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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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Wednesday, 26 August 20
ASIAN COAL PRICES LIKELY TO REMAIN DEPRESSED SAY TRADERS, ANALYSTS - REUTERS
Asian coal prices, which have fallen around 25% this year as power demand slumped due to the coronavirus outbreak, are unlikely to move higher befo ...
Wednesday, 26 August 20
WORLD COAL EXPORTS: INDONESIAN THERMAL COAL EXPORTS HAVE COME UNDER PRESSURE AS THERMAL COAL PRICES WEAKEN - REPORT
Indonesia’s exports to decline sharply from record highs
Indonesia is the world’s largest thermal coal exporter, sellin ...
Wednesday, 26 August 20
JAPAN'S COAL IMPORTS ARE BEING AFFECTED BY COMPETING INFLUENCES - REPORT
Japan is the world’s third largest thermal coal importer, importing an estimated 135 million tonnes of thermal coal in 2019. The country&rsqu ...
Wednesday, 26 August 20
PENDING SOUTH KOREA LEGISLATION COULD FORCE HALT TO COUNTRY’S COAL PLANT EXPORT DEALS - KOREA ECONOMIC DAILY
South Korea’s parliament looks set to pass new legislation to ban financing on foreign coal power projects, putting all overseas coal-fired p ...
Tuesday, 25 August 20
INDIA'S IMPORTS FALL AS LOCKDOWNS IMPACT THE POWER AND INDUSTRIAL SECTORS - REPORT
India is the world’s second largest thermal coal consumer and importer, importing an estimated 211 million tonnes of thermal coal in 2019.&nb ...
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- ASAPP Information Group - India
- Iligan Light & Power Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- Baramulti Group, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Essar Steel Hazira Ltd - India
- Semirara Mining Corp, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ceylon Electricity Board - Sri Lanka
- Thiess Contractors Indonesia
- Edison Trading Spa - Italy
- Australian Coal Association
- Minerals Council of Australia
- Maharashtra Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- South Luzon Thermal Energy Corporation
- GMR Energy Limited - India
- Videocon Industries ltd - India
- Parliament of New Zealand
- Bangladesh Power Developement Board
- Global Green Power PLC Corporation, Philippines
- Planning Commission, India
- Barasentosa Lestari - Indonesia
- Lanco Infratech Ltd - India
- Makarim & Taira - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- OPG Power Generation Pvt Ltd - India
- McConnell Dowell - Australia
- Tamil Nadu electricity Board
- Indian Oil Corporation Limited
- LBH Netherlands Bv - Netherlands
- CIMB Investment Bank - Malaysia
- Mercuria Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- International Coal Ventures Pvt Ltd - India
- Posco Energy - South Korea
- Madhucon Powers Ltd - India
- Globalindo Alam Lestari - Indonesia
- Uttam Galva Steels Limited - India
- Deloitte Consulting - India
- Straits Asia Resources Limited - Singapore
- Georgia Ports Authority, United States
- Energy Link Ltd, New Zealand
- Electricity Generating Authority of Thailand
- Cement Manufacturers Association - India
- Sree Jayajothi Cements Limited - India
- Global Business Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- PowerSource Philippines DevCo
- Grasim Industreis Ltd - India
- Riau Bara Harum - Indonesia
- Renaissance Capital - South Africa
- Neyveli Lignite Corporation Ltd, - India
- Meralco Power Generation, Philippines
- Eastern Energy - Thailand
- PetroVietnam Power Coal Import and Supply Company
- IEA Clean Coal Centre - UK
- Antam Resourcindo - Indonesia
- Kobexindo Tractors - Indoneisa
- Formosa Plastics Group - Taiwan
- Ind-Barath Power Infra Limited - India
- The State Trading Corporation of India Ltd
- Bayan Resources Tbk. - Indonesia
- Manunggal Multi Energi - Indonesia
- Timah Investasi Mineral - Indoneisa
- Chamber of Mines of South Africa
- SMC Global Power, Philippines
- Chettinad Cement Corporation Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Romanian Commodities Exchange
- Indian Energy Exchange, India
- Interocean Group of Companies - India
- Gujarat Sidhee Cement - India
- Heidelberg Cement - Germany
- Binh Thuan Hamico - Vietnam
- Energy Development Corp, Philippines
- India Bulls Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coalindo Energy - Indonesia
- Kumho Petrochemical, South Korea
- Siam City Cement PLC, Thailand
- IHS Mccloskey Coal Group - USA
- The University of Queensland
- Banpu Public Company Limited - Thailand
- Gujarat Electricity Regulatory Commission - India
