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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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Saturday, 05 September 20
INDIA WON'T KICK ITS COAL HABIT SO EASILY - HINDU BUSINESS LINE
India has traditionally considered itself lucky to have been endowed with abundant coal reserves, which it has sought to use to meet its energy nee ...
Saturday, 05 September 20
FINANCING COMPLETE FOR 900MW FIFTH PHASE OF MASSIVE DUBAI SOLAR PARK: ARABIAN BUSINESS
Saudi-based ACWA Power on Thursday announced it has completed the signing of all financing agreements for the fifth phase of the Mohammed bin Rashi ...
Saturday, 05 September 20
POLISH COAL DEMAND EXPECTED TO FALL BY 7 MLN TONNES NEXT YEAR: MINISTER - REUTERS
Poland’s demand for coal is expected to fall by around 7 million tonnes next year, or more than 10% of annual hard coal production, after a d ...
Saturday, 05 September 20
PAKISTAN'S NEW 27-YEAR POWER PLAN RISKS LOCKING IN LONG-TERM OVERCAPACITY, LEAVING IMPORTED COAL AND LNG PLANTS STRANDED - IEEFA
Wind and solar, the country’s cheapest source of new generation, also overlooked
Pakistan risks locking itself into building m ...
Friday, 04 September 20
IN A DEEPENING DEBT HOLE OF $34 BILLION, INDONESIA’S PLN MUST STOP DIGGING - IEEFA
The utility has added IDR100 trillion in debt annually for the last five years
Utilities globally started changing the way they do business ye ...
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- Ministry of Transport, Egypt
- Wilmar Investment Holdings
- Straits Asia Resources Limited - Singapore
- Standard Chartered Bank - UAE
- Tamil Nadu electricity Board
- Bulk Trading Sa - Switzerland
- Maheswari Brothers Coal Limited - India
- Medco Energi Mining Internasional
- Kumho Petrochemical, South Korea
- GAC Shipping (India) Pvt Ltd
- Binh Thuan Hamico - Vietnam
- CNBM International Corporation - China
- Merrill Lynch Commodities Europe
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Leighton Contractors Pty Ltd - Australia
- Independent Power Producers Association of India
- The Treasury - Australian Government
- ASAPP Information Group - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Vedanta Resources Plc - India
- Petrochimia International Co. Ltd.- Taiwan
- Bayan Resources Tbk. - Indonesia
- Australian Coal Association
- Formosa Plastics Group - Taiwan
- SN Aboitiz Power Inc, Philippines
- Vizag Seaport Private Limited - India
- Oldendorff Carriers - Singapore
- Trasteel International SA, Italy
- Bhushan Steel Limited - India
- AsiaOL BioFuels Corp., Philippines
- Commonwealth Bank - Australia
- Riau Bara Harum - Indonesia
- Bhatia International Limited - India
- CIMB Investment Bank - Malaysia
- Eastern Coal Council - USA
- Edison Trading Spa - Italy
- SMC Global Power, Philippines
- Indo Tambangraya Megah - Indonesia
- Salva Resources Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Videocon Industries ltd - India
- Electricity Generating Authority of Thailand
- Neyveli Lignite Corporation Ltd, - India
- PetroVietnam Power Coal Import and Supply Company
- Dalmia Cement Bharat India
- Kapuas Tunggal Persada - Indonesia
- Chettinad Cement Corporation Ltd - India
- London Commodity Brokers - England
- Banpu Public Company Limited - Thailand
- Star Paper Mills Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Mjunction Services Limited - India
- Global Green Power PLC Corporation, Philippines
- Planning Commission, India
- Port Waratah Coal Services - Australia
- Semirara Mining Corp, Philippines
- Indian Energy Exchange, India
- Rio Tinto Coal - Australia
- The State Trading Corporation of India Ltd
- Borneo Indobara - Indonesia
- McConnell Dowell - Australia
- Sree Jayajothi Cements Limited - India
- White Energy Company Limited
- Indika Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Singapore Mercantile Exchange
- Karaikal Port Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mercuria Energy - Indonesia
- PowerSource Philippines DevCo
- Deloitte Consulting - India
- Orica Mining Services - Indonesia
- Sarangani Energy Corporation, Philippines
- The University of Queensland
- Iligan Light & Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- Globalindo Alam Lestari - Indonesia
- Coastal Gujarat Power Limited - India
- Antam Resourcindo - Indonesia
- IEA Clean Coal Centre - UK
- International Coal Ventures Pvt Ltd - India
- Sakthi Sugars Limited - India
