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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, 01 September 21
KOMIPO TO BUY 1.56 MILLION TONS OF 5600 NAR COAL OF AUSTRALIA OR SOUTH AFRICAN ORIGIN FOR 2022 - 2024
COALspot.com: Korea Midland Power Co., Ltd (KOMIPO) has issued an international tender for total 1,560,000 MT of Bituminous Coal to be used a ...
Wednesday, 01 September 21
MARKET INSIGHT - INTERMODAL
As the summer season is coming to an end, the dry bulk market continues to rally. The confidence that the outstanding freight market performance ha ...
Monday, 30 August 21
68% OF U.S. COAL FLEET RETIREMENTS SINCE 2011 WERE PLANTS FUELED BY BITUMINOUS COAL - EIA
In 2011, the United States had 317.6 gigawatts (GW) of coal-fired electric generation capacity. About 88.7 GW of that capacity was retired in the d ...
Friday, 27 August 21
ALL YOU NEED TO KNOW ABOUT COAL'S MASSIVE RALLY AND NEAR-TERM OUTLOOK - CNBCTV18
Australia’s thermal coal at Newcastle Port, the benchmark for the vast Asian market, has surged over 100 percent this year to trade above $16 ...
Friday, 27 August 21
THE ECONOMICS OF INDONESIA’S DIESEL POWER PLANT TO GAS CONVERSION PLAN ARE PROBLEMATIC - IEEFA
Deploying new small-scale LNG is an uphill battle for PGN
Indonesian gas is currently in a precarious position, where the government needs to ...
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- PowerSource Philippines DevCo
- Intertek Mineral Services - Indonesia
- Singapore Mercantile Exchange
- Kideco Jaya Agung - Indonesia
- Georgia Ports Authority, United States
- Kaltim Prima Coal - Indonesia
- Xindia Steels Limited - India
- Interocean Group of Companies - India
- Karaikal Port Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Minerals Council of Australia
- Commonwealth Bank - Australia
- CNBM International Corporation - China
- Miang Besar Coal Terminal - Indonesia
- IHS Mccloskey Coal Group - USA
- GVK Power & Infra Limited - India
- Formosa Plastics Group - Taiwan
- Star Paper Mills Limited - India
- Kumho Petrochemical, South Korea
- India Bulls Power Limited - India
- Binh Thuan Hamico - Vietnam
- Metalloyd Limited - United Kingdom
- Siam City Cement - Thailand
- Mercuria Energy - Indonesia
- SMG Consultants - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Riau Bara Harum - Indonesia
- Energy Link Ltd, New Zealand
- Simpson Spence & Young - Indonesia
- Parliament of New Zealand
- Indogreen Group - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Manunggal Multi Energi - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bukit Baiduri Energy - Indonesia
- Carbofer General Trading SA - India
- Neyveli Lignite Corporation Ltd, - India
- Savvy Resources Ltd - HongKong
- Sree Jayajothi Cements Limited - India
- SN Aboitiz Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- Makarim & Taira - Indonesia
- Semirara Mining Corp, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Sojitz Corporation - Japan
- Kepco SPC Power Corporation, Philippines
- Deloitte Consulting - India
- Grasim Industreis Ltd - India
- Therma Luzon, Inc, Philippines
- Latin American Coal - Colombia
- Semirara Mining and Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Globalindo Alam Lestari - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Power Finance Corporation Ltd., India
- Africa Commodities Group - South Africa
- International Coal Ventures Pvt Ltd - India
- The Treasury - Australian Government
- SMC Global Power, Philippines
- Chamber of Mines of South Africa
- Goldman Sachs - Singapore
- Sarangani Energy Corporation, Philippines
- Malabar Cements Ltd - India
- Bukit Makmur.PT - Indonesia
- Gujarat Sidhee Cement - India
- Vizag Seaport Private Limited - India
- Indonesian Coal Mining Association
- Central Electricity Authority - India
- Mercator Lines Limited - India
- Parry Sugars Refinery, India
- Bhushan Steel Limited - India
- Eastern Coal Council - USA
- Alfred C Toepfer International GmbH - Germany
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Transport, Egypt
- Kartika Selabumi Mining - Indonesia
- Romanian Commodities Exchange
- Cement Manufacturers Association - India
- PTC India Limited - India
- Petron Corporation, Philippines
- Indian Oil Corporation Limited
- Directorate Of Revenue Intelligence - India
- Mintek Dendrill Indonesia
- Billiton Holdings Pty Ltd - Australia
- Posco Energy - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Meralco Power Generation, Philippines
- Tamil Nadu electricity Board
