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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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Monday, 25 October 21
A QUESTION OF POSSESSION - THE BALTIC EXCHANGE
Possession and tangibility are closely related concepts long established under English law. Yet a change to these concepts is around the corner. Th ...
Monday, 25 October 21
CHINA VOWS TO SEVERELY PUNISH MARKET VIOLATIONS AMID LOW COAL FUTURES PRICES - GLOBAL TIMES
Domestic coal futures had plunged for three consecutive trading days after the government vowed to crack down on soaring prices, and China’s ...
Monday, 25 October 21
FARMERS MAY JOIN THE COAL COMMODITY MARKET TO REDUCE RISKS - GLOBAL TIMES
A recent trip to by the Global Times to East China’s Shandong Province to get a glimpse of China’s coal supply chain revealed a surpris ...
Monday, 25 October 21
CHINA COAL PRICES MARK WORST WEEK SINCE MAY ON GOVERNMENT INTERVENTION - REUTERS
China’s thermal coal futures plunged on Friday and turned in their worst week in five months, following Beijing’s strongest interventio ...
Friday, 22 October 21
THE BIG PICTURE: ENERGY MARKETS - BREAK WAVE ADVISORS
The shipping markets have been pulled further into wild markets of coal and other energy sources. Given how nebulous this sector is, it’s alw ...
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- LBH Netherlands Bv - Netherlands
- Directorate General of MIneral and Coal - Indonesia
- SMC Global Power, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Bharathi Cement Corporation - India
- TeaM Sual Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- Indonesian Coal Mining Association
- International Coal Ventures Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Binh Thuan Hamico - Vietnam
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Essar Steel Hazira Ltd - India
- Grasim Industreis Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Central Electricity Authority - India
- Bhushan Steel Limited - India
- South Luzon Thermal Energy Corporation
- OPG Power Generation Pvt Ltd - India
- PowerSource Philippines DevCo
- Independent Power Producers Association of India
- Karaikal Port Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- European Bulk Services B.V. - Netherlands
- Pipit Mutiara Jaya. PT, Indonesia
- Aboitiz Power Corporation - Philippines
- Borneo Indobara - Indonesia
- Savvy Resources Ltd - HongKong
- Videocon Industries ltd - India
- Electricity Generating Authority of Thailand
- Gujarat Sidhee Cement - India
- The Treasury - Australian Government
- VISA Power Limited - India
- London Commodity Brokers - England
- Simpson Spence & Young - Indonesia
- Baramulti Group, Indonesia
- Bayan Resources Tbk. - Indonesia
- Global Green Power PLC Corporation, Philippines
- Vedanta Resources Plc - India
- Heidelberg Cement - Germany
- Vijayanagar Sugar Pvt Ltd - India
- Edison Trading Spa - Italy
- GN Power Mariveles Coal Plant, Philippines
- New Zealand Coal & Carbon
- Thai Mozambique Logistica
- Leighton Contractors Pty Ltd - Australia
- Kumho Petrochemical, South Korea
- Wood Mackenzie - Singapore
- Australian Coal Association
- CIMB Investment Bank - Malaysia
- Minerals Council of Australia
- CNBM International Corporation - China
- Medco Energi Mining Internasional
- Attock Cement Pakistan Limited
- Sojitz Corporation - Japan
- Timah Investasi Mineral - Indoneisa
- Jindal Steel & Power Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Ministry of Mines - Canada
- Standard Chartered Bank - UAE
- PetroVietnam Power Coal Import and Supply Company
- Asmin Koalindo Tuhup - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Kartika Selabumi Mining - Indonesia
- Global Coal Blending Company Limited - Australia
- Gujarat Electricity Regulatory Commission - India
- Power Finance Corporation Ltd., India
- Sindya Power Generating Company Private Ltd
- Electricity Authority, New Zealand
- McConnell Dowell - Australia
- Interocean Group of Companies - India
- SMG Consultants - Indonesia
- San Jose City I Power Corp, Philippines
- Ministry of Transport, Egypt
- Sarangani Energy Corporation, Philippines
- Altura Mining Limited, Indonesia
- Maheswari Brothers Coal Limited - India
- Kobexindo Tractors - Indoneisa
- Makarim & Taira - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Chamber of Mines of South Africa
- Vizag Seaport Private Limited - India
- Intertek Mineral Services - Indonesia
- MS Steel International - UAE
- GVK Power & Infra Limited - India
- Toyota Tsusho Corporation, Japan
- Kepco SPC Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Australian Commodity Traders Exchange
- Economic Council, Georgia
- Madhucon Powers Ltd - India
- Kaltim Prima Coal - Indonesia
- The University of Queensland
- Siam City Cement - Thailand
- Meralco Power Generation, Philippines
- Global Business Power Corporation, Philippines
- Port Waratah Coal Services - Australia
- Renaissance Capital - South Africa
- Georgia Ports Authority, United States
- Coal and Oil Company - UAE
- Barasentosa Lestari - Indonesia
- Ind-Barath Power Infra Limited - India
- Trasteel International SA, Italy
- Manunggal Multi Energi - Indonesia
- Parry Sugars Refinery, India
- Posco Energy - South Korea
- Agrawal Coal Company - India
- Straits Asia Resources Limited - Singapore
- Sical Logistics Limited - India
- Bhatia International Limited - India
- Indo Tambangraya Megah - Indonesia
- Anglo American - United Kingdom
- SN Aboitiz Power Inc, Philippines
- Bhoruka Overseas - Indonesia
- Billiton Holdings Pty Ltd - Australia
- India Bulls Power Limited - India
- Cement Manufacturers Association - India
- The State Trading Corporation of India Ltd
- Goldman Sachs - Singapore
- Ceylon Electricity Board - Sri Lanka
- Central Java Power - Indonesia
- Ambuja Cements Ltd - India
- Bulk Trading Sa - Switzerland
- Siam City Cement PLC, Thailand
- Orica Australia Pty. Ltd.
