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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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Tuesday, 05 October 21
CAPESIZE MARKET WAS IN A STEEP CLIMB FOR MOST OF THIS WEEK - BALTIC EXCHANGE
Capesize
The Capesize market was in a steep climb for most of this week as it reached a pinnacle of $74,786 Wednesday before stalling, regather ...
Wednesday, 29 September 21
THE WRITING IS ON THE WALL: AUSTRALIA’S COAL ERA IS OVER - YAHOO!FINANCE
As the fringe of Australian politics strives to pump up the coal industry, facts show that coal production has started its long run decline.
&n ...
Wednesday, 29 September 21
SURGING COAL PRICES SPLIT ASIAN BUYERS INTO RICH AND POOR - REUTERS
As seaborne coal in Asia trades at, or near, record highs, there are early signs of demand destruction, especially among price-sensitive buyers suc ...
Wednesday, 29 September 21
MARKET INSIGHT - INTERMODAL
Tanker Asset values have surprised to the upside, despite the downward pressure on the freight market. Tanker rates have been hovering close to the ...
Tuesday, 28 September 21
THE MAIDEN EDITION OF DIVE TECHNOLOGY SUMMIT 2021 CONCLUDES SUCCESSFULLY
Press Release: DIVE TECHNOLOGY SUMMIT 2021, a one-day conference on the recent technological advancements in the Industrial Diving industry conclud ...
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- Meralco Power Generation, Philippines
- Maheswari Brothers Coal Limited - India
- Cigading International Bulk Terminal - Indonesia
- Electricity Generating Authority of Thailand
- Tata Chemicals Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Indian Oil Corporation Limited
- Grasim Industreis Ltd - India
- SMC Global Power, Philippines
- Price Waterhouse Coopers - Russia
- Standard Chartered Bank - UAE
- ASAPP Information Group - India
- Bhushan Steel Limited - India
- Essar Steel Hazira Ltd - India
- Kartika Selabumi Mining - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PTC India Limited - India
- Tamil Nadu electricity Board
- Savvy Resources Ltd - HongKong
- Kepco SPC Power Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Chettinad Cement Corporation Ltd - India
- Energy Development Corp, Philippines
- New Zealand Coal & Carbon
- Ministry of Transport, Egypt
- Oldendorff Carriers - Singapore
- Billiton Holdings Pty Ltd - Australia
- Parry Sugars Refinery, India
- Makarim & Taira - Indonesia
- Marubeni Corporation - India
- OPG Power Generation Pvt Ltd - India
- Borneo Indobara - Indonesia
- Wilmar Investment Holdings
- Kobexindo Tractors - Indoneisa
- Ministry of Finance - Indonesia
- SMG Consultants - Indonesia
- Edison Trading Spa - Italy
- Riau Bara Harum - Indonesia
- Kideco Jaya Agung - Indonesia
- IEA Clean Coal Centre - UK
- Larsen & Toubro Limited - India
- Coal and Oil Company - UAE
- Lanco Infratech Ltd - India
- Orica Mining Services - Indonesia
- Renaissance Capital - South Africa
- Economic Council, Georgia
- Toyota Tsusho Corporation, Japan
- Banpu Public Company Limited - Thailand
- IHS Mccloskey Coal Group - USA
- Medco Energi Mining Internasional
- Petrochimia International Co. Ltd.- Taiwan
- Uttam Galva Steels Limited - India
- CNBM International Corporation - China
- Sical Logistics Limited - India
- Eastern Coal Council - USA
- Thai Mozambique Logistica
- Bangladesh Power Developement Board
- Rio Tinto Coal - Australia
- Ind-Barath Power Infra Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Intertek Mineral Services - Indonesia
- Romanian Commodities Exchange
- Krishnapatnam Port Company Ltd. - India
- Iligan Light & Power Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- Global Coal Blending Company Limited - Australia
- Carbofer General Trading SA - India
- Mercator Lines Limited - India
- Bayan Resources Tbk. - Indonesia
- Samtan Co., Ltd - South Korea
- Central Electricity Authority - India
- PowerSource Philippines DevCo
- Sree Jayajothi Cements Limited - India
- Leighton Contractors Pty Ltd - Australia
- Salva Resources Pvt Ltd - India
- Minerals Council of Australia
- Orica Australia Pty. Ltd.
