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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, 22 September 21
MARKET INSIGHT - INTERMODAL
The unfolding last week of a trilateral defence pact between the United States, Australia, the United Kingdom (AUKUS) envisages a wide range of col ...
Tuesday, 21 September 21
CHINESE COAL IMPORTS FROM AUSTRALIA DROP 98.6% AS RESTRICTIONS BITE - BIMCO
In the first seven months of the year Chinese coal imports from Australia have totalled just 780,000 tonnes as Chinese restrictions on Australian c ...
Tuesday, 21 September 21
CHINA'S COAL OUTPUT RESUMES GROWTH IN AUGUST - XINHUA
China’s raw coal output rose 0.8 percent year on year to 340 million tonnes last month, official data showed.
The growth rate ...
Wednesday, 15 September 21
MARKET INSIGHT - INTERMODAL
Following the oil price sell off during most of August, partly triggered by oil demand fears amid the delta COVID variant, oil prices have resumed ...
Saturday, 11 September 21
CIL STEPS UP SUPPLY COAL TO POWER SECTOR; PER-DAY AVERAGE 20 PC HIGHER THAN LAST YEAR - PTI
State-owned CIL on Friday said it has stepped up the supply of coal to the power sector in the first eight days of the current month, with an avera ...
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- Kaltim Prima Coal - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Interocean Group of Companies - India
- Medco Energi Mining Internasional
- Bangladesh Power Developement Board
- Energy Development Corp, Philippines
- Coalindo Energy - Indonesia
- Standard Chartered Bank - UAE
- Bukit Makmur.PT - Indonesia
- Indonesian Coal Mining Association
- Bulk Trading Sa - Switzerland
- Eastern Energy - Thailand
- Australian Coal Association
- San Jose City I Power Corp, Philippines
- Madhucon Powers Ltd - India
- IHS Mccloskey Coal Group - USA
- Bukit Asam (Persero) Tbk - Indonesia
- PNOC Exploration Corporation - Philippines
- Chettinad Cement Corporation Ltd - India
- Antam Resourcindo - Indonesia
- Kapuas Tunggal Persada - Indonesia
- South Luzon Thermal Energy Corporation
- Maheswari Brothers Coal Limited - India
- Krishnapatnam Port Company Ltd. - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kartika Selabumi Mining - Indonesia
- Coal and Oil Company - UAE
- SN Aboitiz Power Inc, Philippines
- Parry Sugars Refinery, India
- Formosa Plastics Group - Taiwan
- Salva Resources Pvt Ltd - India
- Tamil Nadu electricity Board
- Rashtriya Ispat Nigam Limited - India
- Cigading International Bulk Terminal - Indonesia
- Vizag Seaport Private Limited - India
- SMC Global Power, Philippines
- Aditya Birla Group - India
- Ministry of Mines - Canada
- Neyveli Lignite Corporation Ltd, - India
- Indian Oil Corporation Limited
- Minerals Council of Australia
- Central Electricity Authority - India
- Intertek Mineral Services - Indonesia
- Energy Link Ltd, New Zealand
- Malabar Cements Ltd - India
- Vedanta Resources Plc - India
- Marubeni Corporation - India
- Barasentosa Lestari - Indonesia
- New Zealand Coal & Carbon
- Samtan Co., Ltd - South Korea
- Dalmia Cement Bharat India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Port Waratah Coal Services - Australia
- Grasim Industreis Ltd - India
- Singapore Mercantile Exchange
- Bhushan Steel Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Videocon Industries ltd - India
- OPG Power Generation Pvt Ltd - India
- Mintek Dendrill Indonesia
- Alfred C Toepfer International GmbH - Germany
- Baramulti Group, Indonesia
- Global Coal Blending Company Limited - Australia
- Directorate Of Revenue Intelligence - India
- Renaissance Capital - South Africa
- Essar Steel Hazira Ltd - India
- Bhoruka Overseas - Indonesia
- Electricity Generating Authority of Thailand
- Sinarmas Energy and Mining - Indonesia
- Meralco Power Generation, Philippines
- Iligan Light & Power Inc, Philippines
- The Treasury - Australian Government
- Ministry of Finance - Indonesia
- GMR Energy Limited - India
- Global Business Power Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Bayan Resources Tbk. - Indonesia
- Central Java Power - Indonesia
- Gujarat Sidhee Cement - India
- Indo Tambangraya Megah - Indonesia
- Romanian Commodities Exchange
- Mercuria Energy - Indonesia
- Australian Commodity Traders Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Petron Corporation, Philippines
- Xindia Steels Limited - India
- International Coal Ventures Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Ind-Barath Power Infra Limited - India
