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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, 29 August 20
COAL INDIA'S FUEL SUPPLY TO POWER SECTOR DROPS ABOUT 20% IN APR-JUL: PTI
State-owned Coal India”s fuel supply to the power sector registered a decline of 19.5 per cent to 126.30 million tonnes (MT) in the April-Jul ...
Saturday, 29 August 20
SOUTH KOREAN BROKERAGE FIRM KOREA INVESTMENT & SECURITIES TO STOP ALL COAL BUSINESS - KOREA HERALD
South Korean brokerage firm Korea Investment & Securities has decided to stop its investments in coal, in line with the Moon Jae-in administrat ...
Thursday, 27 August 20
KOREAN GENCOS INVITED BIDS FOR TOTAL 985,000 TONS OF BITUMINOUS COAL FOR NOVEMBER 2020 LOADING
COALspot.com: Korea Midland Power Co., Ltd (KOMIPO) on behalf of EWP, KOSPO, KOSEP and KOWEPO has issued an international tender for total 985,000 ...
Thursday, 27 August 20
SOUTHEAST ASIAN NATIONS SET REGION-WIDE RENEWABLE ENERGY GOAL OF 23 PERCENT BY 2025 - ASEAN POST
The Association of Southeast Asian Nations (ASEAN) has set an ambitious target of securing 23 percent of its primary energy from renewable so ...
Thursday, 27 August 20
BANGLADESH POWER MINISTRY SEEKING AUTHORITY TO CANCEL 13,000 MW OF PROPOSED COAL-FIRED CAPACITY - BUSINESS STANDARD
In a bid to move away from dirty energy, the Ministry of Power, Energy and Mineral Resources is seeking the prime minister’s approval to conv ...
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- Indogreen Group - Indonesia
- Mintek Dendrill Indonesia
- European Bulk Services B.V. - Netherlands
- Australian Coal Association
- Ambuja Cements Ltd - India
- Jindal Steel & Power Ltd - India
- ICICI Bank Limited - India
- Port Waratah Coal Services - Australia
- Videocon Industries ltd - India
- Bhatia International Limited - India
- Straits Asia Resources Limited - Singapore
- Chamber of Mines of South Africa
- SN Aboitiz Power Inc, Philippines
- Price Waterhouse Coopers - Russia
- Salva Resources Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Semirara Mining and Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Parry Sugars Refinery, India
- Jorong Barutama Greston.PT - Indonesia
- Mercator Lines Limited - India
- Globalindo Alam Lestari - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Holcim Trading Pte Ltd - Singapore
- Bulk Trading Sa - Switzerland
- Larsen & Toubro Limited - India
- Miang Besar Coal Terminal - Indonesia
- Gujarat Sidhee Cement - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Independent Power Producers Association of India
- Sindya Power Generating Company Private Ltd
- Kapuas Tunggal Persada - Indonesia
- Vizag Seaport Private Limited - India
- Cement Manufacturers Association - India
- Ceylon Electricity Board - Sri Lanka
- PTC India Limited - India
- Sojitz Corporation - Japan
- Asmin Koalindo Tuhup - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Vedanta Resources Plc - India
- Coastal Gujarat Power Limited - India
- Singapore Mercantile Exchange
- The University of Queensland
- Kideco Jaya Agung - Indonesia
- PowerSource Philippines DevCo
- Maharashtra Electricity Regulatory Commission - India
- Karbindo Abesyapradhi - Indoneisa
- Iligan Light & Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Commonwealth Bank - Australia
- Medco Energi Mining Internasional
- Electricity Authority, New Zealand
- Kohat Cement Company Ltd. - Pakistan
- Deloitte Consulting - India
- Kartika Selabumi Mining - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Binh Thuan Hamico - Vietnam
- Posco Energy - South Korea
- Simpson Spence & Young - Indonesia
- Edison Trading Spa - Italy
- Sakthi Sugars Limited - India
- Gujarat Electricity Regulatory Commission - India
- Uttam Galva Steels Limited - India
- Global Green Power PLC Corporation, Philippines
- Borneo Indobara - Indonesia
- Bayan Resources Tbk. - Indonesia
- Sarangani Energy Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Tamil Nadu electricity Board
- Formosa Plastics Group - Taiwan
- GVK Power & Infra Limited - India
- Latin American Coal - Colombia
- Indian Oil Corporation Limited
- Petron Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Siam City Cement - Thailand
- Pendopo Energi Batubara - Indonesia
- PNOC Exploration Corporation - Philippines
- Coalindo Energy - Indonesia
- Essar Steel Hazira Ltd - India
- Ministry of Finance - Indonesia
- Carbofer General Trading SA - India
- SMG Consultants - Indonesia
- New Zealand Coal & Carbon
- Bahari Cakrawala Sebuku - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Economic Council, Georgia
