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Wednesday, 13 October 21
MARKET INSIGHT - INTERMODAL
 Following up on our insight on May 2021, where we discussed about the Capesize market outlook for the second half of the year, we are pleased to see that dry bulk Q4 high seasonality has returned after at least 3 years of underperformance, driving also the Q4’21 and Q1’22 FFA curve to multi year highs. Back in May, we had explained why we thought a higher Cape market peak during 2H2021 was in the cards, with fundamentals recently being boosted by accelerating restocking demand, near record high Capesize congestion at Pacific discharge ports and a global energy supply deficit leading to scrambling for coal supplies globally. In the present insight, we are briefly addressing some of the market points that are likely to impact the direction of freight rates looking forward.
Iron Ore restocking to be in full swing during Q4 regardless of China’s crude steel production contraction. Q1 2022 Risks: Slow-down in construction during winter and in view of China’s Winter Olympics, exacerbated by high energy costs. China’s property developers slowing down land purchases amid deleveraging efforts
The primary force behind the crude steel production decline in the short term is the severe coking coal /coke and power shortage forcing crude steel production to adjust downwards. Cuts are expected to intensify from November 15th to the end of the year as a 1st stage and then through March 2022, as per government’s pledges. Even if most of the targeted steel production cuts materializes through Sep-Dec 2021, probabilities that they will immediately translate into a decline in iron ore requirements are low, as 1) the iron ore restocking process is directly connected to iron ore seaborne supplies which are the strongest during Q4 – the decline in iron ore prices from multi year highs in May 2021 is currently facilitating the restocking process supporting the purchasing power of steel mills – steel mills margins remain strong due to the diverging trends in steel and iron ore prices, despite the surge in coking coal costs 2) Skyrocketing energy costs are likely to negatively impact more the scrap related steel production process during the quarter (Electric Arc Furnaces are higher energy consumers) vs Blast Furnaces (more iron ore requirements). When iron ore restocking will be completed, this will be a negative signal for new iron ore procurement, likely during the 1H2022. On this note, iron ore inventories at China’s ports have increased by +9.2 million tons since the end of Q2 and there is more room for them to inflate further by the end of the year.
Inflationary pressures on the energy complex supportive to dry bulk freight rates in the short-term. Q1 2022 Risks: La Nina conditions might bring a colder winter supporting coal consumption but also wetter conditions in Australia from December to April increasing risks of exports disruptions
Natural gas prices have raised the price ceiling higher for the whole energy complex and while international coal prices have hit record high levels, the price gap with natural gas continues to incentivize substitution in power generation globally and Europe particularly. The competition for securing coal supplies in both basins has inflated $ per ton freight across major coal routes to 12-year highs – which we think is sustainable - as the % of freight in coal prices is still low (approx. 13%) compared to 2009-2010 (approx. 22%).
China’s domestic coal output is expected to increase in the next months on a series of government measures to boost supplies, although the incremental volumes during Q4 are not expected to be sufficient to cover the supply deficit. The continuous decline in coal inventories at major power plants and expectations for a cold winter continue to indicate increasing thermal coal import needs for restocking in the winter heating season. Demand for coal imports is further enhanced by India’s urgency to restock as inventories at power plants have dropped to the lowest level since 2017 at 7.3 million tons but at a record low in terms of days of consumption i.e. just 4 days, as per latest data from India’s Central Electricity Authority.
High bunker prices are supportive to dry bulk freight rates as we had discussed in our May insight, likely to exacerbate fleet inefficiencies across the basins, with the Atlantic expected to benefit more in the short term. Talks about demand destruction from high oil prices will be substantiated when manufacturers’ profitability and consumers’ purchasing power starts to be negatively impacted with costs curves rising upwards. This is likely to take place at higher prices than the current $80/bbl in our view and those would have to be sustained during the quarter.
By Tamara Apostolou, Research Director
Compiled by:
Intermodal Research & Valuations
Analysts:
Yiannis Parganas
Tamara Apostolou
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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Friday, 18 September 20
CHINA'S BENCHMARK POWER COAL PRICE EDGES UP - XINHUA
China’s benchmark power coal price rose slightly during the past week.
The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge of ...
Thursday, 17 September 20
LAST HOPES FOR DEMAND GROWTH SET TO DISAPPOINT THERMAL COAL EXPORTERS - IEEFA
Asian thermal coal exporters are fighting an uphill battle even in new markets
The world’s largest thermal coal exporter is eyeing new m ...
