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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, 29 July 20
2019 U.S. COAL PRODUCTION FALLS TO ITS LOWEST LEVEL SINCE 1978 - EIA
In 2019, U.S. coal production totaled 706 million short tons (MMst), a 7% decrease from the 756 MMst mined in 2018. Last year’s production wa ...
Wednesday, 29 July 20
MARKET INSIGHT - INTERMODAL
The dry bulk sector is beginning to recover from reduced SnP activity recorded in the first quarter of 2020. The table below illustrates that appro ...
Tuesday, 28 July 20
DEUTSCHE BANK TO END GLOBAL BUSINESS ACTIVITIES IN COAL MINING BY 2025 - REUTERS
Deutsche Bank, in a revamp of its policies for fossil fuels, said on Monday that it would end business activities worldwide related to coal mining ...
Monday, 27 July 20
IEEFA ENERGY FINANCE CONFERENCE 2020: COAL, LNG, PETROCHEMICAL SECTORS FACE POOR OUTLOOK AND UPHILL BATTLE FOR INVESTORS
Fossil fuel industries were becoming less financially attractive even before the global coronavirus pandemic
Three major fossil fuel ...
Friday, 24 July 20
IPA: THERMAL COAL IMPORTS AT MAJOR PORTS DECLINE 35 PC TO 17.71 MT IN APR TO JUNE - ECONOMIC TIMES
These ports had handled 27.13 MT of thermal coal and 14.95 MT of coking coal in the April-June period of the previous financial year
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- Siam City Cement PLC, Thailand
- VISA Power Limited - India
- Renaissance Capital - South Africa
- Cement Manufacturers Association - India
- Parliament of New Zealand
- Meralco Power Generation, Philippines
- Mercator Lines Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- ICICI Bank Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Bhushan Steel Limited - India
- Kepco SPC Power Corporation, Philippines
- Coalindo Energy - Indonesia
- Indonesian Coal Mining Association
- Attock Cement Pakistan Limited
- Iligan Light & Power Inc, Philippines
- Dalmia Cement Bharat India
- Bukit Makmur.PT - Indonesia
- Sojitz Corporation - Japan
- Petron Corporation, Philippines
- Eastern Coal Council - USA
- Posco Energy - South Korea
- Larsen & Toubro Limited - India
- Sakthi Sugars Limited - India
- Port Waratah Coal Services - Australia
- Price Waterhouse Coopers - Russia
- Indo Tambangraya Megah - Indonesia
- Edison Trading Spa - Italy
- Energy Development Corp, Philippines
- Commonwealth Bank - Australia
- Therma Luzon, Inc, Philippines
- Jaiprakash Power Ventures ltd
- Uttam Galva Steels Limited - India
- Baramulti Group, Indonesia
- San Jose City I Power Corp, Philippines
- Electricity Generating Authority of Thailand
- Chettinad Cement Corporation Ltd - India
- Meenaskhi Energy Private Limited - India
- Aditya Birla Group - India
- Formosa Plastics Group - Taiwan
- Malabar Cements Ltd - India
- PNOC Exploration Corporation - Philippines
- Samtan Co., Ltd - South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- Goldman Sachs - Singapore
- IEA Clean Coal Centre - UK
- Holcim Trading Pte Ltd - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Chamber of Mines of South Africa
- CNBM International Corporation - China
- GAC Shipping (India) Pvt Ltd
- Leighton Contractors Pty Ltd - Australia
- SMG Consultants - Indonesia
- Vedanta Resources Plc - India
- PetroVietnam Power Coal Import and Supply Company
- Marubeni Corporation - India
- Gujarat Sidhee Cement - India
- Miang Besar Coal Terminal - Indonesia
- Maheswari Brothers Coal Limited - India
- Madhucon Powers Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Grasim Industreis Ltd - India
- Romanian Commodities Exchange
- Star Paper Mills Limited - India
- Interocean Group of Companies - India
- Neyveli Lignite Corporation Ltd, - India
- PTC India Limited - India
- White Energy Company Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ind-Barath Power Infra Limited - India
- Merrill Lynch Commodities Europe
- Orica Mining Services - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Thai Mozambique Logistica
- Ministry of Transport, Egypt
- Anglo American - United Kingdom
- Tata Chemicals Ltd - India
- SMC Global Power, Philippines
- Toyota Tsusho Corporation, Japan
- Kobexindo Tractors - Indoneisa
- Aboitiz Power Corporation - Philippines
- Sical Logistics Limited - India
- Heidelberg Cement - Germany
- London Commodity Brokers - England
- Ministry of Mines - Canada
- Jindal Steel & Power Ltd - India