- Karaikal Port Pvt Ltd - India
- Bhatia International Limited - India
- Georgia Ports Authority, United States
- Cement Manufacturers Association - India
- Bahari Cakrawala Sebuku - Indonesia
- Kepco SPC Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Kideco Jaya Agung - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- White Energy Company Limited
- IEA Clean Coal Centre - UK
- Africa Commodities Group - South Africa
- Vijayanagar Sugar Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- MS Steel International - UAE
- Orica Mining Services - Indonesia
- CIMB Investment Bank - Malaysia
- Commonwealth Bank - Australia
- Sakthi Sugars Limited - India
- McConnell Dowell - Australia
- Binh Thuan Hamico - Vietnam
- Trasteel International SA, Italy
- AsiaOL BioFuels Corp., Philippines
- Posco Energy - South Korea
- European Bulk Services B.V. - Netherlands
- Savvy Resources Ltd - HongKong
- CNBM International Corporation - China
- PowerSource Philippines DevCo
- Sree Jayajothi Cements Limited - India
- PTC India Limited - India
- Gujarat Electricity Regulatory Commission - India
- Miang Besar Coal Terminal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Riau Bara Harum - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Jaiprakash Power Ventures ltd
- Siam City Cement - Thailand
- Maharashtra Electricity Regulatory Commission - India
- Pendopo Energi Batubara - Indonesia
- GVK Power & Infra Limited - India
- Kobexindo Tractors - Indoneisa
- Tata Chemicals Ltd - India
- Bharathi Cement Corporation - India
- Latin American Coal - Colombia
- Star Paper Mills Limited - India
- Holcim Trading Pte Ltd - Singapore
- Thai Mozambique Logistica
- Uttam Galva Steels Limited - India
- ASAPP Information Group - India
- Wilmar Investment Holdings
- VISA Power Limited - India
- Coastal Gujarat Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- TeaM Sual Corporation - Philippines
- Borneo Indobara - Indonesia
- Manunggal Multi Energi - Indonesia
- Lanco Infratech Ltd - India
- Ministry of Transport, Egypt
- Sarangani Energy Corporation, Philippines
- London Commodity Brokers - England
- Ceylon Electricity Board - Sri Lanka
- Semirara Mining and Power Corporation, Philippines
- Agrawal Coal Company - India
- Toyota Tsusho Corporation, Japan
- Larsen & Toubro Limited - India
- Globalindo Alam Lestari - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Kalimantan Lumbung Energi - Indonesia
- Straits Asia Resources Limited - Singapore
- Carbofer General Trading SA - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Economic Council, Georgia
- Wood Mackenzie - Singapore
- Mercator Lines Limited - India
- India Bulls Power Limited - India
- Goldman Sachs - Singapore
- Rio Tinto Coal - Australia
- Global Green Power PLC Corporation, Philippines
- The State Trading Corporation of India Ltd
- Sical Logistics Limited - India
- Merrill Lynch Commodities Europe
- Therma Luzon, Inc, Philippines
- Deloitte Consulting - India
- Semirara Mining Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Altura Mining Limited, Indonesia
- Oldendorff Carriers - Singapore
- Indika Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Meenaskhi Energy Private Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Eastern Coal Council - USA
- SMG Consultants - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Thiess Contractors Indonesia
- The University of Queensland
- Electricity Authority, New Zealand
- Heidelberg Cement - Germany
- Attock Cement Pakistan Limited
- Independent Power Producers Association of India
- Price Waterhouse Coopers - Russia
- GAC Shipping (India) Pvt Ltd
- Kumho Petrochemical, South Korea
- Power Finance Corporation Ltd., India
- Indian Energy Exchange, India
- Planning Commission, India
- Bukit Baiduri Energy - Indonesia
- Ambuja Cements Ltd - India
- Sojitz Corporation - Japan
- Asmin Koalindo Tuhup - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Banpu Public Company Limited - Thailand
- Sindya Power Generating Company Private Ltd
- Orica Australia Pty. Ltd.
- Makarim & Taira - Indonesia
- Parliament of New Zealand
- Anglo American - United Kingdom
- Metalloyd Limited - United Kingdom
- Leighton Contractors Pty Ltd - Australia
- Chamber of Mines of South Africa
- ICICI Bank Limited - India
- Edison Trading Spa - Italy
- Mjunction Services Limited - India
- Simpson Spence & Young - Indonesia
- Indogreen Group - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Siam City Cement PLC, Thailand
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