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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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Thursday, 10 September 20
DRY BULK SHIPPING: CHINA'S DEMAND KEEPING THE DRY BULK MARKET GOING - PETER SAND | BIMCO
Overview
An impressive recovery in Chinese dry bulk imports has protected the industry from the effects of falling demand in the rest of the wo ...
Thursday, 10 September 20
TANKER SHIPPING: FREIGHT RATES BACK AT LOSS-MAKING LEVELS AFTER 12 VERY PROFITABLE MONTHS - BIMCO
Overview
A stunningly strong 12 months for the tanker shipping industry is now being replaced by lower freight rates, as lower oil product ...
Thursday, 10 September 20
INDIA'S COAL IMPORTS STUMBLE IN AUGUST, RAISING RISK OF SLOW RECOVERY - REFINITIV | BANCHERO COSTA
After posting a mild recovery in July, India's coal imports have stumbled in August as the South Asian nation battles to restart it ...
Thursday, 10 September 20
THE FIRST 8 MONTHS OF 2020, INDONESIA EXPORTED 217.4 MLN TONNES OF COAL BASED ON REFINITIV - BANCHERO COSTA
The coal market has been hit by a weaker global economy as a result of COVID-19 pandemic and falling industrial electricity demand ...
Wednesday, 09 September 20
MARKET INSIGHT - INTERMODAL
The uneventful summer lull which is coming to an end soon has left its stigma on the newbuilding market, which has already been devastated by the g ...
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- Heidelberg Cement - Germany
- SMC Global Power, Philippines
- Barasentosa Lestari - Indonesia
- SMG Consultants - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Kaltim Prima Coal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mercuria Energy - Indonesia
- Sree Jayajothi Cements Limited - India
- PNOC Exploration Corporation - Philippines
- Manunggal Multi Energi - Indonesia
- Aditya Birla Group - India
- Kobexindo Tractors - Indoneisa
- Lanco Infratech Ltd - India
- Anglo American - United Kingdom
- Pipit Mutiara Jaya. PT, Indonesia
- Goldman Sachs - Singapore
- Mjunction Services Limited - India
- Grasim Industreis Ltd - India
- Uttam Galva Steels Limited - India
- Power Finance Corporation Ltd., India
- Thai Mozambique Logistica
- CNBM International Corporation - China
- Alfred C Toepfer International GmbH - Germany
- Kartika Selabumi Mining - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Mercator Lines Limited - India
- TeaM Sual Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Price Waterhouse Coopers - Russia
- Sinarmas Energy and Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Interocean Group of Companies - India
- Makarim & Taira - Indonesia
- Oldendorff Carriers - Singapore
- Altura Mining Limited, Indonesia
- Minerals Council of Australia
- Commonwealth Bank - Australia
- White Energy Company Limited
- Miang Besar Coal Terminal - Indonesia
- Latin American Coal - Colombia
- Australian Commodity Traders Exchange
- Metalloyd Limited - United Kingdom
- Neyveli Lignite Corporation Ltd, - India
- Petrochimia International Co. Ltd.- Taiwan
- Savvy Resources Ltd - HongKong
- Indian Energy Exchange, India
- Formosa Plastics Group - Taiwan
- Jaiprakash Power Ventures ltd
- Tata Chemicals Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Holcim Trading Pte Ltd - Singapore
- Ind-Barath Power Infra Limited - India
- Edison Trading Spa - Italy
- Mintek Dendrill Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kideco Jaya Agung - Indonesia
- GVK Power & Infra Limited - India
- Iligan Light & Power Inc, Philippines
- McConnell Dowell - Australia
- Intertek Mineral Services - Indonesia
- Indika Energy - Indonesia
- Bangladesh Power Developement Board
- Sical Logistics Limited - India
- IEA Clean Coal Centre - UK
- Binh Thuan Hamico - Vietnam
- Orica Mining Services - Indonesia
- Toyota Tsusho Corporation, Japan
- GMR Energy Limited - India
- Orica Australia Pty. Ltd.
