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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, 26 October 21
CHINA'S COAL-RICH SHANXI BEEFS UP COAL PRODUCTION - XINHUA
Major coal producers in north China’s Shanxi Province, a leading coal-producing region of the country, have beefed up production to ensure en ...
Tuesday, 26 October 21
ENERGY CRISIS SHOWS COAL IS AN EXPENSIVE AND UNRELIABLE SOURCE OF ELECTRICITY GENERATION - IEEFA
Any knee-jerk reaction that urges more investment in coal completely misses the point
India is teetering on the brink of joining a growing glo ...
Tuesday, 26 October 21
CHINA TO INVESTIGATE ENERGY INDEX PROVIDERS IN BID TO TAME COAL PRICES - REUTERS
China said on Monday it will investigate energy price index providers as it urged coal industry participants to “strictly” meet contrac ...
Tuesday, 26 October 21
THERE IS PLENTY OF COAL AND GAS IN THE WORLD BUT A VOLATILE MARKET IS NOBODY'S FRIEND - IEEFA
Gas will be winding its way out of the energy system
Gas prices are continuing to surge around the world. The cost of gas is at unpr ...
Tuesday, 26 October 21
AUSTRALIA EXPORTED 51.6 MLN TONNES OF COAL TO INDIA IN FIRST 10 MONTHS, 19% OF ALL AUSTRALIAN COAL EXPORTS; CHINA WAS THE DESTINATION FOR JUST 0.7% - BANCHERO COSTA
2020 proved to be a truly terrible year for global seaborne coal trade. In 2021 things started pretty badly, but we are seeing increasing signs of ...
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- Aboitiz Power Corporation - Philippines
- Semirara Mining Corp, Philippines
- Coal and Oil Company - UAE
- OPG Power Generation Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Essar Steel Hazira Ltd - India
- Riau Bara Harum - Indonesia
- Eastern Coal Council - USA
- Tata Chemicals Ltd - India
- Meenaskhi Energy Private Limited - India
- Oldendorff Carriers - Singapore
- LBH Netherlands Bv - Netherlands
- Economic Council, Georgia
- Jorong Barutama Greston.PT - Indonesia
- GMR Energy Limited - India
- Bayan Resources Tbk. - Indonesia
- Australian Coal Association
- Bhatia International Limited - India
- Thiess Contractors Indonesia
- SMG Consultants - Indonesia
- Aditya Birla Group - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Larsen & Toubro Limited - India
- Siam City Cement PLC, Thailand
- Jindal Steel & Power Ltd - India
- Banpu Public Company Limited - Thailand
- Standard Chartered Bank - UAE
- Posco Energy - South Korea
- Coalindo Energy - Indonesia
- Grasim Industreis Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kepco SPC Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Gujarat Sidhee Cement - India
- Ministry of Mines - Canada
- Billiton Holdings Pty Ltd - Australia
- Manunggal Multi Energi - Indonesia
- Star Paper Mills Limited - India
- White Energy Company Limited
- Price Waterhouse Coopers - Russia
- Pendopo Energi Batubara - Indonesia
- Antam Resourcindo - Indonesia
- CNBM International Corporation - China
- Central Java Power - Indonesia
- Maheswari Brothers Coal Limited - India
- Romanian Commodities Exchange
- Global Coal Blending Company Limited - Australia
- Baramulti Group, Indonesia
- Ambuja Cements Ltd - India
- Deloitte Consulting - India
- Neyveli Lignite Corporation Ltd, - India
- Petrochimia International Co. Ltd.- Taiwan
- Directorate General of MIneral and Coal - Indonesia
- PTC India Limited - India
- AsiaOL BioFuels Corp., Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Independent Power Producers Association of India
- Borneo Indobara - Indonesia
- Ministry of Finance - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Intertek Mineral Services - Indonesia
- Vedanta Resources Plc - India
- Kartika Selabumi Mining - Indonesia
- Rio Tinto Coal - Australia
- Interocean Group of Companies - India
- Wood Mackenzie - Singapore
- Bhoruka Overseas - Indonesia
- GAC Shipping (India) Pvt Ltd
- Eastern Energy - Thailand
- Bhushan Steel Limited - India
- Power Finance Corporation Ltd., India
- TeaM Sual Corporation - Philippines
- Indika Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Madhucon Powers Ltd - India
- Jaiprakash Power Ventures ltd
- Gujarat Mineral Development Corp Ltd - India
- Kumho Petrochemical, South Korea
- GN Power Mariveles Coal Plant, Philippines
- International Coal Ventures Pvt Ltd - India
- Siam City Cement - Thailand
- Binh Thuan Hamico - Vietnam
- Bharathi Cement Corporation - India
- The University of Queensland
- IHS Mccloskey Coal Group - USA
- Anglo American - United Kingdom
- Heidelberg Cement - Germany