- Economic Council, Georgia
- Gujarat Electricity Regulatory Commission - India
- Tata Chemicals Ltd - India
- IEA Clean Coal Centre - UK
- Port Waratah Coal Services - Australia
- Jorong Barutama Greston.PT - Indonesia
- Coastal Gujarat Power Limited - India
- Bhoruka Overseas - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Central Java Power - Indonesia
- Timah Investasi Mineral - Indoneisa
- MS Steel International - UAE
- The State Trading Corporation of India Ltd
- Wilmar Investment Holdings
- VISA Power Limited - India
- Energy Development Corp, Philippines
- Global Coal Blending Company Limited - Australia
- Ind-Barath Power Infra Limited - India
- Krishnapatnam Port Company Ltd. - India
- Essar Steel Hazira Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Sical Logistics Limited - India
- Jindal Steel & Power Ltd - India
- Australian Coal Association
- LBH Netherlands Bv - Netherlands
- Salva Resources Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Maheswari Brothers Coal Limited - India
- Mjunction Services Limited - India
- Pendopo Energi Batubara - Indonesia
- European Bulk Services B.V. - Netherlands
- Baramulti Group, Indonesia
- Standard Chartered Bank - UAE
- Renaissance Capital - South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- Thai Mozambique Logistica
- Aboitiz Power Corporation - Philippines
- Edison Trading Spa - Italy
- Larsen & Toubro Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Electricity Authority, New Zealand
- Thiess Contractors Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- OPG Power Generation Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- South Luzon Thermal Energy Corporation
- Bank of Tokyo Mitsubishi UFJ Ltd
- Dalmia Cement Bharat India
- ICICI Bank Limited - India
- Australian Commodity Traders Exchange
- Heidelberg Cement - Germany
- Bhatia International Limited - India
- London Commodity Brokers - England
- ASAPP Information Group - India
- Ministry of Finance - Indonesia
- Sakthi Sugars Limited - India
- Kobexindo Tractors - Indoneisa
- Vedanta Resources Plc - India
- Jaiprakash Power Ventures ltd
- New Zealand Coal & Carbon
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Meenaskhi Energy Private Limited - India
- CIMB Investment Bank - Malaysia
- Videocon Industries ltd - India
- Orica Mining Services - Indonesia
- Barasentosa Lestari - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Eastern Energy - Thailand
- Merrill Lynch Commodities Europe
- Oldendorff Carriers - Singapore
- Price Waterhouse Coopers - Russia
- Siam City Cement PLC, Thailand
- Indian Energy Exchange, India
- Orica Australia Pty. Ltd.
- Iligan Light & Power Inc, Philippines
- PNOC Exploration Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Coal and Oil Company - UAE
- Lanco Infratech Ltd - India
- San Jose City I Power Corp, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Altura Mining Limited, Indonesia
- Medco Energi Mining Internasional
- GN Power Mariveles Coal Plant, Philippines
- Aditya Birla Group - India
- Anglo American - United Kingdom
- Indika Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Ambuja Cements Ltd - India
- Uttam Galva Steels Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Coalindo Energy - Indonesia
- Bangladesh Power Developement Board
- Banpu Public Company Limited - Thailand
- Leighton Contractors Pty Ltd - Australia
- Straits Asia Resources Limited - Singapore
- Bharathi Cement Corporation - India
- Global Business Power Corporation, Philippines
- Marubeni Corporation - India
- Antam Resourcindo - Indonesia
- Ministry of Mines - Canada
- Wood Mackenzie - Singapore
- Agrawal Coal Company - India
- Trasteel International SA, Italy
- Bayan Resources Tbk. - Indonesia
- Indo Tambangraya Megah - Indonesia
- Bulk Trading Sa - Switzerland
- Bukit Asam (Persero) Tbk - Indonesia
- Attock Cement Pakistan Limited
- Planning Commission, India
- Borneo Indobara - Indonesia
- White Energy Company Limited
- GMR Energy Limited - India
- Electricity Generating Authority of Thailand
- Rio Tinto Coal - Australia
- Independent Power Producers Association of India
- AsiaOL BioFuels Corp., Philippines
- Toyota Tsusho Corporation, Japan
- Sindya Power Generating Company Private Ltd
- Global Green Power PLC Corporation, Philippines
- The University of Queensland
- Madhucon Powers Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- McConnell Dowell - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
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