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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, 12 August 20
U.S. COAL PRODUCTION IN 2020 WILL DECREASE BY 29% FROM 2019 LEVELS TO 502 MMST - EIA
U.S. coal consumption, which dropped to its lowest point since April, totaled 95 MMst in the second quarter of 2020.
EIA expec ...
Tuesday, 11 August 20
BHP COAL ASSETS WORTH A BILLION LESS THAN JUST TWO YEARS AGO - IEEFA
Another global investor, the UK’s biggest public pension fund NEST, has withdrawn funds from BHP this week because the company is profiting & ...
Monday, 10 August 20
COAL IMPORT DROPS 43% IN JULY OWING TO HIGH STOCKPILE AT PITHEADS, PLANTS - PTI
“The market participants seem to have adopted a wait and watch approach and are currently looking for a direction. We do not expect to see an ...
Saturday, 08 August 20
GLOBAL COAL POWER PUZZLE - BALTIC EXCHANGE
Global Energy Monitor’s latest Global Coal Plant Tracker has put another nail in the coffin for the coal-carrying fleet with its finding that ...
Friday, 07 August 20
PEABODY'S $1.42 BILLION WRITE-DOWN CONCEDES COAL MINES HAVE LITTLE VALUE AND DIM FUTURE - IEEFA
Trouble at biggest mine in Powder River Basin speaks volumes about state of industry
Peabody Energy, the world’s largest priva ...
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- Karaikal Port Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Sinarmas Energy and Mining - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Semirara Mining and Power Corporation, Philippines
- Mercuria Energy - Indonesia
- Formosa Plastics Group - Taiwan
- The University of Queensland
- Ministry of Transport, Egypt
- Toyota Tsusho Corporation, Japan
- Simpson Spence & Young - Indonesia
- Wood Mackenzie - Singapore
- Global Green Power PLC Corporation, Philippines
- Indonesian Coal Mining Association
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Lanco Infratech Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Deloitte Consulting - India
- Dalmia Cement Bharat India
- South Luzon Thermal Energy Corporation
- PetroVietnam Power Coal Import and Supply Company
- European Bulk Services B.V. - Netherlands
- Port Waratah Coal Services - Australia
- Energy Link Ltd, New Zealand
- Kepco SPC Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Kartika Selabumi Mining - Indonesia
- Manunggal Multi Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- ASAPP Information Group - India
- Cigading International Bulk Terminal - Indonesia
- Essar Steel Hazira Ltd - India
- Bhushan Steel Limited - India
- Eastern Energy - Thailand
- Banpu Public Company Limited - Thailand
- Energy Development Corp, Philippines
- Kaltim Prima Coal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Australian Commodity Traders Exchange
- Indian Oil Corporation Limited
- ICICI Bank Limited - India
- Parliament of New Zealand
- SMG Consultants - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Siam City Cement - Thailand
- Karbindo Abesyapradhi - Indoneisa
- Salva Resources Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Petrochimia International Co. Ltd.- Taiwan
- Uttam Galva Steels Limited - India
- Malabar Cements Ltd - India
- Singapore Mercantile Exchange
- Jindal Steel & Power Ltd - India
- Videocon Industries ltd - India
- Rashtriya Ispat Nigam Limited - India
- IHS Mccloskey Coal Group - USA
- LBH Netherlands Bv - Netherlands
- Altura Mining Limited, Indonesia
- Kapuas Tunggal Persada - Indonesia
- Xindia Steels Limited - India
- CIMB Investment Bank - Malaysia
- Bahari Cakrawala Sebuku - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Wilmar Investment Holdings
- Chamber of Mines of South Africa
- Electricity Authority, New Zealand
- Thai Mozambique Logistica
- Sical Logistics Limited - India
- Mintek Dendrill Indonesia
- Commonwealth Bank - Australia
- Baramulti Group, Indonesia
- Independent Power Producers Association of India
- Jorong Barutama Greston.PT - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Coal and Oil Company - UAE
- Sree Jayajothi Cements Limited - India
- Antam Resourcindo - Indonesia
- SMC Global Power, Philippines
- Jaiprakash Power Ventures ltd
- Chettinad Cement Corporation Ltd - India
- Cement Manufacturers Association - India
- Latin American Coal - Colombia
- Timah Investasi Mineral - Indoneisa
- Tamil Nadu electricity Board
- Economic Council, Georgia
- Planning Commission, India
- Romanian Commodities Exchange
- Attock Cement Pakistan Limited
