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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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Tuesday, 04 August 20
KOEN INVITED BIDS FOR TOTAL 900K MT OF MIN 5600 NCV COAL FOR 3 YEARS
COALspot.com: South Korea’s KOREA SOUTH-EAST POWER CO., LTD. (KOEN) has issued an international tender for 260,000 to 300,000 Tons (MT) min. ...
Tuesday, 04 August 20
THE WORLD’S FLEET OF COAL-FIRED POWER STATIONS HAS GOT SMALLER FOR THE FIRST TIME ON RECORD, WITH MORE CAPACITY RETIRED IN THE FIRST HALF OF 2020 THAN THE AMOUNT OPENED - IEA
This is according to the latest Global Coal Plant Tracker (GCPT) results by Global Energy Monitor (GEM), which we completed last month and report f ...
Monday, 03 August 20
U.S. COAL CONSUMPTION, WHICH HAS DECLINED SINCE ITS 2007 PEAK, FELL TO ITS LOWEST POINT IN APRIL 2020 - EIA
According to the U.S. Energy Information Administration’s (EIA) most recent Monthly Energy Review, the United States consumed 6.5 quadrillion ...
Monday, 03 August 20
LOW OIL PRICE AND CORONA VIRUS HIT SUB-SAHARAN AFRICA OIL PRODUCERS - FITCH RATINGS
The collapse in oil prices and the coronavirus shock is worsening the fiscal and external balances of sub-Saharan African oil producers, Fitch Rati ...
Saturday, 01 August 20
SHIP SHAPE - OUCH: FIS
Thursday afternoon saw a report that US GDP in Q2 shrank by 32.9%. Now this may have beaten expectations, but it’s a bit like saying that you ...
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- Bhushan Steel Limited - India
- Carbofer General Trading SA - India
- Makarim & Taira - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Formosa Plastics Group - Taiwan
- Kaltim Prima Coal - Indonesia
- Pendopo Energi Batubara - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Australian Commodity Traders Exchange
- Timah Investasi Mineral - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- Bulk Trading Sa - Switzerland
- Chamber of Mines of South Africa
- Price Waterhouse Coopers - Russia
- Essar Steel Hazira Ltd - India
- Electricity Authority, New Zealand
- Vizag Seaport Private Limited - India
- Kobexindo Tractors - Indoneisa
- ICICI Bank Limited - India
- Jindal Steel & Power Ltd - India
- Deloitte Consulting - India
- Global Coal Blending Company Limited - Australia
- Sical Logistics Limited - India
- Edison Trading Spa - Italy
- Gujarat Sidhee Cement - India
- Samtan Co., Ltd - South Korea
- Directorate Of Revenue Intelligence - India
- The Treasury - Australian Government
- Energy Development Corp, Philippines
- Sojitz Corporation - Japan
- Wilmar Investment Holdings
- Port Waratah Coal Services - Australia
- Singapore Mercantile Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- The State Trading Corporation of India Ltd
- Petron Corporation, Philippines
- Australian Coal Association
- Minerals Council of Australia
- GN Power Mariveles Coal Plant, Philippines
- Miang Besar Coal Terminal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Global Green Power PLC Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Parry Sugars Refinery, India
- Mercuria Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhoruka Overseas - Indonesia
- Sakthi Sugars Limited - India
- Dalmia Cement Bharat India
- Indonesian Coal Mining Association
- MS Steel International - UAE
- The University of Queensland
- CIMB Investment Bank - Malaysia
- GVK Power & Infra Limited - India
- Mintek Dendrill Indonesia
- Meenaskhi Energy Private Limited - India
- Energy Link Ltd, New Zealand
- PetroVietnam Power Coal Import and Supply Company
- Xindia Steels Limited - India
- Riau Bara Harum - Indonesia
- Altura Mining Limited, Indonesia
- Savvy Resources Ltd - HongKong
- Kartika Selabumi Mining - Indonesia
- Baramulti Group, Indonesia
- Attock Cement Pakistan Limited
- Therma Luzon, Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Intertek Mineral Services - Indonesia
- Uttam Galva Steels Limited - India
- Africa Commodities Group - South Africa
- Sinarmas Energy and Mining - Indonesia
- Thiess Contractors Indonesia
- Bhatia International Limited - India
- Toyota Tsusho Corporation, Japan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Siam City Cement - Thailand
- PowerSource Philippines DevCo
- Parliament of New Zealand
- Mercator Lines Limited - India
- Kumho Petrochemical, South Korea
- Star Paper Mills Limited - India
- SMC Global Power, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- London Commodity Brokers - England
- Cigading International Bulk Terminal - Indonesia
- Anglo American - United Kingdom
- SMG Consultants - Indonesia