- ICICI Bank Limited - India
- Straits Asia Resources Limited - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Banpu Public Company Limited - Thailand
- Cement Manufacturers Association - India
- Romanian Commodities Exchange
- Coal and Oil Company - UAE
- OPG Power Generation Pvt Ltd - India
- Madhucon Powers Ltd - India
- Rio Tinto Coal - Australia
- The State Trading Corporation of India Ltd
- Ministry of Transport, Egypt
- Agrawal Coal Company - India
- Larsen & Toubro Limited - India
- Jindal Steel & Power Ltd - India
- Borneo Indobara - Indonesia
- Vedanta Resources Plc - India
- Globalindo Alam Lestari - Indonesia
- Gujarat Sidhee Cement - India
- TNB Fuel Sdn Bhd - Malaysia
- Dalmia Cement Bharat India
- Siam City Cement PLC, Thailand
- Georgia Ports Authority, United States
- Bukit Baiduri Energy - Indonesia
- Central Electricity Authority - India
- Eastern Energy - Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Singapore Mercantile Exchange
- Gujarat Electricity Regulatory Commission - India
- Trasteel International SA, Italy
- Global Green Power PLC Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Energy Link Ltd, New Zealand
- San Jose City I Power Corp, Philippines
- Deloitte Consulting - India
- Semirara Mining and Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Aboitiz Power Corporation - Philippines
- The University of Queensland
- London Commodity Brokers - England
- Thiess Contractors Indonesia
- CIMB Investment Bank - Malaysia
- India Bulls Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Energy Development Corp, Philippines
- Independent Power Producers Association of India
- Asmin Koalindo Tuhup - Indonesia
- Baramulti Group, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- European Bulk Services B.V. - Netherlands
- Meralco Power Generation, Philippines
- Xindia Steels Limited - India
- Standard Chartered Bank - UAE
- Bhushan Steel Limited - India
- Timah Investasi Mineral - Indoneisa
- Maheswari Brothers Coal Limited - India
- Riau Bara Harum - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Karaikal Port Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Port Waratah Coal Services - Australia
- PowerSource Philippines DevCo
- Pendopo Energi Batubara - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Central Java Power - Indonesia
- Wilmar Investment Holdings
- Ministry of Finance - Indonesia
- Kepco SPC Power Corporation, Philippines
- Global Business Power Corporation, Philippines
- PTC India Limited - India
- Indo Tambangraya Megah - Indonesia
- Eastern Coal Council - USA
- Wood Mackenzie - Singapore
- Directorate General of MIneral and Coal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Global Coal Blending Company Limited - Australia
- Vizag Seaport Private Limited - India
- Africa Commodities Group - South Africa
- Chettinad Cement Corporation Ltd - India
- Planning Commission, India
- Bharathi Cement Corporation - India
- Sojitz Corporation - Japan
- South Luzon Thermal Energy Corporation
- International Coal Ventures Pvt Ltd - India
- Coalindo Energy - Indonesia
- Kumho Petrochemical, South Korea
- Sindya Power Generating Company Private Ltd
- Simpson Spence & Young - Indonesia
- Parliament of New Zealand
- Attock Cement Pakistan Limited
- Electricity Generating Authority of Thailand
- Australian Coal Association
- Bhatia International Limited - India
- MS Steel International - UAE
- Bhoruka Overseas - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Videocon Industries ltd - India
- Semirara Mining Corp, Philippines
- Medco Energi Mining Internasional
- New Zealand Coal & Carbon
- Therma Luzon, Inc, Philippines
- VISA Power Limited - India
- Ministry of Mines - Canada
- Carbofer General Trading SA - India
- Star Paper Mills Limited - India
- Bulk Trading Sa - Switzerland
- GAC Shipping (India) Pvt Ltd
- LBH Netherlands Bv - Netherlands
- Posco Energy - South Korea
- Indian Oil Corporation Limited
- Sarangani Energy Corporation, Philippines
- Ambuja Cements Ltd - India
- Electricity Authority, New Zealand
- Merrill Lynch Commodities Europe
- ASAPP Information Group - India
- Tamil Nadu electricity Board
- IHS Mccloskey Coal Group - USA
- Jorong Barutama Greston.PT - Indonesia
- Siam City Cement - Thailand
- Directorate Of Revenue Intelligence - India
- Renaissance Capital - South Africa
- Samtan Co., Ltd - South Korea
- The Treasury - Australian Government
- Malabar Cements Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Salva Resources Pvt Ltd - India
- Petron Corporation, Philippines
- Chamber of Mines of South Africa
- Indonesian Coal Mining Association
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sakthi Sugars Limited - India
- Marubeni Corporation - India
- Meenaskhi Energy Private Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indogreen Group - Indonesia
- Parry Sugars Refinery, India
- Antam Resourcindo - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bayan Resources Tbk. - Indonesia
- Bukit Makmur.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Economic Council, Georgia
- Coastal Gujarat Power Limited - India
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