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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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Friday, 10 July 20
GLOBAL SHIPPING EARNINGS FORECAST CUT AS SUPPLY SET TO OUTSTRIP DEMAND - MOODY'S
EBITDA forecast worsens, keeping outlook negative. We now expect the aggregate EBITDA of rated shipping companies to fall by around 16%-18% in 2020 ...
Friday, 10 July 20
SLOW RECOVERY IN TANKER RATES TO WEIGH ON BUANA LINTAS LAUTAN - FITCH RATINGS
Fitch Ratings believes that international tanker rates are likely improve after their sharp fall since May 2020, albeit at a slow pace. The weaknes ...
Wednesday, 08 July 20
MARKET INSIGHT - INTERMODAL
During the previous month, the dry bulk market witnessed an impressive increase in the BDI index that has reached 1800 points from 500 with a clear ...
Tuesday, 07 July 20
COAL INDIA WORKERS STRIKE CUTS OUTPUT BY 56%: OFFICIAL - REUTERS
A strike at Coal India Ltd cut production by 56% in the three days ending July 4 as workers oppose opening up coal mining to the private sector, a ...
Tuesday, 07 July 20
WHAT DOES THE PATHWAY TO A NET-ZERO ECONOMY LOOK LIKE FOR MINERS? - WOOD MACKENZIE
Wind, solar, electric vehicles, stationary storage and transmission are all central to achieving the Paris Agreement decarbonisation goals.
&nb ...
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- International Coal Ventures Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Sinarmas Energy and Mining - Indonesia
- European Bulk Services B.V. - Netherlands
- VISA Power Limited - India
- Chettinad Cement Corporation Ltd - India
- Thai Mozambique Logistica
- Thiess Contractors Indonesia
- Samtan Co., Ltd - South Korea
- Indonesian Coal Mining Association
- Banpu Public Company Limited - Thailand
- Metalloyd Limited - United Kingdom
- Standard Chartered Bank - UAE
- Coal and Oil Company - UAE
- Therma Luzon, Inc, Philippines
- Malabar Cements Ltd - India
- The Treasury - Australian Government
- Uttam Galva Steels Limited - India
- Mercator Lines Limited - India
- Riau Bara Harum - Indonesia
- Bayan Resources Tbk. - Indonesia
- Global Coal Blending Company Limited - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Electricity Authority, New Zealand
- Sarangani Energy Corporation, Philippines
- Attock Cement Pakistan Limited
- SMC Global Power, Philippines
- Bukit Baiduri Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Global Business Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- PNOC Exploration Corporation - Philippines
- Marubeni Corporation - India
- Indika Energy - Indonesia
- TeaM Sual Corporation - Philippines
- South Luzon Thermal Energy Corporation
- Africa Commodities Group - South Africa
- Trasteel International SA, Italy
- Baramulti Group, Indonesia
- Vizag Seaport Private Limited - India
- GMR Energy Limited - India
- Tata Chemicals Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Leighton Contractors Pty Ltd - Australia
- Miang Besar Coal Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Planning Commission, India
- Iligan Light & Power Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Romanian Commodities Exchange
- Semirara Mining Corp, Philippines
- Siam City Cement PLC, Thailand
- Bulk Trading Sa - Switzerland
- Krishnapatnam Port Company Ltd. - India
- Grasim Industreis Ltd - India
- Indogreen Group - Indonesia
- SMG Consultants - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Renaissance Capital - South Africa
- Kumho Petrochemical, South Korea
- Indian Oil Corporation Limited
- Global Green Power PLC Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Asmin Koalindo Tuhup - Indonesia
- Interocean Group of Companies - India
- Cigading International Bulk Terminal - Indonesia
- Borneo Indobara - Indonesia
- Mjunction Services Limited - India
- Indian Energy Exchange, India
- Petron Corporation, Philippines
- Videocon Industries ltd - India
- IHS Mccloskey Coal Group - USA
- Antam Resourcindo - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Ministry of Transport, Egypt
- Kohat Cement Company Ltd. - Pakistan
- IEA Clean Coal Centre - UK
- CIMB Investment Bank - Malaysia
- Xindia Steels Limited - India
- Australian Coal Association
- OPG Power Generation Pvt Ltd - India
- New Zealand Coal & Carbon
- White Energy Company Limited
- Economic Council, Georgia
- Billiton Holdings Pty Ltd - Australia
- Ceylon Electricity Board - Sri Lanka
- Agrawal Coal Company - India
- Karbindo Abesyapradhi - Indoneisa
- Intertek Mineral Services - Indonesia
- PTC India Limited - India
- Wood Mackenzie - Singapore
- Sakthi Sugars Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Ambuja Cements Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- PowerSource Philippines DevCo
- Parliament of New Zealand
- Electricity Generating Authority of Thailand
- Parry Sugars Refinery, India
- Bhoruka Overseas - Indonesia
- Pendopo Energi Batubara - Indonesia
- Anglo American - United Kingdom
- Orica Australia Pty. Ltd.
