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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, 20 October 21
CHINA COAL HITS RECORD HIGH AMID TIGHT SUPPLIES - REUTERS
China coal prices hit a record high on Tuesday buoyed by a widening power crunch and cold weather despite Beijing’s efforts to bolster supply ...
Wednesday, 20 October 21
MARKET INSIGHT - INTERMODAL
IMO 2020, Ballast Water Treatment regulations, Green Recycling, GHG emissions, EEXI, CII, ETS, Fit for 55, Carbon price/levy, the Poseidon Principl ...
Tuesday, 19 October 21
SPONGE IRON SECTOR MIGHT REPORT NEGATIVE GROWTH DUE TO COAL CRISIS: SIMA - PTI
The domestic sponge iron industry might report a negative growth in the ongoing December quarter “if the shortage of coal is allowed to conti ...
Tuesday, 19 October 21
COAL INDIA, THE FALL GUY FOR POWER CRISIS - INDIA EXPRESS
The post-Covid economic recovery has led to a major increase in the demand for power, both in India and globally. In India, coal-based power plants ...
Saturday, 16 October 21
SOLAR INSTALLATION SURGE PUTS INDIA ON TRACK TO CAP COAL-FIRED POWER AS EARLY AS 2024 - IEEFA
Recent increase in solar power installations could push coal to peak sooner than expected
If India keeps installing solar capacity a ...
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- Intertek Mineral Services - Indonesia
- Vizag Seaport Private Limited - India
- Formosa Plastics Group - Taiwan
- Bayan Resources Tbk. - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Oldendorff Carriers - Singapore
- Marubeni Corporation - India
- Global Green Power PLC Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- LBH Netherlands Bv - Netherlands
- Merrill Lynch Commodities Europe
- Indika Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
- Global Business Power Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- GMR Energy Limited - India
- Wilmar Investment Holdings
- Banpu Public Company Limited - Thailand
- Dalmia Cement Bharat India
- Kobexindo Tractors - Indoneisa
- Kideco Jaya Agung - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- White Energy Company Limited
- Coalindo Energy - Indonesia
- Sindya Power Generating Company Private Ltd
- Sakthi Sugars Limited - India
- Gujarat Sidhee Cement - India
- Simpson Spence & Young - Indonesia
- Uttam Galva Steels Limited - India
- Mjunction Services Limited - India
- Bharathi Cement Corporation - India
- Maheswari Brothers Coal Limited - India
- Kapuas Tunggal Persada - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Meralco Power Generation, Philippines
- Electricity Generating Authority of Thailand
- Indian Energy Exchange, India
- Karbindo Abesyapradhi - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Planning Commission, India
- Iligan Light & Power Inc, Philippines
- Orica Australia Pty. Ltd.
- Ind-Barath Power Infra Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- South Luzon Thermal Energy Corporation
- Sinarmas Energy and Mining - Indonesia
- Alfred C Toepfer International GmbH - Germany
- The Treasury - Australian Government
- Price Waterhouse Coopers - Russia
- GN Power Mariveles Coal Plant, Philippines
- Attock Cement Pakistan Limited
- Orica Mining Services - Indonesia
- Antam Resourcindo - Indonesia
- IEA Clean Coal Centre - UK
- Australian Commodity Traders Exchange
- Bhoruka Overseas - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ministry of Finance - Indonesia
- Siam City Cement - Thailand
- Directorate Of Revenue Intelligence - India
- Videocon Industries ltd - India
- Minerals Council of Australia
- Chettinad Cement Corporation Ltd - India
- Makarim & Taira - Indonesia
- Bukit Baiduri Energy - Indonesia
- Thiess Contractors Indonesia
- Central Java Power - Indonesia
- Globalindo Alam Lestari - Indonesia
- PowerSource Philippines DevCo
- The State Trading Corporation of India Ltd
- Independent Power Producers Association of India
- Manunggal Multi Energi - Indonesia
- Karaikal Port Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- New Zealand Coal & Carbon
- Heidelberg Cement - Germany
- Baramulti Group, Indonesia
- The University of Queensland
- Ceylon Electricity Board - Sri Lanka
- SMG Consultants - Indonesia
- Sojitz Corporation - Japan
- SN Aboitiz Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- Eastern Coal Council - USA
- Savvy Resources Ltd - HongKong
- Pendopo Energi Batubara - Indonesia
- Aditya Birla Group - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jindal Steel & Power Ltd - India
