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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, 25 October 21
A QUESTION OF POSSESSION - THE BALTIC EXCHANGE
Possession and tangibility are closely related concepts long established under English law. Yet a change to these concepts is around the corner. Th ...
Monday, 25 October 21
CHINA VOWS TO SEVERELY PUNISH MARKET VIOLATIONS AMID LOW COAL FUTURES PRICES - GLOBAL TIMES
Domestic coal futures had plunged for three consecutive trading days after the government vowed to crack down on soaring prices, and China’s ...
Monday, 25 October 21
FARMERS MAY JOIN THE COAL COMMODITY MARKET TO REDUCE RISKS - GLOBAL TIMES
A recent trip to by the Global Times to East China’s Shandong Province to get a glimpse of China’s coal supply chain revealed a surpris ...
Monday, 25 October 21
CHINA COAL PRICES MARK WORST WEEK SINCE MAY ON GOVERNMENT INTERVENTION - REUTERS
China’s thermal coal futures plunged on Friday and turned in their worst week in five months, following Beijing’s strongest interventio ...
Friday, 22 October 21
THE BIG PICTURE: ENERGY MARKETS - BREAK WAVE ADVISORS
The shipping markets have been pulled further into wild markets of coal and other energy sources. Given how nebulous this sector is, it’s alw ...
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- Wilmar Investment Holdings
- Gujarat Electricity Regulatory Commission - India
- Thiess Contractors Indonesia
- Orica Australia Pty. Ltd.
- Sojitz Corporation - Japan
- Madhucon Powers Ltd - India
- Meralco Power Generation, Philippines
- Petron Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Malabar Cements Ltd - India
- Meenaskhi Energy Private Limited - India
- Sinarmas Energy and Mining - Indonesia
- Mjunction Services Limited - India
- Simpson Spence & Young - Indonesia
- Bayan Resources Tbk. - Indonesia
- Xindia Steels Limited - India
- Posco Energy - South Korea
- ICICI Bank Limited - India
- Medco Energi Mining Internasional
- Kideco Jaya Agung - Indonesia
- CNBM International Corporation - China
- OPG Power Generation Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- SN Aboitiz Power Inc, Philippines
- Iligan Light & Power Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- Indonesian Coal Mining Association
- Straits Asia Resources Limited - Singapore
- Heidelberg Cement - Germany
- Lanco Infratech Ltd - India
- Ministry of Transport, Egypt
- PowerSource Philippines DevCo
- Indian Energy Exchange, India
- Independent Power Producers Association of India
- Uttam Galva Steels Limited - India
- Indika Energy - Indonesia
- Chamber of Mines of South Africa
- Energy Development Corp, Philippines
- Metalloyd Limited - United Kingdom
- Mintek Dendrill Indonesia
- Parliament of New Zealand
- Salva Resources Pvt Ltd - India
- Bharathi Cement Corporation - India
- Dalmia Cement Bharat India
- Maharashtra Electricity Regulatory Commission - India
- Edison Trading Spa - Italy
- Sree Jayajothi Cements Limited - India
- Ind-Barath Power Infra Limited - India
- Australian Coal Association
- Thai Mozambique Logistica
- Ministry of Mines - Canada
- Rio Tinto Coal - Australia
- Intertek Mineral Services - Indonesia
- Karaikal Port Pvt Ltd - India
- Central Electricity Authority - India
- PTC India Limited - India
- San Jose City I Power Corp, Philippines
- Cigading International Bulk Terminal - Indonesia
- Baramulti Group, Indonesia
- GVK Power & Infra Limited - India
- IEA Clean Coal Centre - UK
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Essar Steel Hazira Ltd - India
- Grasim Industreis Ltd - India
- Sakthi Sugars Limited - India
- Directorate General of MIneral and Coal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Makarim & Taira - Indonesia
- Ambuja Cements Ltd - India
- McConnell Dowell - Australia
- Agrawal Coal Company - India
- Merrill Lynch Commodities Europe
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Sidhee Cement - India
- Bahari Cakrawala Sebuku - Indonesia
- Sindya Power Generating Company Private Ltd
- Economic Council, Georgia
- India Bulls Power Limited - India
- Aditya Birla Group - India
- Pipit Mutiara Jaya. PT, Indonesia
- Alfred C Toepfer International GmbH - Germany
- International Coal Ventures Pvt Ltd - India
- Mercator Lines Limited - India
- Bukit Makmur.PT - Indonesia
- Bukit Baiduri Energy - Indonesia
- SMC Global Power, Philippines
- Eastern Energy - Thailand
- TeaM Sual Corporation - Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Kaltim Prima Coal - Indonesia