- GVK Power & Infra Limited - India
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining Corp, Philippines
- Aboitiz Power Corporation - Philippines
- PowerSource Philippines DevCo
- OPG Power Generation Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Ministry of Finance - Indonesia
- Larsen & Toubro Limited - India
- Ceylon Electricity Board - Sri Lanka
- Kumho Petrochemical, South Korea
- Central Java Power - Indonesia
- SN Aboitiz Power Inc, Philippines
- Ind-Barath Power Infra Limited - India
- VISA Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Marubeni Corporation - India
- Kohat Cement Company Ltd. - Pakistan
- Straits Asia Resources Limited - Singapore
- Gujarat Mineral Development Corp Ltd - India
- McConnell Dowell - Australia
- Georgia Ports Authority, United States
- Maharashtra Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- Siam City Cement PLC, Thailand
- Vedanta Resources Plc - India
- PNOC Exploration Corporation - Philippines
- Eastern Coal Council - USA
- TeaM Sual Corporation - Philippines
- Bulk Trading Sa - Switzerland
- Trasteel International SA, Italy
- Maheswari Brothers Coal Limited - India
- Bharathi Cement Corporation - India
- Samtan Co., Ltd - South Korea
- Indogreen Group - Indonesia
- MS Steel International - UAE
- Bhoruka Overseas - Indonesia
- Renaissance Capital - South Africa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Barasentosa Lestari - Indonesia
- Bukit Makmur.PT - Indonesia
- Indika Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Grasim Industreis Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Global Business Power Corporation, Philippines
- Australian Coal Association
- Central Electricity Authority - India
- Intertek Mineral Services - Indonesia
- The Treasury - Australian Government
- Parry Sugars Refinery, India
- London Commodity Brokers - England
- Metalloyd Limited - United Kingdom
- Bhatia International Limited - India
- Sojitz Corporation - Japan
- Borneo Indobara - Indonesia
- The State Trading Corporation of India Ltd
- PTC India Limited - India
- Thiess Contractors Indonesia
- Meenaskhi Energy Private Limited - India
- Ministry of Mines - Canada
- Mjunction Services Limited - India
- Bukit Baiduri Energy - Indonesia
- Indian Energy Exchange, India
- Orica Australia Pty. Ltd.
- AsiaOL BioFuels Corp., Philippines
- CNBM International Corporation - China
- India Bulls Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Electricity Generating Authority of Thailand
- Edison Trading Spa - Italy
- Kobexindo Tractors - Indoneisa
- Kideco Jaya Agung - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Therma Luzon, Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Petron Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Vizag Seaport Private Limited - India
- Mercator Lines Limited - India
- Carbofer General Trading SA - India
- Rio Tinto Coal - Australia
- Agrawal Coal Company - India
- Binh Thuan Hamico - Vietnam
- Makarim & Taira - Indonesia
- Gujarat Sidhee Cement - India
- Merrill Lynch Commodities Europe
- Orica Mining Services - Indonesia
- Sakthi Sugars Limited - India
- White Energy Company Limited
- Sindya Power Generating Company Private Ltd
- Interocean Group of Companies - India
- Coastal Gujarat Power Limited - India
- Tata Chemicals Ltd - India
- Meralco Power Generation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Madhucon Powers Ltd - India
- IEA Clean Coal Centre - UK
- Bangladesh Power Developement Board
- Oldendorff Carriers - Singapore
- Bayan Resources Tbk. - Indonesia
- New Zealand Coal & Carbon
- Power Finance Corporation Ltd., India
- Leighton Contractors Pty Ltd - Australia
- Star Paper Mills Limited - India
- Posco Energy - South Korea
- Goldman Sachs - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Riau Bara Harum - Indonesia
- Minerals Council of Australia
- Vijayanagar Sugar Pvt Ltd - India
- Anglo American - United Kingdom
- Indo Tambangraya Megah - Indonesia
- San Jose City I Power Corp, Philippines
- Africa Commodities Group - South Africa
- GAC Shipping (India) Pvt Ltd
- Medco Energi Mining Internasional
- Coalindo Energy - Indonesia
- Heidelberg Cement - Germany
- Miang Besar Coal Terminal - Indonesia
- Aditya Birla Group - India
- GMR Energy Limited - India
- Globalindo Alam Lestari - Indonesia
- Pendopo Energi Batubara - Indonesia
- Savvy Resources Ltd - HongKong
- Standard Chartered Bank - UAE
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