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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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Monday, 20 July 20
OIL PRICE OF $40-43 PER BARREL MORE OR LESS BALANCED - NOVAK | TASS
The Russian Ministry of Energy considers the current oil price of $40-43 per barrel more or less balanced and does not expect price changes after t ...
Monday, 20 July 20
SUPRAMAX: A 63,000 OPEN NORTH CHINA FIXING AN AUSTRALIAN ROUND IN THE LOW $10,000S - BALTIC BRIEFING
Capesize
The capesize market showed some resistance this week to recent losses as all routes saw a small uptick in value to end the week. With ...
Friday, 17 July 20
MISC MALAYSIA ENTERS INTO PURCHASE AGREEMENTS AND TIME CHARTER PARTIES FOR SIX VLECS
MISC Berhad (MISC) has entered into Memorandum of Agreements (MOAs) with six indirect wholly-owned subsidiaries of Zhejiang Satellite Petrochem ...
Wednesday, 15 July 20
HOW MEANINGFUL ARE SOME ESTIMATES FOR INDIA’S COAL CONSUMPTION DATA? - IEEFA
In recent years, BP's estimates for India have contained what appears to be a record of over-optimistic projections
BP’s a ...
Wednesday, 15 July 20
CHINA'S JUNE COAL IMPORTS FALL 6.7% Y/Y ON PORT CURBS - REUTERS
China’s coal imports dropped 6.7% in June from the same period last year, as stringent import restrictions at ports impeded purchases by trad ...
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- Eastern Coal Council - USA
- Maheswari Brothers Coal Limited - India
- Minerals Council of Australia
- Semirara Mining Corp, Philippines
- Renaissance Capital - South Africa
- OPG Power Generation Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Riau Bara Harum - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Medco Energi Mining Internasional
- Singapore Mercantile Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- Siam City Cement - Thailand
- GMR Energy Limited - India
- International Coal Ventures Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- South Luzon Thermal Energy Corporation
- Mercator Lines Limited - India
- Planning Commission, India
- Intertek Mineral Services - Indonesia
- PNOC Exploration Corporation - Philippines
- Global Business Power Corporation, Philippines
- Sojitz Corporation - Japan
- Borneo Indobara - Indonesia
- Meenaskhi Energy Private Limited - India
- Parry Sugars Refinery, India
- Thai Mozambique Logistica
- Miang Besar Coal Terminal - Indonesia
- Ambuja Cements Ltd - India
- Oldendorff Carriers - Singapore
- Krishnapatnam Port Company Ltd. - India
- Manunggal Multi Energi - Indonesia
- Uttam Galva Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- Rio Tinto Coal - Australia
- Sakthi Sugars Limited - India
- Jorong Barutama Greston.PT - Indonesia
- San Jose City I Power Corp, Philippines
- Tata Chemicals Ltd - India
- Coalindo Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Bangladesh Power Developement Board
- PetroVietnam Power Coal Import and Supply Company
- Central Electricity Authority - India
- Bhushan Steel Limited - India
- Bhatia International Limited - India
- Larsen & Toubro Limited - India
- Meralco Power Generation, Philippines
- Wood Mackenzie - Singapore
- Dalmia Cement Bharat India
- McConnell Dowell - Australia
- Altura Mining Limited, Indonesia
- LBH Netherlands Bv - Netherlands
- Mercuria Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Interocean Group of Companies - India
- Therma Luzon, Inc, Philippines
- Trasteel International SA, Italy
- Wilmar Investment Holdings
- Chamber of Mines of South Africa
- The University of Queensland
- Kalimantan Lumbung Energi - Indonesia
- Timah Investasi Mineral - Indoneisa
- Chettinad Cement Corporation Ltd - India
- Salva Resources Pvt Ltd - India
- Lanco Infratech Ltd - India
- Price Waterhouse Coopers - Russia
- India Bulls Power Limited - India
- Simpson Spence & Young - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Sical Logistics Limited - India
- Agrawal Coal Company - India
- Mjunction Services Limited - India
- Petron Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Port Waratah Coal Services - Australia
- Globalindo Alam Lestari - Indonesia
- Indonesian Coal Mining Association
- Aboitiz Power Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Sree Jayajothi Cements Limited - India
- The State Trading Corporation of India Ltd
- Maharashtra Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Karaikal Port Pvt Ltd - India
- Deloitte Consulting - India
- Sindya Power Generating Company Private Ltd
- Georgia Ports Authority, United States
