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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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- Metalloyd Limited - United Kingdom
- Aboitiz Power Corporation - Philippines
- Bhushan Steel Limited - India
- Borneo Indobara - Indonesia
- Indian Oil Corporation Limited
- Edison Trading Spa - Italy
- Orica Mining Services - Indonesia
- VISA Power Limited - India
- Medco Energi Mining Internasional
- Bangladesh Power Developement Board
- Eastern Coal Council - USA
- Planning Commission, India
- Vijayanagar Sugar Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Commonwealth Bank - Australia
- Goldman Sachs - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ceylon Electricity Board - Sri Lanka
- Uttam Galva Steels Limited - India
- Leighton Contractors Pty Ltd - Australia
- Wood Mackenzie - Singapore
- Parry Sugars Refinery, India
- Tamil Nadu electricity Board
- Meenaskhi Energy Private Limited - India
- Alfred C Toepfer International GmbH - Germany
- The University of Queensland
- Kaltim Prima Coal - Indonesia
- Mintek Dendrill Indonesia
- Latin American Coal - Colombia
- Banpu Public Company Limited - Thailand
- Videocon Industries ltd - India
- Riau Bara Harum - Indonesia
- Indika Energy - Indonesia
- Heidelberg Cement - Germany
- GMR Energy Limited - India
- Wilmar Investment Holdings
- Manunggal Multi Energi - Indonesia
- Samtan Co., Ltd - South Korea
- ASAPP Information Group - India
- Dalmia Cement Bharat India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Karaikal Port Pvt Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- McConnell Dowell - Australia
- GN Power Mariveles Coal Plant, Philippines
- PTC India Limited - India
- Mercuria Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Semirara Mining Corp, Philippines
- Kobexindo Tractors - Indoneisa
- Savvy Resources Ltd - HongKong
- Chettinad Cement Corporation Ltd - India
- Globalindo Alam Lestari - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Bhatia International Limited - India
- SMG Consultants - Indonesia
- Chamber of Mines of South Africa
- Thai Mozambique Logistica
- Power Finance Corporation Ltd., India
- Siam City Cement - Thailand
- Tata Chemicals Ltd - India
- Orica Australia Pty. Ltd.
- Ind-Barath Power Infra Limited - India
- Essar Steel Hazira Ltd - India
- Energy Link Ltd, New Zealand
- Pendopo Energi Batubara - Indonesia
- New Zealand Coal & Carbon
- Agrawal Coal Company - India
- Sarangani Energy Corporation, Philippines
- Meralco Power Generation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Price Waterhouse Coopers - Russia
- Minerals Council of Australia
- Ambuja Cements Ltd - India
- GVK Power & Infra Limited - India
- Kartika Selabumi Mining - Indonesia
- CNBM International Corporation - China
- Africa Commodities Group - South Africa
- Trasteel International SA, Italy
- Electricity Authority, New Zealand
- Coal and Oil Company - UAE
- Iligan Light & Power Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- PowerSource Philippines DevCo
- Makarim & Taira - Indonesia
- India Bulls Power Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Gujarat Electricity Regulatory Commission - India
- Binh Thuan Hamico - Vietnam
- Thiess Contractors Indonesia
- OPG Power Generation Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Kepco SPC Power Corporation, Philippines
- Posco Energy - South Korea
- MS Steel International - UAE
- Toyota Tsusho Corporation, Japan
- Pipit Mutiara Jaya. PT, Indonesia
- Renaissance Capital - South Africa
- Bukit Makmur.PT - Indonesia
- Simpson Spence & Young - Indonesia
- Georgia Ports Authority, United States
- Economic Council, Georgia
- Rio Tinto Coal - Australia
- Indonesian Coal Mining Association
- Global Business Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Electricity Generating Authority of Thailand
- The Treasury - Australian Government
- Mercator Lines Limited - India
- Kumho Petrochemical, South Korea
- Gujarat Sidhee Cement - India
- The State Trading Corporation of India Ltd
- Bharathi Cement Corporation - India
- European Bulk Services B.V. - Netherlands
- Intertek Mineral Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- Aditya Birla Group - India
- LBH Netherlands Bv - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Sakthi Sugars Limited - India
- Lanco Infratech Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Baramulti Group, Indonesia
- CIMB Investment Bank - Malaysia
- Directorate General of MIneral and Coal - Indonesia
- Timah Investasi Mineral - Indoneisa
- PNOC Exploration Corporation - Philippines
- Madhucon Powers Ltd - India
- International Coal Ventures Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Indo Tambangraya Megah - Indonesia
- Global Coal Blending Company Limited - Australia
- Ministry of Mines - Canada
- GAC Shipping (India) Pvt Ltd
- TNB Fuel Sdn Bhd - Malaysia
- Oldendorff Carriers - Singapore
- Mjunction Services Limited - India
- Central Electricity Authority - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Finance - Indonesia
- Independent Power Producers Association of India
- IHS Mccloskey Coal Group - USA
- Eastern Energy - Thailand
- Sical Logistics Limited - India
- Maheswari Brothers Coal Limited - India
- SMC Global Power, Philippines
- Therma Luzon, Inc, Philippines
- IEA Clean Coal Centre - UK
- Cigading International Bulk Terminal - Indonesia
- TeaM Sual Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- Petron Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Star Paper Mills Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Altura Mining Limited, Indonesia
- Kideco Jaya Agung - Indonesia
- Directorate Of Revenue Intelligence - India
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement PLC, Thailand
- ICICI Bank Limited - India
- Bhoruka Overseas - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Deloitte Consulting - India
- Xindia Steels Limited - India
- Sinarmas Energy and Mining - Indonesia
- Bukit Baiduri Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Port Waratah Coal Services - Australia
- Sindya Power Generating Company Private Ltd
- Straits Asia Resources Limited - Singapore
- Salva Resources Pvt Ltd - India
- Romanian Commodities Exchange
- Vizag Seaport Private Limited - India
- Energy Development Corp, Philippines
- Larsen & Toubro Limited - India
- Australian Coal Association
- Interocean Group of Companies - India
- Bulk Trading Sa - Switzerland
- Carbofer General Trading SA - India
- Coalindo Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Jaiprakash Power Ventures ltd
- Neyveli Lignite Corporation Ltd, - India
- Vedanta Resources Plc - India
- Coastal Gujarat Power Limited - India
- Australian Commodity Traders Exchange
- Attock Cement Pakistan Limited
- Anglo American - United Kingdom
- Standard Chartered Bank - UAE
- Kalimantan Lumbung Energi - Indonesia
- Global Green Power PLC Corporation, Philippines
- London Commodity Brokers - England
- Kapuas Tunggal Persada - Indonesia
- Parliament of New Zealand
- Sojitz Corporation - Japan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cement Manufacturers Association - India
- San Jose City I Power Corp, Philippines
- Formosa Plastics Group - Taiwan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Marubeni Corporation - India
- Sree Jayajothi Cements Limited - India
- Krishnapatnam Port Company Ltd. - India
- Grasim Industreis Ltd - India
- Singapore Mercantile Exchange
- Antam Resourcindo - Indonesia
- Ministry of Transport, Egypt
- Indogreen Group - Indonesia
- Central Java Power - Indonesia
- Indian Energy Exchange, India
- Malabar Cements Ltd - India
- White Energy Company Limited
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