- Mercator Lines Limited - India
- Australian Coal Association
- Rashtriya Ispat Nigam Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Renaissance Capital - South Africa
- Indogreen Group - Indonesia
- Romanian Commodities Exchange
- Carbofer General Trading SA - India
- Parry Sugars Refinery, India
- Singapore Mercantile Exchange
- Borneo Indobara - Indonesia
- Mercuria Energy - Indonesia
- Lanco Infratech Ltd - India
- Agrawal Coal Company - India
- Trasteel International SA, Italy
- GVK Power & Infra Limited - India
- Billiton Holdings Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- Rio Tinto Coal - Australia
- Holcim Trading Pte Ltd - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jaiprakash Power Ventures ltd
- Central Electricity Authority - India
- Economic Council, Georgia
- Port Waratah Coal Services - Australia
- Electricity Authority, New Zealand
- Ambuja Cements Ltd - India
- Mintek Dendrill Indonesia
- Sarangani Energy Corporation, Philippines
- Bhatia International Limited - India
- Indian Oil Corporation Limited
- Vedanta Resources Plc - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Therma Luzon, Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Medco Energi Mining Internasional
- Riau Bara Harum - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Timah Investasi Mineral - Indoneisa
- PTC India Limited - India
- Wood Mackenzie - Singapore
- Chamber of Mines of South Africa
- Tamil Nadu electricity Board
- Siam City Cement PLC, Thailand
- Petrochimia International Co. Ltd.- Taiwan
- McConnell Dowell - Australia
- Meenaskhi Energy Private Limited - India
- Energy Link Ltd, New Zealand
- Cement Manufacturers Association - India
- Power Finance Corporation Ltd., India
- CNBM International Corporation - China
- Star Paper Mills Limited - India
- Bhushan Steel Limited - India
- Asmin Koalindo Tuhup - Indonesia
- OPG Power Generation Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Anglo American - United Kingdom
- Indo Tambangraya Megah - Indonesia
- Larsen & Toubro Limited - India
- AsiaOL BioFuels Corp., Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Toyota Tsusho Corporation, Japan
- Energy Development Corp, Philippines
- Sree Jayajothi Cements Limited - India
- Goldman Sachs - Singapore
- Commonwealth Bank - Australia
- Madhucon Powers Ltd - India
- Standard Chartered Bank - UAE
- PetroVietnam Power Coal Import and Supply Company
- Binh Thuan Hamico - Vietnam
- Deloitte Consulting - India
- VISA Power Limited - India
- MS Steel International - UAE
- TeaM Sual Corporation - Philippines
- Ministry of Transport, Egypt
- European Bulk Services B.V. - Netherlands
- SMC Global Power, Philippines
- ICICI Bank Limited - India
- Semirara Mining and Power Corporation, Philippines
- Sical Logistics Limited - India
- San Jose City I Power Corp, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Eastern Energy - Thailand
- Grasim Industreis Ltd - India
- London Commodity Brokers - England
- PNOC Exploration Corporation - Philippines
- Kumho Petrochemical, South Korea
- Coal and Oil Company - UAE
- Kaltim Prima Coal - Indonesia
- Edison Trading Spa - Italy
- Barasentosa Lestari - Indonesia
- Bulk Trading Sa - Switzerland
- Jorong Barutama Greston.PT - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Kepco SPC Power Corporation, Philippines
- Indonesian Coal Mining Association
- Krishnapatnam Port Company Ltd. - India
- Petron Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Parliament of New Zealand
- India Bulls Power Limited - India
- Xindia Steels Limited - India
- Posco Energy - South Korea
- Tata Chemicals Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Georgia Ports Authority, United States
- Bukit Makmur.PT - Indonesia
- Bangladesh Power Developement Board
- ASAPP Information Group - India
- Interocean Group of Companies - India
- Directorate General of MIneral and Coal - Indonesia
- Ministry of Mines - Canada
- Miang Besar Coal Terminal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Latin American Coal - Colombia
- Salva Resources Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Africa Commodities Group - South Africa
- CIMB Investment Bank - Malaysia
- Thai Mozambique Logistica
- Gujarat Electricity Regulatory Commission - India
- Metalloyd Limited - United Kingdom
- TNB Fuel Sdn Bhd - Malaysia
- Malabar Cements Ltd - India
- Coastal Gujarat Power Limited - India
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