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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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Monday, 27 September 21
CHINESE COAL FIRMS MEET TO ADDRESS WINTER SUPPLY CHALLENGES - CNBC
Major Chinese coal producers are trying to resolve supply shortages and curb price rises as the country’s winter consumption peak approaches, ...
Saturday, 25 September 21
HIGH STAKES FOR ASIAN DEVELOPMENT BANK’S AMBITIOUS COAL POWER RETIREMENT PLAN - IEEFA
Implementation challenges could block funding for other equally important high impact clean energy funding strategies
In the lead up ...
Thursday, 23 September 21
LONGER COAL CONTRACTS MAY REIN IN PRICES - ECNS
In China’s coal sector that has been marred recently by price surges, regional authorities and related enterprises should ensure the fuel con ...
Thursday, 23 September 21
BALTIC INDEX HITS 12-YEAR PEAK ON FIRMER VESSELS RATES - REUTERS
The Baltic Exchange’s main dry bulk sea freight index rose for a fourth straight session on Wednesday to a 12-year high, buoyed by higher rat ...
Thursday, 23 September 21
RECORD-HIGH GAS PRICES AFFECT MANY EUROPEAN CORPORATE SECTORS - FITCH RATINGS
Record-high natural gas prices are putting pressure on supply chains of many European corporate sectors, including non-integrated energy suppliers, ...
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- TNB Fuel Sdn Bhd - Malaysia
- Barasentosa Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Indian Oil Corporation Limited
- Ceylon Electricity Board - Sri Lanka
- Chettinad Cement Corporation Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Romanian Commodities Exchange
- Edison Trading Spa - Italy
- MS Steel International - UAE
- Uttam Galva Steels Limited - India
- Samtan Co., Ltd - South Korea
- New Zealand Coal & Carbon
- Anglo American - United Kingdom
- Dalmia Cement Bharat India
- Banpu Public Company Limited - Thailand
- Mintek Dendrill Indonesia
- Commonwealth Bank - Australia
- Bukit Makmur.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Toyota Tsusho Corporation, Japan
- Minerals Council of Australia
- GAC Shipping (India) Pvt Ltd
- Holcim Trading Pte Ltd - Singapore
- San Jose City I Power Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Power Finance Corporation Ltd., India
- Bulk Trading Sa - Switzerland
- Sree Jayajothi Cements Limited - India
- Parliament of New Zealand
- Goldman Sachs - Singapore
- Eastern Energy - Thailand
- GMR Energy Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Savvy Resources Ltd - HongKong
- Larsen & Toubro Limited - India
- Ministry of Mines - Canada
- White Energy Company Limited
- Altura Mining Limited, Indonesia
- Sakthi Sugars Limited - India
- Sarangani Energy Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- PowerSource Philippines DevCo
- Chamber of Mines of South Africa
- Thai Mozambique Logistica
- Aditya Birla Group - India
- Coastal Gujarat Power Limited - India
- Straits Asia Resources Limited - Singapore
- Iligan Light & Power Inc, Philippines
- Essar Steel Hazira Ltd - India
- The State Trading Corporation of India Ltd
- Australian Commodity Traders Exchange
- IEA Clean Coal Centre - UK
- Karaikal Port Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Semirara Mining Corp, Philippines
- Central Java Power - Indonesia
- Petron Corporation, Philippines
- Electricity Authority, New Zealand
- PNOC Exploration Corporation - Philippines
- SMG Consultants - Indonesia
- Binh Thuan Hamico - Vietnam
- Petrochimia International Co. Ltd.- Taiwan
- Bhushan Steel Limited - India
- Ministry of Transport, Egypt
- Central Electricity Authority - India
- Meenaskhi Energy Private Limited - India
- Coal and Oil Company - UAE
- Videocon Industries ltd - India
- Rio Tinto Coal - Australia
- Indian Energy Exchange, India
- Trasteel International SA, Italy
- Pendopo Energi Batubara - Indonesia
- Attock Cement Pakistan Limited
- Bharathi Cement Corporation - India
- Standard Chartered Bank - UAE
- AsiaOL BioFuels Corp., Philippines
- Kepco SPC Power Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- IHS Mccloskey Coal Group - USA
- Mercator Lines Limited - India
- London Commodity Brokers - England
- Manunggal Multi Energi - Indonesia
- Heidelberg Cement - Germany
- Miang Besar Coal Terminal - Indonesia
- ICICI Bank Limited - India
- Bhoruka Overseas - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Lanco Infratech Ltd - India
- European Bulk Services B.V. - Netherlands
- Agrawal Coal Company - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kohat Cement Company Ltd. - Pakistan
