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