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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, 15 October 21
GLOBAL STEEL DEMAND GROWTH DOWNGRADED FOR 2021 DUE TO CHINA - WORLD STEEL ASSOCIATION
The World Steel Association (worldsteel) today released an update of its Short Range Outlook (SRO) for 2021 and 2022. worldsteel forecasts that ste ...
Thursday, 14 October 21
SPIKING COAL PRICES: DON’T BLAME THE ENERGY TRANSITION - IEEFA
Volatility highlights urgency for renewables-based energy solutions
“Energy crisis.” The phrase evokes nearly-forgotten ...
Thursday, 14 October 21
EIA FORECASTS U.S. COAL PRODUCTION TOTALS 588 MMST IN 2021, UP 53 MMST YOY
U.S. coal production in EIA's forecasts totals 588 million short tons (MMst) in 2021, 53 MMst more than in 2020.
According ...
Wednesday, 13 October 21
COAL PRICES ARE ROARING BACK AMID A GLOBAL ENERGY CRUNCH - SYDNEY MORNING HERALD
Soaring coal prices have placed Australia’s mining and energy exports on track to reach a record $349 billion this year evenas the value of t ...
Wednesday, 13 October 21
CHINA ISN'T THE ONLY HUGE ASIAN ECONOMY WITH A COAL SHORTAGE NOW - CNBC
China is not the only Asian giant grappling with an energy crunch — India is also teetering on the edge of a power crisis.
Mos ...
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- PowerSource Philippines DevCo
- Bayan Resources Tbk. - Indonesia
- Cement Manufacturers Association - India
- Grasim Industreis Ltd - India
- Dalmia Cement Bharat India
- Wilmar Investment Holdings
- Vizag Seaport Private Limited - India
- Sojitz Corporation - Japan
- Deloitte Consulting - India
- Jorong Barutama Greston.PT - Indonesia
- Kartika Selabumi Mining - Indonesia
- ASAPP Information Group - India
- Gujarat Electricity Regulatory Commission - India
- Baramulti Group, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bukit Makmur.PT - Indonesia
- Port Waratah Coal Services - Australia
- Anglo American - United Kingdom
- White Energy Company Limited
- Central Electricity Authority - India
- Goldman Sachs - Singapore
- Price Waterhouse Coopers - Russia
- CIMB Investment Bank - Malaysia
- Bukit Asam (Persero) Tbk - Indonesia
- Malabar Cements Ltd - India
- Edison Trading Spa - Italy
- South Luzon Thermal Energy Corporation
- Vijayanagar Sugar Pvt Ltd - India
- Economic Council, Georgia
- Planning Commission, India
- Kepco SPC Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Therma Luzon, Inc, Philippines
- Indonesian Coal Mining Association
- The University of Queensland
- Ind-Barath Power Infra Limited - India
- Star Paper Mills Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sree Jayajothi Cements Limited - India
- Australian Commodity Traders Exchange
- Petrochimia International Co. Ltd.- Taiwan
- Miang Besar Coal Terminal - Indonesia
- Bukit Baiduri Energy - Indonesia
- Australian Coal Association
- Renaissance Capital - South Africa
- Heidelberg Cement - Germany
- Pendopo Energi Batubara - Indonesia
- TeaM Sual Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Holcim Trading Pte Ltd - Singapore
- Parry Sugars Refinery, India
- Formosa Plastics Group - Taiwan
- The State Trading Corporation of India Ltd
- Tamil Nadu electricity Board
- Aboitiz Power Corporation - Philippines
- Petron Corporation, Philippines
- Singapore Mercantile Exchange
- Ministry of Mines - Canada
- AsiaOL BioFuels Corp., Philippines
- Binh Thuan Hamico - Vietnam
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mintek Dendrill Indonesia
- London Commodity Brokers - England
- Maharashtra Electricity Regulatory Commission - India
- Latin American Coal - Colombia
- Sindya Power Generating Company Private Ltd
- Global Coal Blending Company Limited - Australia
- Straits Asia Resources Limited - Singapore
- Banpu Public Company Limited - Thailand
- Attock Cement Pakistan Limited
- Kalimantan Lumbung Energi - Indonesia
- Sical Logistics Limited - India
- Sinarmas Energy and Mining - Indonesia
- Makarim & Taira - Indonesia
- Medco Energi Mining Internasional
- Intertek Mineral Services - Indonesia
- Savvy Resources Ltd - HongKong
- Tata Chemicals Ltd - India
- GAC Shipping (India) Pvt Ltd
- Wood Mackenzie - Singapore
- Trasteel International SA, Italy
- Energy Development Corp, Philippines
- Sarangani Energy Corporation, Philippines
- PTC India Limited - India
- Semirara Mining and Power Corporation, Philippines
- Romanian Commodities Exchange
- McConnell Dowell - Australia
- LBH Netherlands Bv - Netherlands
- VISA Power Limited - India