- Sarangani Energy Corporation, Philippines
- VISA Power Limited - India
- Dalmia Cement Bharat India
- Commonwealth Bank - Australia
- McConnell Dowell - Australia
- Ambuja Cements Ltd - India
- Port Waratah Coal Services - Australia
- Alfred C Toepfer International GmbH - Germany
- LBH Netherlands Bv - Netherlands
- Latin American Coal - Colombia
- Karbindo Abesyapradhi - Indoneisa
- Antam Resourcindo - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Cement Manufacturers Association - India
- Attock Cement Pakistan Limited
- Interocean Group of Companies - India
- Electricity Authority, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Power Finance Corporation Ltd., India
- Pendopo Energi Batubara - Indonesia
- Goldman Sachs - Singapore
- Parliament of New Zealand
- Posco Energy - South Korea
- Jaiprakash Power Ventures ltd
- International Coal Ventures Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Central Java Power - Indonesia
- Bhoruka Overseas - Indonesia
- Anglo American - United Kingdom
- Bahari Cakrawala Sebuku - Indonesia
- Bharathi Cement Corporation - India
- Indika Energy - Indonesia
- Mjunction Services Limited - India
- The University of Queensland
- Sojitz Corporation - Japan
- Maharashtra Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Bukit Makmur.PT - Indonesia
- Coastal Gujarat Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Independent Power Producers Association of India
- Indogreen Group - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Georgia Ports Authority, United States
- Sindya Power Generating Company Private Ltd
- Bukit Baiduri Energy - Indonesia
- Heidelberg Cement - Germany
- The State Trading Corporation of India Ltd
- Ministry of Mines - Canada
- Straits Asia Resources Limited - Singapore
- Eastern Energy - Thailand
- Barasentosa Lestari - Indonesia
- White Energy Company Limited
- Petron Corporation, Philippines
- London Commodity Brokers - England
- Formosa Plastics Group - Taiwan
- Bulk Trading Sa - Switzerland
- The Treasury - Australian Government
- Kohat Cement Company Ltd. - Pakistan
- Energy Link Ltd, New Zealand
- Globalindo Alam Lestari - Indonesia
- San Jose City I Power Corp, Philippines
- GN Power Mariveles Coal Plant, Philippines
- PNOC Exploration Corporation - Philippines
- Sakthi Sugars Limited - India
- Karaikal Port Pvt Ltd - India
- Coalindo Energy - Indonesia
- Altura Mining Limited, Indonesia
- TeaM Sual Corporation - Philippines
- Manunggal Multi Energi - Indonesia
- Meenaskhi Energy Private Limited - India
- Videocon Industries ltd - India
- Planning Commission, India
- Vedanta Resources Plc - India
- Indonesian Coal Mining Association
- Aditya Birla Group - India
- Pipit Mutiara Jaya. PT, Indonesia
- GAC Shipping (India) Pvt Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Malabar Cements Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- India Bulls Power Limited - India
- GVK Power & Infra Limited - India
- Singapore Mercantile Exchange
- Kumho Petrochemical, South Korea
- Vijayanagar Sugar Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Therma Luzon, Inc, Philippines
- Star Paper Mills Limited - India
- Australian Commodity Traders Exchange
- Deloitte Consulting - India
- Semirara Mining and Power Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Gujarat Mineral Development Corp Ltd - India
- Madhucon Powers Ltd - India
- Simpson Spence & Young - Indonesia
- Bhatia International Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Vizag Seaport Private Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Africa Commodities Group - South Africa
- Wood Mackenzie - Singapore
- Baramulti Group, Indonesia
- Metalloyd Limited - United Kingdom
- Miang Besar Coal Terminal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Gujarat Sidhee Cement - India
- Siam City Cement PLC, Thailand
- Siam City Cement - Thailand
- South Luzon Thermal Energy Corporation
- AsiaOL BioFuels Corp., Philippines
- Australian Coal Association
- Jindal Steel & Power Ltd - India
- Xindia Steels Limited - India
- Indo Tambangraya Megah - Indonesia
- Timah Investasi Mineral - Indoneisa
- Aboitiz Power Corporation - Philippines
- Trasteel International SA, Italy
- Global Business Power Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Semirara Mining Corp, Philippines
- MS Steel International - UAE
- Thiess Contractors Indonesia
- Directorate Of Revenue Intelligence - India
- Sinarmas Energy and Mining - Indonesia
- ICICI Bank Limited - India
- Mintek Dendrill Indonesia
- Agrawal Coal Company - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Indian Energy Exchange, India
- Global Green Power PLC Corporation, Philippines
- Chamber of Mines of South Africa
- European Bulk Services B.V. - Netherlands
- GMR Energy Limited - India
- Mercuria Energy - Indonesia
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