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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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Saturday, 16 October 21
DESPITE HIGHER COAL PRICES, U.S. COAL RECOVERY LOOKS WEAK BY MOST MEASURES - IEEFA
U.S. coal sector is locked into a long-term sectoral decline
Coal prices have surged to the highest level in years in the U.S., and have soare ...
Saturday, 16 October 21
COAL IS 'KING' AS GAS PRICES SOAR, TOTAL CEO SAYS - AND IT’S BACKFIRING ON CLEANER ENERGY GOALS - CNBC
Surging natural gas prices have led to a jump in coal use, with plants in Europe and Asia firing back up as temperatures decline and the world grap ...
Saturday, 16 October 21
VIETNAM'S COAL-FIRED POWER MAY DOUBLE BY 2030 UNDER DRAFT ENERGY PLAN - REUTERS
Vietnam may double the amount of coal-fired electric generation it installs by 2030 under a draft power development plan submitted to the prime min ...
Friday, 15 October 21
AUSTRALIA'S WHITEHAVEN EXPECTS TO BE DEBT-FREE NEXT YEAR AS COAL PRICES SOAR - REUTERS
Australia’s Whitehaven Coal WHC.AX said on Thursday it expects to be debt-free by early 2022, as thermal coal prices surge to record highs on ...
Friday, 15 October 21
WINTER CHILL KEEPS CHINA'S COAL PRICES HIGH, POWER CRUNCH STOKES INFLATION - REUTERS
China coal prices held near record highs on Thursday as cold weather swept into the country’s north and power plants stocked up on the fuel t ...
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- LBH Netherlands Bv - Netherlands
- Meenaskhi Energy Private Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Bangladesh Power Developement Board
- Energy Link Ltd, New Zealand
- Directorate Of Revenue Intelligence - India
- Iligan Light & Power Inc, Philippines
- Indogreen Group - Indonesia
- Chettinad Cement Corporation Ltd - India
- Latin American Coal - Colombia
- Timah Investasi Mineral - Indoneisa
- Electricity Authority, New Zealand
- Maharashtra Electricity Regulatory Commission - India
- Indika Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Salva Resources Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Global Business Power Corporation, Philippines
- Bhatia International Limited - India
- Bhushan Steel Limited - India
- Sarangani Energy Corporation, Philippines
- Minerals Council of Australia
- Toyota Tsusho Corporation, Japan
- Sical Logistics Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- The Treasury - Australian Government
- Leighton Contractors Pty Ltd - Australia
- Videocon Industries ltd - India
- Tamil Nadu electricity Board
- Sinarmas Energy and Mining - Indonesia
- Indian Oil Corporation Limited
- ICICI Bank Limited - India
- Simpson Spence & Young - Indonesia
- South Luzon Thermal Energy Corporation
- Bukit Asam (Persero) Tbk - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Malabar Cements Ltd - India
- Anglo American - United Kingdom
- Ministry of Finance - Indonesia
- PTC India Limited - India
- Cigading International Bulk Terminal - Indonesia
- Commonwealth Bank - Australia
- Planning Commission, India
- Kalimantan Lumbung Energi - Indonesia
- GMR Energy Limited - India
- Mintek Dendrill Indonesia
- IHS Mccloskey Coal Group - USA
- Africa Commodities Group - South Africa
- Banpu Public Company Limited - Thailand
- Manunggal Multi Energi - Indonesia
- Sakthi Sugars Limited - India
- Bulk Trading Sa - Switzerland
- Kumho Petrochemical, South Korea
- Medco Energi Mining Internasional
- Jorong Barutama Greston.PT - Indonesia
- Posco Energy - South Korea
- Mjunction Services Limited - India
- Holcim Trading Pte Ltd - Singapore
- Energy Development Corp, Philippines
- Vedanta Resources Plc - India
- Karbindo Abesyapradhi - Indoneisa
- Vizag Seaport Private Limited - India
- Kaltim Prima Coal - Indonesia
- Australian Coal Association
- Binh Thuan Hamico - Vietnam
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Eastern Coal Council - USA
- Central Electricity Authority - India
- OPG Power Generation Pvt Ltd - India
- MS Steel International - UAE
- Orica Mining Services - Indonesia
- Renaissance Capital - South Africa
- Gujarat Mineral Development Corp Ltd - India
- Mercator Lines Limited - India
- Price Waterhouse Coopers - Russia
- Maheswari Brothers Coal Limited - India
- Independent Power Producers Association of India
- India Bulls Power Limited - India
- Larsen & Toubro Limited - India
- Meralco Power Generation, Philippines
- Thiess Contractors Indonesia
- Marubeni Corporation - India
- Deloitte Consulting - India
- Uttam Galva Steels Limited - India
- Bayan Resources Tbk. - Indonesia
- SMG Consultants - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Sojitz Corporation - Japan
- McConnell Dowell - Australia
- Baramulti Group, Indonesia
- Aditya Birla Group - India
- PetroVietnam Power Coal Import and Supply Company
- Bukit Makmur.PT - Indonesia
- Coastal Gujarat Power Limited - India
- Ambuja Cements Ltd - India
- Therma Luzon, Inc, Philippines
- Wood Mackenzie - Singapore
- AsiaOL BioFuels Corp., Philippines
- Karaikal Port Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- PowerSource Philippines DevCo
- Intertek Mineral Services - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- CNBM International Corporation - China
- San Jose City I Power Corp, Philippines
- Wilmar Investment Holdings
- Xindia Steels Limited - India
- Sindya Power Generating Company Private Ltd
- Directorate General of MIneral and Coal - Indonesia
- Orica Australia Pty. Ltd.