- Sree Jayajothi Cements Limited - India
- Kalimantan Lumbung Energi - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Central Java Power - Indonesia
- ICICI Bank Limited - India
- Manunggal Multi Energi - Indonesia
- Orica Mining Services - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Port Waratah Coal Services - Australia
- Aditya Birla Group - India
- Commonwealth Bank - Australia
- Meralco Power Generation, Philippines
- The State Trading Corporation of India Ltd
- LBH Netherlands Bv - Netherlands
- Wilmar Investment Holdings
- Madhucon Powers Ltd - India
- McConnell Dowell - Australia
- Vedanta Resources Plc - India
- Energy Development Corp, Philippines
- Aboitiz Power Corporation - Philippines
- ASAPP Information Group - India
- Chamber of Mines of South Africa
- Maheswari Brothers Coal Limited - India
- The University of Queensland
- Binh Thuan Hamico - Vietnam
- Medco Energi Mining Internasional
- Posco Energy - South Korea
- Kapuas Tunggal Persada - Indonesia
- Kartika Selabumi Mining - Indonesia
- CNBM International Corporation - China
- Directorate Of Revenue Intelligence - India
- Sojitz Corporation - Japan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- London Commodity Brokers - England
- Star Paper Mills Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- San Jose City I Power Corp, Philippines
- Singapore Mercantile Exchange
- Mintek Dendrill Indonesia
- Gujarat Sidhee Cement - India
- Kobexindo Tractors - Indoneisa
- Toyota Tsusho Corporation, Japan
- Latin American Coal - Colombia
- Deloitte Consulting - India
- Coastal Gujarat Power Limited - India
- Central Electricity Authority - India
- Altura Mining Limited, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Mines - Canada
- Kepco SPC Power Corporation, Philippines
- Georgia Ports Authority, United States
- Indo Tambangraya Megah - Indonesia
- Siam City Cement - Thailand
- GAC Shipping (India) Pvt Ltd
- Tamil Nadu electricity Board
- Timah Investasi Mineral - Indoneisa
- Eastern Energy - Thailand
- Rio Tinto Coal - Australia
- Straits Asia Resources Limited - Singapore
- Bhatia International Limited - India
- Bharathi Cement Corporation - India
- Ind-Barath Power Infra Limited - India
- Australian Commodity Traders Exchange
- Larsen & Toubro Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Jindal Steel & Power Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Lanco Infratech Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Sical Logistics Limited - India
- Dalmia Cement Bharat India
- Kideco Jaya Agung - Indonesia
- Oldendorff Carriers - Singapore
- Karaikal Port Pvt Ltd - India
- Goldman Sachs - Singapore
- Rashtriya Ispat Nigam Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Jaiprakash Power Ventures ltd
- Formosa Plastics Group - Taiwan
- Bukit Makmur.PT - Indonesia
- Sindya Power Generating Company Private Ltd
- Edison Trading Spa - Italy
- Energy Link Ltd, New Zealand
- Mercuria Energy - Indonesia
- Coalindo Energy - Indonesia
- Essar Steel Hazira Ltd - India
- Cement Manufacturers Association - India
- MS Steel International - UAE
- Barasentosa Lestari - Indonesia
- Power Finance Corporation Ltd., India
- India Bulls Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Independent Power Producers Association of India
- Minerals Council of Australia
- Carbofer General Trading SA - India
- Bangladesh Power Developement Board
- GVK Power & Infra Limited - India
- Meenaskhi Energy Private Limited - India
- Globalindo Alam Lestari - Indonesia
- Eastern Coal Council - USA
- Simpson Spence & Young - Indonesia
- SN Aboitiz Power Inc, Philippines
- Ministry of Finance - Indonesia
- Makarim & Taira - Indonesia
- Bhushan Steel Limited - India
- Heidelberg Cement - Germany
- Merrill Lynch Commodities Europe
- Savvy Resources Ltd - HongKong
- Price Waterhouse Coopers - Russia
- Kaltim Prima Coal - Indonesia
- Salva Resources Pvt Ltd - India
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