- Electricity Authority, New Zealand
- Vedanta Resources Plc - India
- SMG Consultants - Indonesia
- Coastal Gujarat Power Limited - India
- PNOC Exploration Corporation - Philippines
- Power Finance Corporation Ltd., India
- Manunggal Multi Energi - Indonesia
- Globalindo Alam Lestari - Indonesia
- Global Coal Blending Company Limited - Australia
- Ceylon Electricity Board - Sri Lanka
- Toyota Tsusho Corporation, Japan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Anglo American - United Kingdom
- Formosa Plastics Group - Taiwan
- Wood Mackenzie - Singapore
- Samtan Co., Ltd - South Korea
- Kapuas Tunggal Persada - Indonesia
- Africa Commodities Group - South Africa
- Timah Investasi Mineral - Indoneisa
- Renaissance Capital - South Africa
- Energy Link Ltd, New Zealand
- Attock Cement Pakistan Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kalimantan Lumbung Energi - Indonesia
- Directorate Of Revenue Intelligence - India
- TNB Fuel Sdn Bhd - Malaysia
- Trasteel International SA, Italy
- Cement Manufacturers Association - India
- MS Steel International - UAE
- Riau Bara Harum - Indonesia
- The University of Queensland
- Borneo Indobara - Indonesia
- Banpu Public Company Limited - Thailand
- Sarangani Energy Corporation, Philippines
- South Luzon Thermal Energy Corporation
- ASAPP Information Group - India
- Port Waratah Coal Services - Australia
- Semirara Mining and Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Aboitiz Power Corporation - Philippines
- Eastern Coal Council - USA
- Maheswari Brothers Coal Limited - India
- Price Waterhouse Coopers - Russia
- Tamil Nadu electricity Board
- Goldman Sachs - Singapore
- New Zealand Coal & Carbon
- IHS Mccloskey Coal Group - USA
- Commonwealth Bank - Australia
- Billiton Holdings Pty Ltd - Australia
- Latin American Coal - Colombia
- Videocon Industries ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Therma Luzon, Inc, Philippines
- Coalindo Energy - Indonesia
- Altura Mining Limited, Indonesia
- AsiaOL BioFuels Corp., Philippines
- Leighton Contractors Pty Ltd - Australia
- GN Power Mariveles Coal Plant, Philippines
- Krishnapatnam Port Company Ltd. - India
- Bhoruka Overseas - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Romanian Commodities Exchange
- Georgia Ports Authority, United States
- Orica Mining Services - Indonesia
- Minerals Council of Australia
- European Bulk Services B.V. - Netherlands
- Deloitte Consulting - India
- Mercuria Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement PLC, Thailand
- The Treasury - Australian Government
- Bank of Tokyo Mitsubishi UFJ Ltd
- Carbofer General Trading SA - India
- Jindal Steel & Power Ltd - India
- Barasentosa Lestari - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Australian Commodity Traders Exchange
- Bulk Trading Sa - Switzerland
- GMR Energy Limited - India
- Standard Chartered Bank - UAE
- Antam Resourcindo - Indonesia
- Electricity Generating Authority of Thailand
- Marubeni Corporation - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- White Energy Company Limited
- Ministry of Finance - Indonesia
- Tata Chemicals Ltd - India
- Indo Tambangraya Megah - Indonesia
- Kobexindo Tractors - Indoneisa
- The State Trading Corporation of India Ltd
- Parry Sugars Refinery, India
- LBH Netherlands Bv - Netherlands
- London Commodity Brokers - England
- Interocean Group of Companies - India
- Bhushan Steel Limited - India
- Singapore Mercantile Exchange
- Bangladesh Power Developement Board
- Larsen & Toubro Limited - India
- Oldendorff Carriers - Singapore
- Jaiprakash Power Ventures ltd
- Bhatia International Limited - India
- Indian Oil Corporation Limited
- Indogreen Group - Indonesia
- Savvy Resources Ltd - HongKong
- Global Green Power PLC Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Chettinad Cement Corporation Ltd - India
- CIMB Investment Bank - Malaysia
- Neyveli Lignite Corporation Ltd, - India
- Central Java Power - Indonesia
- Star Paper Mills Limited - India
- Vizag Seaport Private Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Coal and Oil Company - UAE
- Global Business Power Corporation, Philippines
- Siam City Cement - Thailand
- Kartika Selabumi Mining - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Semirara Mining Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Pendopo Energi Batubara - Indonesia
- VISA Power Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Sical Logistics Limited - India
- Planning Commission, India
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