- PNOC Exploration Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- Kepco SPC Power Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Coal and Oil Company - UAE
- Riau Bara Harum - Indonesia
- Heidelberg Cement - Germany
- Cement Manufacturers Association - India
- Global Green Power PLC Corporation, Philippines
- Power Finance Corporation Ltd., India
- Interocean Group of Companies - India
- Jindal Steel & Power Ltd - India
- Goldman Sachs - Singapore
- Barasentosa Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- Miang Besar Coal Terminal - Indonesia
- Gujarat Sidhee Cement - India
- Global Coal Blending Company Limited - Australia
- Kideco Jaya Agung - Indonesia
- London Commodity Brokers - England
- Grasim Industreis Ltd - India
- Makarim & Taira - Indonesia
- Indian Energy Exchange, India
- Aboitiz Power Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Attock Cement Pakistan Limited
- Kapuas Tunggal Persada - Indonesia
- Star Paper Mills Limited - India
- New Zealand Coal & Carbon
- Parry Sugars Refinery, India
- GN Power Mariveles Coal Plant, Philippines
- Siam City Cement PLC, Thailand
- Pendopo Energi Batubara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bank of Tokyo Mitsubishi UFJ Ltd
- Dalmia Cement Bharat India
- CIMB Investment Bank - Malaysia
- SN Aboitiz Power Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Trasteel International SA, Italy
- Central Java Power - Indonesia
- Semirara Mining and Power Corporation, Philippines
- GVK Power & Infra Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Semirara Mining Corp, Philippines
- Gujarat Electricity Regulatory Commission - India
- Bukit Baiduri Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Singapore Mercantile Exchange
- Krishnapatnam Port Company Ltd. - India
- Standard Chartered Bank - UAE
- TeaM Sual Corporation - Philippines
- Port Waratah Coal Services - Australia
- Savvy Resources Ltd - HongKong
- Mercuria Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Rio Tinto Coal - Australia
- Rashtriya Ispat Nigam Limited - India
- Edison Trading Spa - Italy
- Agrawal Coal Company - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coalindo Energy - Indonesia
- Bharathi Cement Corporation - India
- Australian Commodity Traders Exchange
- Samtan Co., Ltd - South Korea
- Carbofer General Trading SA - India
- Ceylon Electricity Board - Sri Lanka
- Ministry of Transport, Egypt
- Siam City Cement - Thailand
- Parliament of New Zealand
- Formosa Plastics Group - Taiwan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Lanco Infratech Ltd - India
- Globalindo Alam Lestari - Indonesia
- SMC Global Power, Philippines
- Tata Chemicals Ltd - India
- Indonesian Coal Mining Association
- The University of Queensland
- Thai Mozambique Logistica
- Ministry of Mines - Canada
- Georgia Ports Authority, United States
- Madhucon Powers Ltd - India
- Kartika Selabumi Mining - Indonesia
- Chamber of Mines of South Africa
- Indo Tambangraya Megah - Indonesia
- Electricity Generating Authority of Thailand
- Eastern Energy - Thailand
- Petron Corporation, Philippines
- VISA Power Limited - India
- White Energy Company Limited
- Oldendorff Carriers - Singapore
- Borneo Indobara - Indonesia
- ASAPP Information Group - India
- Pipit Mutiara Jaya. PT, Indonesia
- Straits Asia Resources Limited - Singapore
- Economic Council, Georgia
- Neyveli Lignite Corporation Ltd, - India
- Merrill Lynch Commodities Europe
- Antam Resourcindo - Indonesia
- IEA Clean Coal Centre - UK
- Altura Mining Limited, Indonesia
- Romanian Commodities Exchange
- Billiton Holdings Pty Ltd - Australia
- GAC Shipping (India) Pvt Ltd
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