBM International Corporation - China
- Indian Oil Corporation Limited
- Global Coal Blending Company Limited - Australia
- Port Waratah Coal Services - Australia
- Latin American Coal - Colombia
- Electricity Authority, New Zealand
- PNOC Exploration Corporation - Philippines
- Formosa Plastics Group - Taiwan
- Jorong Barutama Greston.PT - Indonesia
- Eastern Energy - Thailand
- Interocean Group of Companies - India
- Mercator Lines Limited - India
- Chettinad Cement Corporation Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Semirara Mining Corp, Philippines
- Metalloyd Limited - United Kingdom
- The University of Queensland
- Malabar Cements Ltd - India
- Baramulti Group, Indonesia
- Merrill Lynch Commodities Europe
- Holcim Trading Pte Ltd - Singapore
- Heidelberg Cement - Germany
- Miang Besar Coal Terminal - Indonesia
- Minerals Council of Australia
- Karaikal Port Pvt Ltd - India
- Ambuja Cements Ltd - India
- Simpson Spence & Young - Indonesia
- ICICI Bank Limited - India
- Bayan Resources Tbk. - Indonesia
- Deloitte Consulting - India
- Coastal Gujarat Power Limited - India
- Global Green Power PLC Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Xindia Steels Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Vijayanagar Sugar Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- CIMB Investment Bank - Malaysia
- Coalindo Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Energy Link Ltd, New Zealand
- SN Aboitiz Power Inc, Philippines
- Bhushan Steel Limited - India
- Jaiprakash Power Ventures ltd
- Uttam Galva Steels Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Romanian Commodities Exchange
- Alfred C Toepfer International GmbH - Germany
- Bhatia International Limited - India
- ASAPP Information Group - India
- Globalindo Alam Lestari - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Kideco Jaya Agung - Indonesia
- TeaM Sual Corporation - Philippines
- Siam City Cement - Thailand
- Planning Commission, India
- Lanco Infratech Ltd - India
- Coal and Oil Company - UAE
- Agrawal Coal Company - India
- Kaltim Prima Coal - Indonesia
- Rio Tinto Coal - Australia
- Larsen & Toubro Limited - India
- GAC Shipping (India) Pvt Ltd
- Economic Council, Georgia
- Salva Resources Pvt Ltd - India
- Attock Cement Pakistan Limited
- Star Paper Mills Limited - India
- Vedanta Resources Plc - India
- Barasentosa Lestari - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Thiess Contractors Indonesia
- Essar Steel Hazira Ltd - India
- Maheswari Brothers Coal Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Edison Trading Spa - Italy
- GVK Power & Infra Limited - India
- Commonwealth Bank - Australia
- IHS Mccloskey Coal Group - USA
- Ind-Barath Power Infra Limited - India
- Orica Mining Services - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Tata Chemicals Ltd - India
- Kumho Petrochemical, South Korea
- Meenaskhi Energy Private Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Madhucon Powers Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- GN Power Mariveles Coal Plant, Philippines
- Ministry of Finance - Indonesia
- AsiaOL BioFuels Corp., Philippines
- The State Trading Corporation of India Ltd
- Central Electricity Authority - India
- Marubeni Corporation - India
- Dalmia Cement Bharat India
- Timah Investasi Mineral - Indoneisa
- Manunggal Multi Energi - Indonesia
- Mercuria Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Borneo Indobara - Indonesia
- Grasim Industreis Ltd - India
- Jindal Steel & Power Ltd - India
- Bulk Trading Sa - Switzerland
- Renaissance Capital - South Africa
- Banpu Public Company Limited - Thailand
- Bangladesh Power Developement Board
- Georgia Ports Authority, United States
- PetroVietnam Power Coal Import and Supply Company
- Billiton Holdings Pty Ltd - Australia
- Altura Mining Limited, Indonesia
- Riau Bara Harum - Indonesia
- Bukit Baiduri Energy - Indonesia
- Indogreen Group - Indonesia
- Global Business Power Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- SMC Global Power, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Eastern Coal Council - USA
- Thai Mozambique Logistica
- Standard Chartered Bank - UAE
- Indo Tambangraya Megah - Indonesia
- Medco Energi Mining Internasional
- New Zealand Coal & Carbon
- Kartika Selabumi Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Meralco Power Generation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Siam City Cement PLC, Thailand
- LBH Netherlands Bv - Netherlands
- SMG Consultants - Indonesia
- Samtan Co., Ltd - South Korea
- MS Steel International - UAE
- Petron Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- South Luzon Thermal Energy Corporation
- White Energy Company Limited
- McConnell Dowell - Australia
- Power Finance Corporation Ltd., India
- IEA Clean Coal Centre - UK
- Pipit Mutiara Jaya. PT, Indonesia
- Energy Development Corp, Philippines
- Australian Commodity Traders Exchange
- Wilmar Investment Holdings
- Bahari Cakrawala Sebuku - Indonesia
- Trasteel International SA, Italy
- Anglo American - United Kingdom
- Carbofer General Trading SA - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Transport, Egypt
- Kepco SPC Power Corporation, Philippines
- Africa Commodities Group - South Africa
- The Treasury - Australian Government
- PowerSource Philippines DevCo
- India Bulls Power Limited - India
- Straits Asia Resources Limited - Singapore
- Central Java Power - Indonesia
- Indika Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Indonesian Coal Mining Association
- Oldendorff Carriers - Singapore
- Ministry of Mines - Canada
- Independent Power Producers Association of India
- Sindya Power Generating Company Private Ltd
- Gujarat Sidhee Cement - India
- Indian Energy Exchange, India
- Makarim & Taira - Indonesia
- Bharathi Cement Corporation - India
- Parliament of New Zealand
- International Coal Ventures Pvt Ltd - India
- Singapore Mercantile Exchange
- Cement Manufacturers Association - India
- Australian Coal Association
- Gujarat Mineral Development Corp Ltd - India
- Goldman Sachs - Singapore
- Vizag Seaport Private Limited - India
- Directorate Of Revenue Intelligence - India
- Aditya Birla Group - India
- Sarangani Energy Corporation, Philippines
- Sakthi Sugars Limited - India
- Ceylon Electricity Board - Sri Lanka
- Semirara Mining and Power Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Mjunction Services Limited - India
- Tamil Nadu electricity Board
- San Jose City I Power Corp, Philippines
- Savvy Resources Ltd - HongKong
- Pendopo Energi Batubara - Indonesia
- Sojitz Corporation - Japan
- PTC India Limited - India
- Chamber of Mines of South Africa
- Mintek Dendrill Indonesia
- Posco Energy - South Korea
- Bukit Makmur.PT - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- GMR Energy Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Electricity Generating Authority of Thailand
- London Commodity Brokers - England
- Wood Mackenzie - Singapore
- VISA Power Limited - India
- Parry Sugars Refinery, India
- Kobexindo Tractors - Indoneisa
- Sree Jayajothi Cements Limited - India
- Gujarat Electricity Regulatory Commission - India
- Intertek Mineral Services - Indonesia
- Orica Australia Pty. Ltd.
- Antam Resourcindo - Indonesia
- Videocon Industries ltd - India
- Sical Logistics Limited - India
- Price Waterhouse Coopers - Russia
- Iligan Light & Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
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