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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, 01 August 20
ASIA HOPE FOR LONG-TERM OIL DEMAND - BALTIC BRIEFING
Oil demand in Asia Pacific might be expected to plunge 1.8m barrels per day (bpd) this year, but there are still strong prospects for growth over t ...
Friday, 31 July 20
SHORT-TERM IMPACT ON THE CHEMICAL SHIPPING MARKET IF THE INDIA-CHINA DISPUTE ESCALATES - DREWRY
Due to the India-China dispute, the threat of deteriorating trade relations between the two countries has become real. Meanwhile, we expect freight ...
Friday, 31 July 20
PANAMAX: THE PERIOD MARKET REMAINS QUIET WITH FEW FIXTURES REPORTED - FEARNLEYS
Capesize
After weeks of dropping rates, there are finally some resistance for the Capes. Pacific rounds improving to upper15,000s by the middle ...
Friday, 31 July 20
PANDEMIC SENDING SOUTH AFRICAN COAL INDUSTRY TO EARLIER GRAVE - IEEFA
Could South Africa’s coal export industry, one of the largest in the world, be about to take a severe hit from the coronavirus?
...
Friday, 31 July 20
BOTSWANA PLANS MORE COAL-FIRED POWER AS AFRICAN SOLAR ACCELERATES - IEEFA
An African economic leader like Botswana should embrace solar to reduce subsidies and tariff hikes
As Sub-Saharan solar ambition has ...
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- Samtan Co., Ltd - South Korea
- Maheswari Brothers Coal Limited - India
- Coal and Oil Company - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Interocean Group of Companies - India
- Mercator Lines Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Bayan Resources Tbk. - Indonesia
- Baramulti Group, Indonesia
- Larsen & Toubro Limited - India
- Indo Tambangraya Megah - Indonesia
- Gujarat Sidhee Cement - India
- Malabar Cements Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Barasentosa Lestari - Indonesia
- Kobexindo Tractors - Indoneisa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Mines - Canada
- Bank of Tokyo Mitsubishi UFJ Ltd
- Trasteel International SA, Italy
- Romanian Commodities Exchange
- Australian Coal Association
- Leighton Contractors Pty Ltd - Australia
- Globalindo Alam Lestari - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- IHS Mccloskey Coal Group - USA
- Australian Commodity Traders Exchange
- Ind-Barath Power Infra Limited - India
- TeaM Sual Corporation - Philippines
- Port Waratah Coal Services - Australia
- SMG Consultants - Indonesia
- Meralco Power Generation, Philippines
- Renaissance Capital - South Africa
- Bangladesh Power Developement Board
- Antam Resourcindo - Indonesia
- New Zealand Coal & Carbon
- Borneo Indobara - Indonesia
- McConnell Dowell - Australia
- Economic Council, Georgia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Uttam Galva Steels Limited - India
- Orica Mining Services - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Therma Luzon, Inc, Philippines
- Orica Australia Pty. Ltd.
- Electricity Generating Authority of Thailand
- Petron Corporation, Philippines
- Independent Power Producers Association of India
- Bharathi Cement Corporation - India
- PTC India Limited - India
- Parliament of New Zealand
- Gujarat Electricity Regulatory Commission - India
- LBH Netherlands Bv - Netherlands
- Karbindo Abesyapradhi - Indoneisa
- Bhoruka Overseas - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Medco Energi Mining Internasional
- The State Trading Corporation of India Ltd
- Chamber of Mines of South Africa
- Ministry of Transport, Egypt
- Planning Commission, India
- Miang Besar Coal Terminal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Oldendorff Carriers - Singapore
- Indian Oil Corporation Limited
- Kaltim Prima Coal - Indonesia
- Mercuria Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Coastal Gujarat Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- India Bulls Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- Marubeni Corporation - India
- Kohat Cement Company Ltd. - Pakistan
- Goldman Sachs - Singapore
- Attock Cement Pakistan Limited
- Mjunction Services Limited - India
- Georgia Ports Authority, United States
- PowerSource Philippines DevCo
- Kartika Selabumi Mining - Indonesia
- San Jose City I Power Corp, Philippines
- Grasim Industreis Ltd - India
- Videocon Industries ltd - India
- Sree Jayajothi Cements Limited - India
- South Luzon Thermal Energy Corporation
- Kalimantan Lumbung Energi - Indonesia
- Central Java Power - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Essar Steel Hazira Ltd - India
