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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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Saturday, 09 October 21
CHINA POWER CUTS: COAL MINERS ORDERED TO BOOST OUTPUT, SAY REPORTS - BBC
Beijing has reportedly ordered China’s coal mines to boost output as an energy shortage across the country has seen millions of homes and bus ...
Friday, 08 October 21
SEPTEMBER CRUDE OIL TANKER DEMOLISHING HITS 39-MONTHS HIGH AT 1.9M DWT - PETER SAND
Has the lid finally come off for crude oil tanker demolition in 2021? If judged by the 1.9m DWT of capacity that was removed in September, the answ ...
Friday, 08 October 21
COAL SHORTAGE MAY LEAD TO RISE IN STEEL PRICES IN COMING MONTHS: JSPL MD - PTI
Steel prices are expected to increase in the coming months as companies are buying coal at three times the rates a month ago, said a top industry e ...
Wednesday, 06 October 21
INDONESIA COAL PRICE REFERENCE: ANOTHER MONTH, ANOTHER RALLY
COALspot.com: Indonesian Coal Price Reference in a steep climb for most of second and third quarters of 2021 as it reached a pinnacle of $161.63 Oc ...
Wednesday, 06 October 21
EUROPEAN COAL FUTURES CLIMB TO 13-YEAR PEAK - REUTERS
European coal futures rose to a 13-year high and physical thermal coal prices were at record highs as rallying gas prices and strong Asian demand f ...
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- Energy Development Corp, Philippines
- Price Waterhouse Coopers - Russia
- Uttam Galva Steels Limited - India
- Medco Energi Mining Internasional
- Indian Energy Exchange, India
- Larsen & Toubro Limited - India
- Sojitz Corporation - Japan
- Karbindo Abesyapradhi - Indoneisa
- Kartika Selabumi Mining - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Savvy Resources Ltd - HongKong
- Binh Thuan Hamico - Vietnam
- Thai Mozambique Logistica
- Oldendorff Carriers - Singapore
- Power Finance Corporation Ltd., India
- Pipit Mutiara Jaya. PT, Indonesia
- Pendopo Energi Batubara - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Attock Cement Pakistan Limited
- GAC Shipping (India) Pvt Ltd
- Kobexindo Tractors - Indoneisa
- European Bulk Services B.V. - Netherlands
- Rio Tinto Coal - Australia
- GN Power Mariveles Coal Plant, Philippines
- Intertek Mineral Services - Indonesia
- IHS Mccloskey Coal Group - USA
- Indika Energy - Indonesia
- Sakthi Sugars Limited - India
- Singapore Mercantile Exchange
- GVK Power & Infra Limited - India
- Tamil Nadu electricity Board
- The State Trading Corporation of India Ltd
- Leighton Contractors Pty Ltd - Australia
- Timah Investasi Mineral - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Africa Commodities Group - South Africa
- Global Business Power Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Barasentosa Lestari - Indonesia
- Minerals Council of Australia
- Planning Commission, India
- Directorate General of MIneral and Coal - Indonesia
- Sree Jayajothi Cements Limited - India
- Metalloyd Limited - United Kingdom
- Sindya Power Generating Company Private Ltd
- Vizag Seaport Private Limited - India
- Deloitte Consulting - India
- Aboitiz Power Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- Gujarat Sidhee Cement - India
- SMC Global Power, Philippines
- Grasim Industreis Ltd - India
- LBH Netherlands Bv - Netherlands
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kaltim Prima Coal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Interocean Group of Companies - India
- Wilmar Investment Holdings
- Goldman Sachs - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Siam City Cement - Thailand
- Electricity Generating Authority of Thailand
- Chamber of Mines of South Africa
- Altura Mining Limited, Indonesia
- Lanco Infratech Ltd - India
- ASAPP Information Group - India
- Mercator Lines Limited - India
- India Bulls Power Limited - India
- Kideco Jaya Agung - Indonesia
- San Jose City I Power Corp, Philippines
- Mjunction Services Limited - India
- Salva Resources Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ceylon Electricity Board - Sri Lanka
- Central Electricity Authority - India
- GMR Energy Limited - India
- Meralco Power Generation, Philippines
- Australian Coal Association
- Vedanta Resources Plc - India
- White Energy Company Limited
- OPG Power Generation Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Merrill Lynch Commodities Europe
- Malabar Cements Ltd - India
- Ministry of Finance - Indonesia
- Economic Council, Georgia
- Miang Besar Coal Terminal - Indonesia
- Carbofer General Trading SA - India
- Standard Chartered Bank - UAE
- Latin American Coal - Colombia
- MS Steel International - UAE
- Agrawal Coal Company - India
- Gujarat Mineral Development Corp Ltd - India
- Cement Manufacturers Association - India
- AsiaOL BioFuels Corp., Philippines
- Parliament of New Zealand
- Semirara Mining Corp, Philippines
- Commonwealth Bank - Australia
- Directorate Of Revenue Intelligence - India
- South Luzon Thermal Energy Corporation
- Mercuria Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Meenaskhi Energy Private Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Ambuja Cements Ltd - India
- Independent Power Producers Association of India
- Bhoruka Overseas - Indonesia
- Madhucon Powers Ltd - India
- Formosa Plastics Group - Taiwan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bhushan Steel Limited - India
- PTC India Limited - India
- Kapuas Tunggal Persada - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Orica Australia Pty. Ltd.
