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