- Central Java Power - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Bharathi Cement Corporation - India
- Xindia Steels Limited - India
- Jaiprakash Power Ventures ltd
- Toyota Tsusho Corporation, Japan
- Maharashtra Electricity Regulatory Commission - India
- Petron Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Manunggal Multi Energi - Indonesia
- Siam City Cement - Thailand
- Pendopo Energi Batubara - Indonesia
- Miang Besar Coal Terminal - Indonesia
- San Jose City I Power Corp, Philippines
- Latin American Coal - Colombia
- Minerals Council of Australia
- Kobexindo Tractors - Indoneisa
- European Bulk Services B.V. - Netherlands
- MS Steel International - UAE
- Vijayanagar Sugar Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Global Coal Blending Company Limited - Australia
- Economic Council, Georgia
- Mercator Lines Limited - India
- Sindya Power Generating Company Private Ltd
- Electricity Authority, New Zealand
- Aboitiz Power Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Agrawal Coal Company - India
- Bhoruka Overseas - Indonesia
- Timah Investasi Mineral - Indoneisa
- India Bulls Power Limited - India
- VISA Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Larsen & Toubro Limited - India
- Barasentosa Lestari - Indonesia
- TeaM Sual Corporation - Philippines
- Grasim Industreis Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Ind-Barath Power Infra Limited - India
- Gujarat Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- GVK Power & Infra Limited - India
- Tata Chemicals Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Simpson Spence & Young - Indonesia
- Energy Link Ltd, New Zealand
- Sojitz Corporation - Japan
- Bukit Makmur.PT - Indonesia
- Carbofer General Trading SA - India
- ICICI Bank Limited - India
- Meenaskhi Energy Private Limited - India
- New Zealand Coal & Carbon
- Parry Sugars Refinery, India
- Directorate Of Revenue Intelligence - India
- Kartika Selabumi Mining - Indonesia
- Mintek Dendrill Indonesia
- Metalloyd Limited - United Kingdom
- Ministry of Finance - Indonesia
- Thiess Contractors Indonesia
- Coalindo Energy - Indonesia
- Altura Mining Limited, Indonesia
- Essar Steel Hazira Ltd - India
- Heidelberg Cement - Germany
- Energy Development Corp, Philippines
- SMG Consultants - Indonesia
- Semirara Mining and Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Kepco SPC Power Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Posco Energy - South Korea
- Aditya Birla Group - India
- Cement Manufacturers Association - India
- Wood Mackenzie - Singapore
- Eastern Energy - Thailand
- Marubeni Corporation - India
- LBH Netherlands Bv - Netherlands
- Kalimantan Lumbung Energi - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Siam City Cement PLC, Thailand
- Indian Oil Corporation Limited
- Goldman Sachs - Singapore
- Billiton Holdings Pty Ltd - Australia
- Ambuja Cements Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Baramulti Group, Indonesia
- Sical Logistics Limited - India
- Power Finance Corporation Ltd., India
- PTC India Limited - India
- Uttam Galva Steels Limited - India
- Interocean Group of Companies - India
- Coal and Oil Company - UAE
- Meralco Power Generation, Philippines
- Madhucon Powers Ltd - India
- Chamber of Mines of South Africa
- Savvy Resources Ltd - HongKong
- Renaissance Capital - South Africa
- Bahari Cakrawala Sebuku - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Central Electricity Authority - India
- Bukit Baiduri Energy - Indonesia
- Indonesian Coal Mining Association
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kideco Jaya Agung - Indonesia
- Anglo American - United Kingdom
- Malabar Cements Ltd - India
- Kaltim Prima Coal - Indonesia
- Bangladesh Power Developement Board
- Karbindo Abesyapradhi - Indoneisa
- Ceylon Electricity Board - Sri Lanka
- Africa Commodities Group - South Africa
- Ministry of Mines - Canada
- Jindal Steel & Power Ltd - India
- Georgia Ports Authority, United States
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thai Mozambique Logistica
- Australian Commodity Traders Exchange
- GMR Energy Limited - India
- Orica Australia Pty. Ltd.
- Indogreen Group - Indonesia
- Intertek Mineral Services - Indonesia
- Gujarat Sidhee Cement - India
- Parliament of New Zealand
- Lanco Infratech Ltd - India
- Attock Cement Pakistan Limited
- Asmin Koalindo Tuhup - Indonesia
- Romanian Commodities Exchange
- Krishnapatnam Port Company Ltd. - India
- Makarim & Taira - Indonesia
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