- Indika Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Posco Energy - South Korea
- Directorate General of MIneral and Coal - Indonesia
- Minerals Council of Australia
- Coal and Oil Company - UAE
- Energy Link Ltd, New Zealand
- Oldendorff Carriers - Singapore
- Antam Resourcindo - Indonesia
- Metalloyd Limited - United Kingdom
- Carbofer General Trading SA - India
- Karaikal Port Pvt Ltd - India
- Indogreen Group - Indonesia
- Directorate Of Revenue Intelligence - India
- Electricity Generating Authority of Thailand
- Asmin Koalindo Tuhup - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Leighton Contractors Pty Ltd - Australia
- SN Aboitiz Power Inc, Philippines
- Mjunction Services Limited - India
- Kapuas Tunggal Persada - Indonesia
- Coastal Gujarat Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indian Energy Exchange, India
- Independent Power Producers Association of India
- Thiess Contractors Indonesia
- Mercator Lines Limited - India
- Globalindo Alam Lestari - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement - Thailand
- European Bulk Services B.V. - Netherlands
- Interocean Group of Companies - India
- Chamber of Mines of South Africa
- Bharathi Cement Corporation - India
- Vedanta Resources Plc - India
- Agrawal Coal Company - India
- Rio Tinto Coal - Australia
- Barasentosa Lestari - Indonesia
- Marubeni Corporation - India
- Madhucon Powers Ltd - India
- CNBM International Corporation - China
- Bulk Trading Sa - Switzerland
- Eastern Coal Council - USA
- Orica Australia Pty. Ltd.
- Orica Mining Services - Indonesia
- Kumho Petrochemical, South Korea
- Videocon Industries ltd - India
- Jindal Steel & Power Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Iligan Light & Power Inc, Philippines
- Riau Bara Harum - Indonesia
- Sakthi Sugars Limited - India
- Africa Commodities Group - South Africa
- Indian Oil Corporation Limited
- Neyveli Lignite Corporation Ltd, - India
- MS Steel International - UAE
- Karbindo Abesyapradhi - Indoneisa
- Meralco Power Generation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Gujarat Sidhee Cement - India
- Power Finance Corporation Ltd., India
- Kaltim Prima Coal - Indonesia
- Mercuria Energy - Indonesia
- Electricity Authority, New Zealand
- India Bulls Power Limited - India
- Xindia Steels Limited - India
- Bhoruka Overseas - Indonesia
- Salva Resources Pvt Ltd - India
- Borneo Indobara - Indonesia
- GVK Power & Infra Limited - India
- Kideco Jaya Agung - Indonesia
- PNOC Exploration Corporation - Philippines
- Uttam Galva Steels Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Thai Mozambique Logistica
- OPG Power Generation Pvt Ltd - India
- SMG Consultants - Indonesia
- San Jose City I Power Corp, Philippines
- The Treasury - Australian Government
- Bangladesh Power Developement Board
- Eastern Energy - Thailand
- Altura Mining Limited, Indonesia
- Cigading International Bulk Terminal - Indonesia
- SMC Global Power, Philippines
- Larsen & Toubro Limited - India
- Meenaskhi Energy Private Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Global Business Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- GMR Energy Limited - India
- Global Green Power PLC Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Merrill Lynch Commodities Europe
- Standard Chartered Bank - UAE
- Essar Steel Hazira Ltd - India
- Alfred C Toepfer International GmbH - Germany
- New Zealand Coal & Carbon
- Manunggal Multi Energi - Indonesia
- Siam City Cement PLC, Thailand
- Lanco Infratech Ltd - India
- Parliament of New Zealand
- Aditya Birla Group - India
- Bhatia International Limited - India
- Central Java Power - Indonesia
- Toyota Tsusho Corporation, Japan
- Rashtriya Ispat Nigam Limited - India
- Timah Investasi Mineral - Indoneisa
- Indo Tambangraya Megah - Indonesia
- Commonwealth Bank - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Semirara Mining Corp, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ambuja Cements Ltd - India
- Simpson Spence & Young - Indonesia
- Georgia Ports Authority, United States
- ICICI Bank Limited - India
- Coalindo Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Ministry of Transport, Egypt
- Bahari Cakrawala Sebuku - Indonesia
- Ministry of Finance - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- IEA Clean Coal Centre - UK
- Bhushan Steel Limited - India
- International Coal Ventures Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
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