- Madhucon Powers Ltd - India
- Malabar Cements Ltd - India
- Sindya Power Generating Company Private Ltd
- Manunggal Multi Energi - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Ministry of Transport, Egypt
- Economic Council, Georgia
- White Energy Company Limited
- Eastern Energy - Thailand
- Jorong Barutama Greston.PT - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Marubeni Corporation - India
- Petrochimia International Co. Ltd.- Taiwan
- Indian Oil Corporation Limited
- Lanco Infratech Ltd - India
- Ministry of Mines - Canada
- Iligan Light & Power Inc, Philippines
- Bharathi Cement Corporation - India
- Bayan Resources Tbk. - Indonesia
- Ministry of Finance - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Videocon Industries ltd - India
- Medco Energi Mining Internasional
- Chettinad Cement Corporation Ltd - India
- Borneo Indobara - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Orica Mining Services - Indonesia
- European Bulk Services B.V. - Netherlands
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Agrawal Coal Company - India
- Meralco Power Generation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Ind-Barath Power Infra Limited - India
- Thai Mozambique Logistica
- Simpson Spence & Young - Indonesia
- Sarangani Energy Corporation, Philippines
- Renaissance Capital - South Africa
- Standard Chartered Bank - UAE
- Globalindo Alam Lestari - Indonesia
- Power Finance Corporation Ltd., India
- Coalindo Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Siam City Cement PLC, Thailand
- New Zealand Coal & Carbon
- Holcim Trading Pte Ltd - Singapore
- Interocean Group of Companies - India
- Eastern Coal Council - USA
- Rio Tinto Coal - Australia
- Tamil Nadu electricity Board
- Ambuja Cements Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Oldendorff Carriers - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Wood Mackenzie - Singapore
- Salva Resources Pvt Ltd - India
- Latin American Coal - Colombia
- India Bulls Power Limited - India
- South Luzon Thermal Energy Corporation
- Alfred C Toepfer International GmbH - Germany
- VISA Power Limited - India
- Global Business Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Rashtriya Ispat Nigam Limited - India
- Orica Australia Pty. Ltd.
- Coal and Oil Company - UAE
- Neyveli Lignite Corporation Ltd, - India
- Electricity Generating Authority of Thailand
- Cement Manufacturers Association - India
- Grasim Industreis Ltd - India
- McConnell Dowell - Australia
- Bukit Baiduri Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- SN Aboitiz Power Inc, Philippines
- Semirara Mining Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Aboitiz Power Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Barasentosa Lestari - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Antam Resourcindo - Indonesia
- Central Electricity Authority - India
- Banpu Public Company Limited - Thailand
- Kapuas Tunggal Persada - Indonesia
- TeaM Sual Corporation - Philippines
- Trasteel International SA, Italy
- Jaiprakash Power Ventures ltd
- CNBM International Corporation - China
- Sree Jayajothi Cements Limited - India
- Planning Commission, India
- International Coal Ventures Pvt Ltd - India
- Indian Energy Exchange, India
- Independent Power Producers Association of India
- Karaikal Port Pvt Ltd - India
- Mjunction Services Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- ASAPP Information Group - India
- AsiaOL BioFuels Corp., Philippines
- Kepco SPC Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Commonwealth Bank - Australia
- Central Java Power - Indonesia
- Metalloyd Limited - United Kingdom
- Bukit Asam (Persero) Tbk - Indonesia
- Vedanta Resources Plc - India
- GAC Shipping (India) Pvt Ltd
- Georgia Ports Authority, United States
- Vijayanagar Sugar Pvt Ltd - India
- Heidelberg Cement - Germany
- Indogreen Group - Indonesia
- Maheswari Brothers Coal Limited - India
- Tata Chemicals Ltd - India
- PTC India Limited - India
- Posco Energy - South Korea
- Binh Thuan Hamico - Vietnam
- Romanian Commodities Exchange
- Merrill Lynch Commodities Europe
- Billiton Holdings Pty Ltd - Australia
- IHS Mccloskey Coal Group - USA
- Bank of Tokyo Mitsubishi UFJ Ltd
- Aditya Birla Group - India
- IEA Clean Coal Centre - UK
- Goldman Sachs - Singapore
- Larsen & Toubro Limited - India
- Indika Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Kideco Jaya Agung - Indonesia
- GMR Energy Limited - India
- Straits Asia Resources Limited - Singapore
- Bangladesh Power Developement Board
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