- Coastal Gujarat Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Electricity Authority, New Zealand
- Anglo American - United Kingdom
- Mintek Dendrill Indonesia
- Rashtriya Ispat Nigam Limited - India
- New Zealand Coal & Carbon
- The Treasury - Australian Government
- European Bulk Services B.V. - Netherlands
- Bukit Baiduri Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Global Green Power PLC Corporation, Philippines
- Australian Commodity Traders Exchange
- Samtan Co., Ltd - South Korea
- Kideco Jaya Agung - Indonesia
- Ministry of Mines - Canada
- Antam Resourcindo - Indonesia
- Global Coal Blending Company Limited - Australia
- Straits Asia Resources Limited - Singapore
- Indian Oil Corporation Limited
- Bharathi Cement Corporation - India
- Power Finance Corporation Ltd., India
- SN Aboitiz Power Inc, Philippines
- Baramulti Group, Indonesia
- MS Steel International - UAE
- Carbofer General Trading SA - India
- Sinarmas Energy and Mining - Indonesia
- ASAPP Information Group - India
- Coal and Oil Company - UAE
- CIMB Investment Bank - Malaysia
- Directorate General of MIneral and Coal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- SMC Global Power, Philippines
- ICICI Bank Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- PTC India Limited - India
- Leighton Contractors Pty Ltd - Australia
- Bulk Trading Sa - Switzerland
- Xindia Steels Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- VISA Power Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Star Paper Mills Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ind-Barath Power Infra Limited - India
- Jaiprakash Power Ventures ltd
- Directorate Of Revenue Intelligence - India
- Aditya Birla Group - India
- Eastern Energy - Thailand
- Latin American Coal - Colombia
- Makarim & Taira - Indonesia
- Ministry of Finance - Indonesia
- SMG Consultants - Indonesia
- Orica Mining Services - Indonesia
- Sarangani Energy Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Indogreen Group - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- CNBM International Corporation - China
- Vizag Seaport Private Limited - India
- Madhucon Powers Ltd - India
- Heidelberg Cement - Germany
- Economic Council, Georgia
- Metalloyd Limited - United Kingdom
- GAC Shipping (India) Pvt Ltd
- Energy Link Ltd, New Zealand
- GVK Power & Infra Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Commonwealth Bank - Australia
- Thiess Contractors Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Tamil Nadu electricity Board
- Pipit Mutiara Jaya. PT, Indonesia
- Kartika Selabumi Mining - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Kaltim Prima Coal - Indonesia
- PowerSource Philippines DevCo
- TeaM Sual Corporation - Philippines
- Marubeni Corporation - India
- Posco Energy - South Korea
- Billiton Holdings Pty Ltd - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Bayan Resources Tbk. - Indonesia
- Energy Development Corp, Philippines
- Attock Cement Pakistan Limited
- Essar Steel Hazira Ltd - India
- Formosa Plastics Group - Taiwan
- Grasim Industreis Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Romanian Commodities Exchange
- Vedanta Resources Plc - India
- Bukit Makmur.PT - Indonesia
- Siam City Cement PLC, Thailand
- Asmin Koalindo Tuhup - Indonesia
- Bhoruka Overseas - Indonesia
- Electricity Generating Authority of Thailand
- Standard Chartered Bank - UAE
- IEA Clean Coal Centre - UK
- Goldman Sachs - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Barasentosa Lestari - Indonesia
- Pendopo Energi Batubara - Indonesia
- Africa Commodities Group - South Africa
- Gujarat Sidhee Cement - India
- Cement Manufacturers Association - India
- White Energy Company Limited
- Holcim Trading Pte Ltd - Singapore
- Edison Trading Spa - Italy
- IHS Mccloskey Coal Group - USA
- Australian Coal Association
- Orica Australia Pty. Ltd.
- Gujarat Electricity Regulatory Commission - India
- Malabar Cements Ltd - India
- Independent Power Producers Association of India
- Bahari Cakrawala Sebuku - Indonesia
- Kumho Petrochemical, South Korea
- Savvy Resources Ltd - HongKong
- Iligan Light & Power Inc, Philippines
- Central Java Power - Indonesia
- Indika Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Transport, Egypt
- London Commodity Brokers - England
- Parliament of New Zealand
- Toyota Tsusho Corporation, Japan
- Merrill Lynch Commodities Europe
- Alfred C Toepfer International GmbH - Germany
- Indian Energy Exchange, India
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