- Aditya Birla Group - India
- Sinarmas Energy and Mining - Indonesia
- Mintek Dendrill Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Marubeni Corporation - India
- Rashtriya Ispat Nigam Limited - India
- Ministry of Transport, Egypt
- Trasteel International SA, Italy
- Agrawal Coal Company - India
- GVK Power & Infra Limited - India
- Metalloyd Limited - United Kingdom
- Indika Energy - Indonesia
- Wood Mackenzie - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Bharathi Cement Corporation - India
- Rio Tinto Coal - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Coal and Oil Company - UAE
- Intertek Mineral Services - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Altura Mining Limited, Indonesia
- GAC Shipping (India) Pvt Ltd
- Xindia Steels Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Directorate Of Revenue Intelligence - India
- Karaikal Port Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Sical Logistics Limited - India
- Bhoruka Overseas - Indonesia
- Africa Commodities Group - South Africa
- Medco Energi Mining Internasional
- Independent Power Producers Association of India
- Kartika Selabumi Mining - Indonesia
- Indogreen Group - Indonesia
- Oldendorff Carriers - Singapore
- Carbofer General Trading SA - India
- Anglo American - United Kingdom
- Tata Chemicals Ltd - India
- Electricity Authority, New Zealand
- Therma Luzon, Inc, Philippines
- CNBM International Corporation - China
- San Jose City I Power Corp, Philippines
- Kapuas Tunggal Persada - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhatia International Limited - India
- Central Electricity Authority - India
- VISA Power Limited - India
- Semirara Mining and Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Sarangani Energy Corporation, Philippines
- Thai Mozambique Logistica
- Cigading International Bulk Terminal - Indonesia
- London Commodity Brokers - England
- Dalmia Cement Bharat India
- Jaiprakash Power Ventures ltd
- Billiton Holdings Pty Ltd - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indo Tambangraya Megah - Indonesia
- Attock Cement Pakistan Limited
- Simpson Spence & Young - Indonesia
- Bulk Trading Sa - Switzerland
- Bukit Asam (Persero) Tbk - Indonesia
- The Treasury - Australian Government
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Singapore Mercantile Exchange
- Ambuja Cements Ltd - India
- PTC India Limited - India
- Port Waratah Coal Services - Australia
- Power Finance Corporation Ltd., India
- Wilmar Investment Holdings
- Malabar Cements Ltd - India
- MS Steel International - UAE
- SMG Consultants - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Eastern Coal Council - USA
- Savvy Resources Ltd - HongKong
- Australian Commodity Traders Exchange
- Petrochimia International Co. Ltd.- Taiwan
- Aboitiz Power Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- Vizag Seaport Private Limited - India
- Kaltim Prima Coal - Indonesia
- Central Java Power - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- White Energy Company Limited
- Alfred C Toepfer International GmbH - Germany
- Karbindo Abesyapradhi - Indoneisa
- TeaM Sual Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Merrill Lynch Commodities Europe
- Sojitz Corporation - Japan
- Ministry of Mines - Canada
- Petron Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Bhushan Steel Limited - India
- Sakthi Sugars Limited - India
- Ministry of Finance - Indonesia
- Jindal Steel & Power Ltd - India
- Samtan Co., Ltd - South Korea
- Larsen & Toubro Limited - India
- Commonwealth Bank - Australia
- Orica Mining Services - Indonesia
- PNOC Exploration Corporation - Philippines
- Toyota Tsusho Corporation, Japan
- Orica Australia Pty. Ltd.
- Standard Chartered Bank - UAE
- New Zealand Coal & Carbon
- Salva Resources Pvt Ltd - India
- Borneo Indobara - Indonesia
- Kepco SPC Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Vedanta Resources Plc - India
- Economic Council, Georgia
- Latin American Coal - Colombia
- Jorong Barutama Greston.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bukit Baiduri Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Goldman Sachs - Singapore
- Mercator Lines Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- Krishnapatnam Port Company Ltd. - India
- Star Paper Mills Limited - India
- Mjunction Services Limited - India
- Price Waterhouse Coopers - Russia
- Parry Sugars Refinery, India
- Siam City Cement - Thailand
- ICICI Bank Limited - India
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