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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, 13 October 21
FBX INDEX: THE IMPOSSIBILITY OF SHORT-TERM FORECASTING - LARS JENSEN
Will freight rates on Asia-Europe or the Transpacific reach 40.000 USD/FFE in the run-up prior to Chinese New Year 2022? Or will they start droppin ...
Wednesday, 13 October 21
CHINA FLOODS: COAL PRICE HITS FRESH HIGH AS MINES SHUT - BBC
The price of coal used in China’s power plants has surged to a new record high as another of the country’s key mining regions is hit by ...
Tuesday, 12 October 21
BUMA SIGNS CONDITIONAL AGREEMENT FOR AUSTRALIAN ASSET ACQUISITION
PT Tbk. announced that its subsidiary, PT Bukit Makmur Mandiri Utama, through its newly incorporated Australian subsidiary, BUMA International Pty ...
Tuesday, 12 October 21
INDONESIA'S COAL-BASED POWER PLANTS ARE SUBJECT TO CARBON TAX NEXT YEAR, ELECTRICITY COSTS COULD RISE! - CNBC
The Indonesian government is planning plans to implement a carbon tax of IDR 30 per kilogram (kg) of carbon dioxide equivalent (CO2e) or equivalent ...
Monday, 11 October 21
COAL ABANDONMENT IN POWER GENERATION PROMOTED GAS DEMAND GROWTH IN EUROPE - TOP MANAGER: TASS
Accelerated abandonment of coal in power generation and the overall recovery of economic activity facilitated gas demand growth in Europe and led t ...
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- Indian Energy Exchange, India
- Rashtriya Ispat Nigam Limited - India
- Eastern Coal Council - USA
- Bhoruka Overseas - Indonesia
- Billiton Holdings Pty Ltd - Australia
- White Energy Company Limited
- Romanian Commodities Exchange
- IEA Clean Coal Centre - UK
- Mercator Lines Limited - India
- Chamber of Mines of South Africa
- Siam City Cement - Thailand
- ASAPP Information Group - India
- Maheswari Brothers Coal Limited - India
- The State Trading Corporation of India Ltd
- Meralco Power Generation, Philippines
- Central Electricity Authority - India
- The Treasury - Australian Government
- Semirara Mining Corp, Philippines
- Maharashtra Electricity Regulatory Commission - India
- European Bulk Services B.V. - Netherlands
- Salva Resources Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Sojitz Corporation - Japan
- Bhatia International Limited - India
- Ceylon Electricity Board - Sri Lanka
- Wood Mackenzie - Singapore
- Riau Bara Harum - Indonesia
- Posco Energy - South Korea
- Iligan Light & Power Inc, Philippines
- Tata Chemicals Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Coalindo Energy - Indonesia
- Deloitte Consulting - India
- MS Steel International - UAE
- Minerals Council of Australia
- Mjunction Services Limited - India
- Agrawal Coal Company - India
- AsiaOL BioFuels Corp., Philippines
- Parliament of New Zealand
- Simpson Spence & Young - Indonesia
- Central Java Power - Indonesia
- Sindya Power Generating Company Private Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Latin American Coal - Colombia
- Makarim & Taira - Indonesia
- SMC Global Power, Philippines
- Goldman Sachs - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Power Finance Corporation Ltd., India
- CIMB Investment Bank - Malaysia
- Bangladesh Power Developement Board
- Kaltim Prima Coal - Indonesia
- Global Business Power Corporation, Philippines
- Videocon Industries ltd - India
- New Zealand Coal & Carbon
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Anglo American - United Kingdom
- Petrochimia International Co. Ltd.- Taiwan
- Sinarmas Energy and Mining - Indonesia
- Grasim Industreis Ltd - India
- Bayan Resources Tbk. - Indonesia
- Dalmia Cement Bharat India
- Thai Mozambique Logistica
- Port Waratah Coal Services - Australia
- Savvy Resources Ltd - HongKong
- TeaM Sual Corporation - Philippines
- Star Paper Mills Limited - India
- Indogreen Group - Indonesia
- Indo Tambangraya Megah - Indonesia
- Ind-Barath Power Infra Limited - India
- Thiess Contractors Indonesia
- VISA Power Limited - India
- Sakthi Sugars Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Africa Commodities Group - South Africa
- Cigading International Bulk Terminal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Banpu Public Company Limited - Thailand
- London Commodity Brokers - England
- Siam City Cement PLC, Thailand
- Gujarat Sidhee Cement - India
- Jorong Barutama Greston.PT - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Mercuria Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Georgia Ports Authority, United States
- Samtan Co., Ltd - South Korea