- Port Waratah Coal Services - Australia
- Indogreen Group - Indonesia
- Bukit Makmur.PT - Indonesia
- Tata Chemicals Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Riau Bara Harum - Indonesia
- SN Aboitiz Power Inc, Philippines
- Renaissance Capital - South Africa
- Georgia Ports Authority, United States
- Straits Asia Resources Limited - Singapore
- Eastern Coal Council - USA
- Marubeni Corporation - India
- Kumho Petrochemical, South Korea
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Therma Luzon, Inc, Philippines
- SMG Consultants - Indonesia
- Videocon Industries ltd - India
- Bangladesh Power Developement Board
- TeaM Sual Corporation - Philippines
- Bhatia International Limited - India
- Essar Steel Hazira Ltd - India
- Maheswari Brothers Coal Limited - India
- Borneo Indobara - Indonesia
- Parry Sugars Refinery, India
- Makarim & Taira - Indonesia
- Mintek Dendrill Indonesia
- Kepco SPC Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- ICICI Bank Limited - India
- Central Java Power - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Karaikal Port Pvt Ltd - India
- Eastern Energy - Thailand
- Samtan Co., Ltd - South Korea
- Indo Tambangraya Megah - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Star Paper Mills Limited - India
- The University of Queensland
- Manunggal Multi Energi - Indonesia
- Romanian Commodities Exchange
- Sinarmas Energy and Mining - Indonesia
- Baramulti Group, Indonesia
- Alfred C Toepfer International GmbH - Germany
- Ministry of Transport, Egypt
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sical Logistics Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Coal and Oil Company - UAE
- Holcim Trading Pte Ltd - Singapore
- Chettinad Cement Corporation Ltd - India
- Jaiprakash Power Ventures ltd
- Aditya Birla Group - India
- Jindal Steel & Power Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Krishnapatnam Port Company Ltd. - India
- Antam Resourcindo - Indonesia
- Edison Trading Spa - Italy
- Indian Oil Corporation Limited
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Dalmia Cement Bharat India
- Gujarat Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- Global Green Power PLC Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- International Coal Ventures Pvt Ltd - India
- Bharathi Cement Corporation - India
- Wood Mackenzie - Singapore
- CNBM International Corporation - China
- Siam City Cement PLC, Thailand
- Electricity Authority, New Zealand
- PowerSource Philippines DevCo
- Heidelberg Cement - Germany
- Bayan Resources Tbk. - Indonesia
- Semirara Mining and Power Corporation, Philippines
- IEA Clean Coal Centre - UK
- Posco Energy - South Korea
- Ministry of Mines - Canada
- Thiess Contractors Indonesia
- Xindia Steels Limited - India
- Anglo American - United Kingdom
- Global Coal Blending Company Limited - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Ind-Barath Power Infra Limited - India
- Coalindo Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Orica Mining Services - Indonesia
- CIMB Investment Bank - Malaysia
- The Treasury - Australian Government
- Toyota Tsusho Corporation, Japan
- Bulk Trading Sa - Switzerland
- Trasteel International SA, Italy
- New Zealand Coal & Carbon
- Energy Link Ltd, New Zealand
- Petron Corporation, Philippines
- Simpson Spence & Young - Indonesia
- McConnell Dowell - Australia
- Australian Commodity Traders Exchange
- London Commodity Brokers - England
- TNB Fuel Sdn Bhd - Malaysia
- VISA Power Limited - India
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