- Miang Besar Coal Terminal - Indonesia
- Makarim & Taira - Indonesia
- Bukit Makmur.PT - Indonesia
- ICICI Bank Limited - India
- Minerals Council of Australia
- New Zealand Coal & Carbon
- Attock Cement Pakistan Limited
- PowerSource Philippines DevCo
- Vizag Seaport Private Limited - India
- Electricity Authority, New Zealand
- Sojitz Corporation - Japan
- SMC Global Power, Philippines
- Edison Trading Spa - Italy
- Barasentosa Lestari - Indonesia
- Chettinad Cement Corporation Ltd - India
- Kobexindo Tractors - Indoneisa
- Energy Development Corp, Philippines
- Thai Mozambique Logistica
- ASAPP Information Group - India
- Sakthi Sugars Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Malabar Cements Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Chamber of Mines of South Africa
- Singapore Mercantile Exchange
- Meralco Power Generation, Philippines
- Karaikal Port Pvt Ltd - India
- Parry Sugars Refinery, India
- Indian Oil Corporation Limited
- Gujarat Electricity Regulatory Commission - India
- Samtan Co., Ltd - South Korea
- Dalmia Cement Bharat India
- India Bulls Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- MS Steel International - UAE
- Timah Investasi Mineral - Indoneisa
- The State Trading Corporation of India Ltd
- Petron Corporation, Philippines
- Renaissance Capital - South Africa
- Kohat Cement Company Ltd. - Pakistan
- Sical Logistics Limited - India
- Kideco Jaya Agung - Indonesia
- CIMB Investment Bank - Malaysia
- London Commodity Brokers - England
- Alfred C Toepfer International GmbH - Germany
- Global Business Power Corporation, Philippines
- Wilmar Investment Holdings
- Straits Asia Resources Limited - Singapore
- VISA Power Limited - India
- Formosa Plastics Group - Taiwan
- European Bulk Services B.V. - Netherlands
- Metalloyd Limited - United Kingdom
- Savvy Resources Ltd - HongKong
- Altura Mining Limited, Indonesia
- San Jose City I Power Corp, Philippines
- Georgia Ports Authority, United States
- Merrill Lynch Commodities Europe
- Energy Link Ltd, New Zealand
- Indonesian Coal Mining Association
- Mercator Lines Limited - India
- Coastal Gujarat Power Limited - India
- Bukit Baiduri Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Indo Tambangraya Megah - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Ministry of Transport, Egypt
- Iligan Light & Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Tamil Nadu electricity Board
- Carbofer General Trading SA - India
- Sree Jayajothi Cements Limited - India
- Mintek Dendrill Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Globalindo Alam Lestari - Indonesia
- Indogreen Group - Indonesia
- PNOC Exploration Corporation - Philippines
- Rashtriya Ispat Nigam Limited - India
- Salva Resources Pvt Ltd - India
- Australian Commodity Traders Exchange
- Asmin Koalindo Tuhup - Indonesia
- Indian Energy Exchange, India
- Marubeni Corporation - India
- Kaltim Prima Coal - Indonesia
- Directorate Of Revenue Intelligence - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Medco Energi Mining Internasional
- Maharashtra Electricity Regulatory Commission - India
- Kalimantan Lumbung Energi - Indonesia
- Lanco Infratech Ltd - India
- Central Electricity Authority - India
- Goldman Sachs - Singapore
- Cement Manufacturers Association - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Trasteel International SA, Italy
- Africa Commodities Group - South Africa
- Uttam Galva Steels Limited - India
- Mjunction Services Limited - India
- South Luzon Thermal Energy Corporation
- Latin American Coal - Colombia
- Bangladesh Power Developement Board
- Commonwealth Bank - Australia
- Electricity Generating Authority of Thailand
- Planning Commission, India
- Orica Australia Pty. Ltd.
- Orica Mining Services - Indonesia
- Videocon Industries ltd - India
- Parliament of New Zealand
- Port Waratah Coal Services - Australia
- GVK Power & Infra Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The Treasury - Australian Government
- Mercuria Energy - Indonesia
- IEA Clean Coal Centre - UK
- PetroVietnam Power Coal Import and Supply Company
- Xindia Steels Limited - India
- Agrawal Coal Company - India
- Leighton Contractors Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- Holcim Trading Pte Ltd - Singapore
- Bulk Trading Sa - Switzerland
- Krishnapatnam Port Company Ltd. - India
- McConnell Dowell - Australia
- Simpson Spence & Young - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
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