- Mjunction Services Limited - India
- Madhucon Powers Ltd - India
- Coalindo Energy - Indonesia
- Indika Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Therma Luzon, Inc, Philippines
- Sojitz Corporation - Japan
- Electricity Generating Authority of Thailand
- CIMB Investment Bank - Malaysia
- Sindya Power Generating Company Private Ltd
- Interocean Group of Companies - India
- Star Paper Mills Limited - India
- Kartika Selabumi Mining - Indonesia
- Siam City Cement PLC, Thailand
- Kalimantan Lumbung Energi - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- SMC Global Power, Philippines
- Thiess Contractors Indonesia
- India Bulls Power Limited - India
- Kumho Petrochemical, South Korea
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Maheswari Brothers Coal Limited - India
- Ministry of Finance - Indonesia
- GVK Power & Infra Limited - India
- Ind-Barath Power Infra Limited - India
- PTC India Limited - India
- Gujarat Mineral Development Corp Ltd - India
- The University of Queensland
- Aboitiz Power Corporation - Philippines
- Vizag Seaport Private Limited - India
- Gujarat Electricity Regulatory Commission - India
- Orica Australia Pty. Ltd.
- TeaM Sual Corporation - Philippines
- Sical Logistics Limited - India
- Indogreen Group - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Energy Development Corp, Philippines
- Eastern Coal Council - USA
- South Luzon Thermal Energy Corporation
- Baramulti Group, Indonesia
- Xindia Steels Limited - India
- Global Coal Blending Company Limited - Australia
- Wilmar Investment Holdings
- Carbofer General Trading SA - India
- Gujarat Sidhee Cement - India
- Global Green Power PLC Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Cement Manufacturers Association - India
- Sinarmas Energy and Mining - Indonesia
- Indo Tambangraya Megah - Indonesia
- SN Aboitiz Power Inc, Philippines
- Antam Resourcindo - Indonesia
- LBH Netherlands Bv - Netherlands
- Ambuja Cements Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Bangladesh Power Developement Board
- Leighton Contractors Pty Ltd - Australia
- Krishnapatnam Port Company Ltd. - India
- Alfred C Toepfer International GmbH - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Makarim & Taira - Indonesia
- Medco Energi Mining Internasional
- Latin American Coal - Colombia
- Timah Investasi Mineral - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Baiduri Energy - Indonesia
- Orica Mining Services - Indonesia
- Directorate Of Revenue Intelligence - India
- Jorong Barutama Greston.PT - Indonesia
- Port Waratah Coal Services - Australia
- Metalloyd Limited - United Kingdom
- Energy Link Ltd, New Zealand
- Parry Sugars Refinery, India
- OPG Power Generation Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Economic Council, Georgia
- Oldendorff Carriers - Singapore
- The Treasury - Australian Government
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- McConnell Dowell - Australia
- GN Power Mariveles Coal Plant, Philippines
- Jindal Steel & Power Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Africa Commodities Group - South Africa
- Bayan Resources Tbk. - Indonesia
- ASAPP Information Group - India
- Mercuria Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Meralco Power Generation, Philippines
- Independent Power Producers Association of India
- Kideco Jaya Agung - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Posco Energy - South Korea
- Borneo Indobara - Indonesia
- Australian Coal Association
- Wood Mackenzie - Singapore
- Marubeni Corporation - India
- Riau Bara Harum - Indonesia
- Indonesian Coal Mining Association
- Semirara Mining and Power Corporation, Philippines
- Georgia Ports Authority, United States
- Tata Chemicals Ltd - India
- Singapore Mercantile Exchange
- Bhatia International Limited - India
- Tamil Nadu electricity Board
- VISA Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Vedanta Resources Plc - India
- Siam City Cement - Thailand
- Kaltim Prima Coal - Indonesia
- Planning Commission, India
- Global Business Power Corporation, Philippines
- Malabar Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
- Price Waterhouse Coopers - Russia
- Intertek Mineral Services - Indonesia
- Merrill Lynch Commodities Europe
- Salva Resources Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Deloitte Consulting - India
- CNBM International Corporation - China
- Simpson Spence & Young - Indonesia
- Grasim Industreis Ltd - India
- Renaissance Capital - South Africa
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