- Indonesian Coal Mining Association
- Singapore Mercantile Exchange
- Directorate General of MIneral and Coal - Indonesia
- The University of Queensland
- Bukit Makmur.PT - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- LBH Netherlands Bv - Netherlands
- PowerSource Philippines DevCo
- Oldendorff Carriers - Singapore
- Sical Logistics Limited - India
- Pendopo Energi Batubara - Indonesia
- SN Aboitiz Power Inc, Philippines
- Aboitiz Power Corporation - Philippines
- GMR Energy Limited - India
- Planning Commission, India
- Parry Sugars Refinery, India
- Bharathi Cement Corporation - India
- PTC India Limited - India
- Timah Investasi Mineral - Indoneisa
- Chettinad Cement Corporation Ltd - India
- International Coal Ventures Pvt Ltd - India
- Cement Manufacturers Association - India
- Kobexindo Tractors - Indoneisa
- Jindal Steel & Power Ltd - India
- Manunggal Multi Energi - Indonesia
- Electricity Generating Authority of Thailand
- SMG Consultants - Indonesia
- Commonwealth Bank - Australia
- Mintek Dendrill Indonesia
- Semirara Mining and Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Formosa Plastics Group - Taiwan
- GAC Shipping (India) Pvt Ltd
- Ministry of Transport, Egypt
- South Luzon Thermal Energy Corporation
- Eastern Energy - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Uttam Galva Steels Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Marubeni Corporation - India
- Petron Corporation, Philippines
- Trasteel International SA, Italy
- GVK Power & Infra Limited - India
- OPG Power Generation Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Madhucon Powers Ltd - India
- Coal and Oil Company - UAE
- Altura Mining Limited, Indonesia
- Attock Cement Pakistan Limited
- PetroVietnam Power Coal Import and Supply Company
- Bukit Baiduri Energy - Indonesia
- Indian Oil Corporation Limited
- India Bulls Power Limited - India
- Gujarat Electricity Regulatory Commission - India
- Xindia Steels Limited - India
- Orica Australia Pty. Ltd.
- Barasentosa Lestari - Indonesia
- IHS Mccloskey Coal Group - USA
- Ministry of Mines - Canada
- Baramulti Group, Indonesia
- Price Waterhouse Coopers - Russia
- Sree Jayajothi Cements Limited - India
- Bhushan Steel Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Energy Link Ltd, New Zealand
- Ambuja Cements Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Larsen & Toubro Limited - India
- Global Coal Blending Company Limited - Australia
- Heidelberg Cement - Germany
- Electricity Authority, New Zealand
- CNBM International Corporation - China
- Lanco Infratech Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Edison Trading Spa - Italy
- Kepco SPC Power Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Merrill Lynch Commodities Europe
- ICICI Bank Limited - India
- Globalindo Alam Lestari - Indonesia
- Orica Mining Services - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Meenaskhi Energy Private Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Finance - Indonesia
- Global Green Power PLC Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Australian Commodity Traders Exchange
- Jaiprakash Power Ventures ltd
- Australian Coal Association
- Rio Tinto Coal - Australia
- Kohat Cement Company Ltd. - Pakistan
- Aditya Birla Group - India
- Metalloyd Limited - United Kingdom
- Carbofer General Trading SA - India
- Independent Power Producers Association of India
- Straits Asia Resources Limited - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indika Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Malabar Cements Ltd - India
- Intertek Mineral Services - Indonesia
- Borneo Indobara - Indonesia
- Sarangani Energy Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Antam Resourcindo - Indonesia
- Kartika Selabumi Mining - Indonesia
- Renaissance Capital - South Africa
- Directorate Of Revenue Intelligence - India
- Interocean Group of Companies - India
- Standard Chartered Bank - UAE
- Toyota Tsusho Corporation, Japan
- Vizag Seaport Private Limited - India
- Tamil Nadu electricity Board
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Energy Development Corp, Philippines
- Karaikal Port Pvt Ltd - India
- Medco Energi Mining Internasional
- Bulk Trading Sa - Switzerland
- Economic Council, Georgia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Essar Steel Hazira Ltd - India
- McConnell Dowell - Australia
- Coastal Gujarat Power Limited - India
- Vedanta Resources Plc - India
- Wilmar Investment Holdings
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