Wednesday, 16 September 20
MARKET INSIGHT - INTERMODAL
Another active week in terms of SnP has concluded in the dry bulk market with a diversified array of transactions recorded. Despite the correction ...
Friday, 11 September 20
IMO 2020: A REVIEW OF THE TRANSITION TO VLSFOS - GARD
KNOWLEDGE TO ELEVATE
Many predictions were made in the run up to the imposition of the MARPOL 2020 sulphur cap, none of which was that the tra ...
Thursday, 10 September 20
U.S. COAL PRODUCTION IN 2020 TO BE 511 MMST, 28 PER CENT LOWER THAN IN 2019 - EIA
EIA expects total U.S. coal production in 2020 to be 511 million short tons (MMst), 194 MMst (28%) lower than in 2019. Mitigation efforts related t ...
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- Pendopo Energi Batubara - Indonesia
- London Commodity Brokers - England
- Jindal Steel & Power Ltd - India
- Sakthi Sugars Limited - India
- Vizag Seaport Private Limited - India
- Rashtriya Ispat Nigam Limited - India
- Savvy Resources Ltd - HongKong
- Bhatia International Limited - India
- Videocon Industries ltd - India
- Posco Energy - South Korea
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Baramulti Group, Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Bulk Trading Sa - Switzerland
- Mjunction Services Limited - India
- Merrill Lynch Commodities Europe
- New Zealand Coal & Carbon
- Bahari Cakrawala Sebuku - Indonesia
- Makarim & Taira - Indonesia
- Maheswari Brothers Coal Limited - India
- CNBM International Corporation - China
- Essar Steel Hazira Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- CIMB Investment Bank - Malaysia
- Parry Sugars Refinery, India
- Electricity Authority, New Zealand
- Goldman Sachs - Singapore
- Global Coal Blending Company Limited - Australia
- Malabar Cements Ltd - India
- Planning Commission, India
- PowerSource Philippines DevCo
- Kalimantan Lumbung Energi - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Deloitte Consulting - India
- Port Waratah Coal Services - Australia
- PNOC Exploration Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- OPG Power Generation Pvt Ltd - India
- Ministry of Finance - Indonesia
- Sree Jayajothi Cements Limited - India
- Meenaskhi Energy Private Limited - India
- Agrawal Coal Company - India
- Ambuja Cements Ltd - India
- Ministry of Transport, Egypt
- Georgia Ports Authority, United States
- Bukit Makmur.PT - Indonesia
- PTC India Limited - India
- Power Finance Corporation Ltd., India
- Latin American Coal - Colombia
- Karbindo Abesyapradhi - Indoneisa
- Simpson Spence & Young - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Krishnapatnam Port Company Ltd. - India
- Bharathi Cement Corporation - India
- Directorate Of Revenue Intelligence - India
- ICICI Bank Limited - India
- Edison Trading Spa - Italy
- Gujarat Sidhee Cement - India
- Bayan Resources Tbk. - Indonesia
- Electricity Generating Authority of Thailand
- San Jose City I Power Corp, Philippines
- Wood Mackenzie - Singapore
- Coal and Oil Company - UAE
- Economic Council, Georgia
- Siam City Cement PLC, Thailand
- Ind-Barath Power Infra Limited - India
- Global Green Power PLC Corporation, Philippines
- Energy Link Ltd, New Zealand
- Bhushan Steel Limited - India
- Indogreen Group - Indonesia
- Interocean Group of Companies - India
- Mercuria Energy - Indonesia
- Medco Energi Mining Internasional
- Siam City Cement - Thailand
- Price Waterhouse Coopers - Russia
- Sinarmas Energy and Mining - Indonesia
- Indian Energy Exchange, India
- Star Paper Mills Limited - India
- Tata Chemicals Ltd - India
- The Treasury - Australian Government
- Minerals Council of Australia
- SMC Global Power, Philippines
- Orica Mining Services - Indonesia
- Salva Resources Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Dalmia Cement Bharat India
- South Luzon Thermal Energy Corporation
- Rio Tinto Coal - Australia
- Timah Investasi Mineral - Indoneisa
- Directorate General of MIneral and Coal - Indonesia
- Parliament of New Zealand
- Miang Besar Coal Terminal - Indonesia
- Petron Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- SN Aboitiz Power Inc, Philippines
- Intertek Mineral Services - Indonesia
- Formosa Plastics Group - Taiwan