- Sinarmas Energy and Mining - Indonesia
- Planning Commission, India
- Petrochimia International Co. Ltd.- Taiwan
- Semirara Mining and Power Corporation, Philippines
- Tata Chemicals Ltd - India
- Mjunction Services Limited - India
- IHS Mccloskey Coal Group - USA
- Indogreen Group - Indonesia
- Mintek Dendrill Indonesia
- PTC India Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Commonwealth Bank - Australia
- Riau Bara Harum - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Star Paper Mills Limited - India
- GMR Energy Limited - India
- Ministry of Finance - Indonesia
- Merrill Lynch Commodities Europe
- IEA Clean Coal Centre - UK
- Chettinad Cement Corporation Ltd - India
- AsiaOL BioFuels Corp., Philippines
- ASAPP Information Group - India
- Karbindo Abesyapradhi - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Banpu Public Company Limited - Thailand
- Maharashtra Electricity Regulatory Commission - India
- Deloitte Consulting - India
- Jaiprakash Power Ventures ltd
- Antam Resourcindo - Indonesia
- Kideco Jaya Agung - Indonesia
- Energy Development Corp, Philippines
- Miang Besar Coal Terminal - Indonesia
- Eastern Energy - Thailand
- Meenaskhi Energy Private Limited - India
- Aditya Birla Group - India
- Thiess Contractors Indonesia
- Romanian Commodities Exchange
- Latin American Coal - Colombia
- Sakthi Sugars Limited - India
- Tamil Nadu electricity Board
- Price Waterhouse Coopers - Russia
- Singapore Mercantile Exchange
- Indian Energy Exchange, India
- Bangladesh Power Developement Board
- Dalmia Cement Bharat India
- Indian Oil Corporation Limited
- Bukit Asam (Persero) Tbk - Indonesia
- Globalindo Alam Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- PNOC Exploration Corporation - Philippines
- Formosa Plastics Group - Taiwan
- Holcim Trading Pte Ltd - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Makmur.PT - Indonesia
- Therma Luzon, Inc, Philippines
- Marubeni Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Orica Mining Services - Indonesia
- Lanco Infratech Ltd - India
- Coastal Gujarat Power Limited - India
- Xindia Steels Limited - India
- Eastern Coal Council - USA
- Malabar Cements Ltd - India
- Petron Corporation, Philippines
- Mercuria Energy - Indonesia
- Wilmar Investment Holdings
- Coalindo Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Semirara Mining Corp, Philippines
- Larsen & Toubro Limited - India
- Mercator Lines Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Iligan Light & Power Inc, Philippines
- Salva Resources Pvt Ltd - India
- Uttam Galva Steels Limited - India
- GAC Shipping (India) Pvt Ltd
- White Energy Company Limited
- Rio Tinto Coal - Australia
- Oldendorff Carriers - Singapore
- Indika Energy - Indonesia
- ICICI Bank Limited - India
- Krishnapatnam Port Company Ltd. - India
- Rashtriya Ispat Nigam Limited - India
- Samtan Co., Ltd - South Korea
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Carbofer General Trading SA - India
- Parliament of New Zealand
- Africa Commodities Group - South Africa
- Energy Link Ltd, New Zealand
- Offshore Bulk Terminal Pte Ltd, Singapore
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