- Global Business Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Kapuas Tunggal Persada - Indonesia
- Bukit Baiduri Energy - Indonesia
- TeaM Sual Corporation - Philippines
- PowerSource Philippines DevCo
- Bhatia International Limited - India
- Oldendorff Carriers - Singapore
- Rashtriya Ispat Nigam Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Borneo Indobara - Indonesia
- MS Steel International - UAE
- Banpu Public Company Limited - Thailand
- Ministry of Finance - Indonesia
- Siam City Cement - Thailand
- Mercuria Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Billiton Holdings Pty Ltd - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Sree Jayajothi Cements Limited - India
- Minerals Council of Australia
- Manunggal Multi Energi - Indonesia
- Australian Coal Association
- Riau Bara Harum - Indonesia
- Kaltim Prima Coal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Carbofer General Trading SA - India
- GVK Power & Infra Limited - India
- Alfred C Toepfer International GmbH - Germany
- Kumho Petrochemical, South Korea
- Electricity Authority, New Zealand
- Pendopo Energi Batubara - Indonesia
- Kideco Jaya Agung - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Lanco Infratech Ltd - India
- Semirara Mining Corp, Philippines
- Sindya Power Generating Company Private Ltd
- Sinarmas Energy and Mining - Indonesia
- Mjunction Services Limited - India
- Coal and Oil Company - UAE
- McConnell Dowell - Australia
- The State Trading Corporation of India Ltd
- Global Green Power PLC Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Kartika Selabumi Mining - Indonesia
- Australian Commodity Traders Exchange
- Asmin Koalindo Tuhup - Indonesia
- Salva Resources Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Georgia Ports Authority, United States
- The University of Queensland
- Parry Sugars Refinery, India
- Mintek Dendrill Indonesia
- New Zealand Coal & Carbon
- Coastal Gujarat Power Limited - India
- Power Finance Corporation Ltd., India
- Rio Tinto Coal - Australia
- Indian Oil Corporation Limited
- Timah Investasi Mineral - Indoneisa
- Straits Asia Resources Limited - Singapore
- Wood Mackenzie - Singapore
- Thiess Contractors Indonesia
- Eastern Energy - Thailand
- Simpson Spence & Young - Indonesia
- Wilmar Investment Holdings
- Economic Council, Georgia
- Indian Energy Exchange, India
- Xindia Steels Limited - India
- Globalindo Alam Lestari - Indonesia
- South Luzon Thermal Energy Corporation
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Independent Power Producers Association of India
- Directorate Of Revenue Intelligence - India
- Antam Resourcindo - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Latin American Coal - Colombia
- Bulk Trading Sa - Switzerland
- Vizag Seaport Private Limited - India
- Makarim & Taira - Indonesia
- Central Java Power - Indonesia
- Planning Commission, India
- International Coal Ventures Pvt Ltd - India
- GMR Energy Limited - India
- Bangladesh Power Developement Board
- Gujarat Mineral Development Corp Ltd - India
- Bharathi Cement Corporation - India
- Bukit Asam (Persero) Tbk - Indonesia
- Metalloyd Limited - United Kingdom
- European Bulk Services B.V. - Netherlands
- Orica Australia Pty. Ltd.
- Altura Mining Limited, Indonesia
- Barasentosa Lestari - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Savvy Resources Ltd - HongKong
- Bahari Cakrawala Sebuku - Indonesia
- Ambuja Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Singapore Mercantile Exchange
- Africa Commodities Group - South Africa
- Bhoruka Overseas - Indonesia
- Global Coal Blending Company Limited - Australia
- Semirara Mining and Power Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Trasteel International SA, Italy
- Agrawal Coal Company - India
- Central Electricity Authority - India
- Binh Thuan Hamico - Vietnam
- Indogreen Group - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- Intertek Mineral Services - Indonesia
- Tamil Nadu electricity Board
- India Bulls Power Limited - India
- LBH Netherlands Bv - Netherlands
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Standard Chartered Bank - UAE
- Medco Energi Mining Internasional
- Deloitte Consulting - India
- The Treasury - Australian Government
- Indika Energy - Indonesia
- ASAPP Information Group - India
- AsiaOL BioFuels Corp., Philippines
- Essar Steel Hazira Ltd - India
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