- TNB Fuel Sdn Bhd - Malaysia
- Kapuas Tunggal Persada - Indonesia
- McConnell Dowell - Australia
- Billiton Holdings Pty Ltd - Australia
- Riau Bara Harum - Indonesia
- Grasim Industreis Ltd - India
- Madhucon Powers Ltd - India
- Kartika Selabumi Mining - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Central Java Power - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Bhoruka Overseas - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Australian Commodity Traders Exchange
- Anglo American - United Kingdom
- Jaiprakash Power Ventures ltd
- Bukit Baiduri Energy - Indonesia
- Bangladesh Power Developement Board
- The University of Queensland
- Globalindo Alam Lestari - Indonesia
- ASAPP Information Group - India
- International Coal Ventures Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Lanco Infratech Ltd - India
- Marubeni Corporation - India
- Coalindo Energy - Indonesia
- Ministry of Mines - Canada
- Pipit Mutiara Jaya. PT, Indonesia
- Energy Development Corp, Philippines
- Commonwealth Bank - Australia
- Borneo Indobara - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Cement Manufacturers Association - India
- Heidelberg Cement - Germany
- Africa Commodities Group - South Africa
- Chamber of Mines of South Africa
- Gujarat Electricity Regulatory Commission - India
- TeaM Sual Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Barasentosa Lestari - Indonesia
- European Bulk Services B.V. - Netherlands
- Straits Asia Resources Limited - Singapore
- Kepco SPC Power Corporation, Philippines
- Tamil Nadu electricity Board
- Indonesian Coal Mining Association
- Iligan Light & Power Inc, Philippines
- White Energy Company Limited
- Indian Oil Corporation Limited
- Uttam Galva Steels Limited - India
- Therma Luzon, Inc, Philippines
- India Bulls Power Limited - India
- Thai Mozambique Logistica
- SMG Consultants - Indonesia
- Kumho Petrochemical, South Korea
- Semirara Mining and Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Oldendorff Carriers - Singapore
- Leighton Contractors Pty Ltd - Australia
- IEA Clean Coal Centre - UK
- Standard Chartered Bank - UAE
- Alfred C Toepfer International GmbH - Germany
- Singapore Mercantile Exchange
- PetroVietnam Power Coal Import and Supply Company
- Sojitz Corporation - Japan
- Vijayanagar Sugar Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Eastern Energy - Thailand
- Holcim Trading Pte Ltd - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Kaltim Prima Coal - Indonesia
- Kideco Jaya Agung - Indonesia
- Attock Cement Pakistan Limited
- Antam Resourcindo - Indonesia
- Vedanta Resources Plc - India
- Samtan Co., Ltd - South Korea
- Australian Coal Association
- Trasteel International SA, Italy
- Manunggal Multi Energi - Indonesia
- Indo Tambangraya Megah - Indonesia
- Semirara Mining Corp, Philippines
- Romanian Commodities Exchange
- VISA Power Limited - India
- Thiess Contractors Indonesia
- Cigading International Bulk Terminal - Indonesia
- Sical Logistics Limited - India
- Carbofer General Trading SA - India
- Xindia Steels Limited - India
- GMR Energy Limited - India
- MS Steel International - UAE
- Coastal Gujarat Power Limited - India
- Mercator Lines Limited - India
- GVK Power & Infra Limited - India
- Orica Australia Pty. Ltd.
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- LBH Netherlands Bv - Netherlands
- GAC Shipping (India) Pvt Ltd
- Binh Thuan Hamico - Vietnam
- Eastern Coal Council - USA
- Larsen & Toubro Limited - India
- Meralco Power Generation, Philippines
- Karaikal Port Pvt Ltd - India
- Indika Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Toyota Tsusho Corporation, Japan
- Altura Mining Limited, Indonesia
- Mintek Dendrill Indonesia
- IHS Mccloskey Coal Group - USA
- The State Trading Corporation of India Ltd
- Sarangani Energy Corporation, Philippines
- Aditya Birla Group - India
- Aboitiz Power Corporation - Philippines
- Renaissance Capital - South Africa
- Wilmar Investment Holdings
- Central Electricity Authority - India
- Banpu Public Company Limited - Thailand
- Independent Power Producers Association of India
- Global Business Power Corporation, Philippines
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