- Merrill Lynch Commodities Europe
- Coalindo Energy - Indonesia
- Madhucon Powers Ltd - India
- Vizag Seaport Private Limited - India
- Electricity Authority, New Zealand
- Eastern Energy - Thailand
- Semirara Mining Corp, Philippines
- Manunggal Multi Energi - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bhushan Steel Limited - India
- Sindya Power Generating Company Private Ltd
- European Bulk Services B.V. - Netherlands
- VISA Power Limited - India
- Timah Investasi Mineral - Indoneisa
- Energy Link Ltd, New Zealand
- Star Paper Mills Limited - India
- Tamil Nadu electricity Board
- Global Green Power PLC Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Latin American Coal - Colombia
- Jindal Steel & Power Ltd - India
- The University of Queensland
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Kumho Petrochemical, South Korea
- Central Electricity Authority - India
- Standard Chartered Bank - UAE
- Bhatia International Limited - India
- CIMB Investment Bank - Malaysia
- Kideco Jaya Agung - Indonesia
- PNOC Exploration Corporation - Philippines
- Wilmar Investment Holdings
- Aboitiz Power Corporation - Philippines
- Makarim & Taira - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Lanco Infratech Ltd - India
- Karaikal Port Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- GVK Power & Infra Limited - India
- IEA Clean Coal Centre - UK
- Edison Trading Spa - Italy
- Simpson Spence & Young - Indonesia
- CNBM International Corporation - China
- Indika Energy - Indonesia
- Commonwealth Bank - Australia
- Sakthi Sugars Limited - India
- ASAPP Information Group - India
- Singapore Mercantile Exchange
- Riau Bara Harum - Indonesia
- Indian Energy Exchange, India
- Energy Development Corp, Philippines
- ICICI Bank Limited - India
- Sical Logistics Limited - India
- Indonesian Coal Mining Association
- Bukit Makmur.PT - Indonesia
- Cement Manufacturers Association - India
- Tata Chemicals Ltd - India
- Parry Sugars Refinery, India
- SMC Global Power, Philippines
- Meenaskhi Energy Private Limited - India
- Mintek Dendrill Indonesia
- Carbofer General Trading SA - India
- Toyota Tsusho Corporation, Japan
- Africa Commodities Group - South Africa
- Bukit Baiduri Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- Intertek Mineral Services - Indonesia
- Formosa Plastics Group - Taiwan
- Posco Energy - South Korea
- Alfred C Toepfer International GmbH - Germany
- Pipit Mutiara Jaya. PT, Indonesia
- Salva Resources Pvt Ltd - India
- Ministry of Finance - Indonesia
- Power Finance Corporation Ltd., India
- Heidelberg Cement - Germany
- Global Coal Blending Company Limited - Australia
- Bulk Trading Sa - Switzerland
- Vedanta Resources Plc - India
- Banpu Public Company Limited - Thailand
- Iligan Light & Power Inc, Philippines
- White Energy Company Limited
- Sarangani Energy Corporation, Philippines
- Sojitz Corporation - Japan
- OPG Power Generation Pvt Ltd - India
- Agrawal Coal Company - India
- Binh Thuan Hamico - Vietnam
- Siam City Cement PLC, Thailand
- Gujarat Mineral Development Corp Ltd - India
- Xindia Steels Limited - India
- GN Power Mariveles Coal Plant, Philippines
- The Treasury - Australian Government
- Chettinad Cement Corporation Ltd - India
- MS Steel International - UAE
- Billiton Holdings Pty Ltd - Australia
- Straits Asia Resources Limited - Singapore
- Thai Mozambique Logistica
- Jaiprakash Power Ventures ltd
- Thiess Contractors Indonesia
- Minerals Council of Australia
- Eastern Coal Council - USA
- Pendopo Energi Batubara - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Deloitte Consulting - India
- Rio Tinto Coal - Australia
- London Commodity Brokers - England
- Global Business Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Rashtriya Ispat Nigam Limited - India
- International Coal Ventures Pvt Ltd - India
- Anglo American - United Kingdom
- Price Waterhouse Coopers - Russia
- Metalloyd Limited - United Kingdom
- Altura Mining Limited, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Siam City Cement - Thailand
- Aditya Birla Group - India
- Kepco SPC Power Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Indogreen Group - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Wood Mackenzie - Singapore
- GMR Energy Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- SN Aboitiz Power Inc, Philippines
- Dalmia Cement Bharat India
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