- Tata Chemicals Ltd - India
- Dalmia Cement Bharat India
- Electricity Generating Authority of Thailand
- Riau Bara Harum - Indonesia
- Attock Cement Pakistan Limited
- OPG Power Generation Pvt Ltd - India
- CNBM International Corporation - China
- Rashtriya Ispat Nigam Limited - India
- GMR Energy Limited - India
- IHS Mccloskey Coal Group - USA
- Semirara Mining Corp, Philippines
- Sree Jayajothi Cements Limited - India
- Energy Development Corp, Philippines
- McConnell Dowell - Australia
- Intertek Mineral Services - Indonesia
- Grasim Industreis Ltd - India
- Rio Tinto Coal - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Orica Mining Services - Indonesia
- London Commodity Brokers - England
- Global Coal Blending Company Limited - Australia
- Krishnapatnam Port Company Ltd. - India
- Petrochimia International Co. Ltd.- Taiwan
- Indo Tambangraya Megah - Indonesia
- Baramulti Group, Indonesia
- Chettinad Cement Corporation Ltd - India
- Interocean Group of Companies - India
- Trasteel International SA, Italy
- Marubeni Corporation - India
- Manunggal Multi Energi - Indonesia
- Toyota Tsusho Corporation, Japan
- Kobexindo Tractors - Indoneisa
- Kepco SPC Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- The Treasury - Australian Government
- Indika Energy - Indonesia
- Global Business Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Siam City Cement PLC, Thailand
- Ind-Barath Power Infra Limited - India
- White Energy Company Limited
- Pipit Mutiara Jaya. PT, Indonesia
- VISA Power Limited - India
- MS Steel International - UAE
- Standard Chartered Bank - UAE
- Antam Resourcindo - Indonesia
- Anglo American - United Kingdom
- Sical Logistics Limited - India
- Georgia Ports Authority, United States
- Coal and Oil Company - UAE
- GAC Shipping (India) Pvt Ltd
- Heidelberg Cement - Germany
- Cigading International Bulk Terminal - Indonesia
- Minerals Council of Australia
- Power Finance Corporation Ltd., India
- Maheswari Brothers Coal Limited - India
- Central Electricity Authority - India
- The State Trading Corporation of India Ltd
- Bukit Baiduri Energy - Indonesia
- Barasentosa Lestari - Indonesia
- SMC Global Power, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Planning Commission, India
- Oldendorff Carriers - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Australian Commodity Traders Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Xindia Steels Limited - India
- Bukit Makmur.PT - Indonesia
- Aditya Birla Group - India
- Central Java Power - Indonesia
- India Bulls Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bangladesh Power Developement Board
- Thai Mozambique Logistica
- Wood Mackenzie - Singapore
- Banpu Public Company Limited - Thailand
- Bhoruka Overseas - Indonesia
- Meenaskhi Energy Private Limited - India
- Leighton Contractors Pty Ltd - Australia
- Star Paper Mills Limited - India
- Eastern Coal Council - USA
- Bharathi Cement Corporation - India
- Savvy Resources Ltd - HongKong
- Makarim & Taira - Indonesia
- Energy Link Ltd, New Zealand
- Bhushan Steel Limited - India
- Parliament of New Zealand
- Madhucon Powers Ltd - India
- LBH Netherlands Bv - Netherlands
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Africa Commodities Group - South Africa
- Mercuria Energy - Indonesia
- ASAPP Information Group - India
- Jaiprakash Power Ventures ltd
- Ministry of Mines - Canada
- CIMB Investment Bank - Malaysia
- IEA Clean Coal Centre - UK
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Altura Mining Limited, Indonesia
- Romanian Commodities Exchange
- TeaM Sual Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Meralco Power Generation, Philippines
- Aboitiz Power Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Renaissance Capital - South Africa
- Samtan Co., Ltd - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Agrawal Coal Company - India
- Indonesian Coal Mining Association
- Alfred C Toepfer International GmbH - Germany
- Kumho Petrochemical, South Korea
- Indian Energy Exchange, India
- Sinarmas Energy and Mining - Indonesia
- Merrill Lynch Commodities Europe
- Lanco Infratech Ltd - India
- Karaikal Port Pvt Ltd - India
- Wilmar Investment Holdings
- Eastern Energy - Thailand
- Goldman Sachs - Singapore
- Malabar Cements Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Transport, Egypt
- Kaltim Prima Coal - Indonesia
- Mjunction Services Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Thiess Contractors Indonesia
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