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Friday, 22 October 21
THE BIG PICTURE: ENERGY MARKETS - BREAK WAVE ADVISORS
 The shipping markets have been pulled further into wild markets of coal and other energy sources. Given how nebulous this sector is, it’s always difficult to point to individual stories that are impacting freight, the below is an overview of how shipping is being affected in the various corners of this market.
ENORMOUS VOLATILITY
Another day, another supply chain crisis. Since we last wrote about coal a few weeks ago, the market has continued to tighten, with the commodity becoming exceptionally scarce. This week, prices delivered in Europe (API2), for example, surged to record levels of $280 per tonne, a more than 300% increase since the start of the year and 25% higher than the peak of 2008. Prices for thermal coal here were in part dragged up by surging gas costs. In Europe, benchmark LNG prices also turned parabolic this week, with near-term futures touching a high of €155 per MWh, translating to a 657% gain YTD.
However prices dramatically corrected downwards yesterday on news of imminent increased Russian supply. At the time of writing, futures have swung below €100 per MWh. This appears to have put a dent in Coal prices in the region too, which slumped to $190 per tonne earlier today and have since stabilised around $214.
Still, despite these wild moves, prices are such that coal-fired power generators here have been strongly incentivised to increase utilisation rates and import more coal where possible. Europe’s imports were up by 34% YoY in Q3, reaching 11.6m tonnes, and there is scope for this to grow if generating capacity can be found.
Amid peak gas prices this week, the cost of generating electricity from coal was as much as 50% cheaper versus using gas, accounting for the cost of burning the former under the EU emissions trading scheme. Given the extent of coal power capacity cuts in Europe over the last few years however, there is likely a ceiling to how far imports can rebound, but the shortage here is just one facet to how coal is driving freight.
CHINA GETTING TIGHTER
As we have written for much of this year, China has been facing extremely high coal prices due to its import quotas, the ban on Australian supply, COVID-related restrictions on overland imports and shortfalls in domestic supply. But in recent weeks the situation has deteriorated and end-users are scrambling for material. Inventories at China’s power stations currently translate to eleven days of supply, the lowest this metric has been in five years, while power supply for energy-intensive industries, such as cement and fertiliser production, has been rationed.
Despite the official ban on Australian cargoes still being in place, China’s total coal imports over Q3 surged by 47% YoY to 27.2m tonnes, buoyed by a surge in volumes from nearby suppliers Indonesia and Russia. But these volumes have not been able to satisfy demand, especially for higher-grade material. As a result, we’ve also seen a jump in imports from further afield, such the US, volumes of which were up almost seven-fold YoY in Q3 at 1.2m tonnes. Imports from Canada, Colombia and Mozambique were also up by 74%, 189% and 341% YoY respectively. And even more indicative of scarce supply is, this week we heard of coal from Kazakhstan being shipped to China in a Cape (via Russia).
The upshot of this shake-up is that average Cape employment per tonne of coal shipped increased by about 4% in Q3 versus the same period last year. The dislocation of the fleet caused by these trends has meant that Capes are on average ballasting 6% longer for coal cargoes versus before the pandemic.
INDIA TOO
More recently, India has joined the ranks of countries experiencing fuel shortages, helping to propel coal prices higher. Coal India, the country’s state-owned producer that accounts for about 80% of the country’s output has seen its operations throttled by flooding, while Indian power demand is resurging from the pandemic lows. At the same time, imports, which typically satisfy about a quarter of India’s demand have dipped over the last couple of months because of the surge in prices. With many utilities locked into long-term energy supply contracts at fixed prices, their purchases on the seaborne market are extremely price-sensitive.
In the longer-term, a recovery in domestic output and the winter slowdown in power demand will likely ease shortages, but with short-term domestic supply becoming extremely tight, the government may act to bolster imported volumes. Based on the latest government reports, 80% of Indian coal power stations are operating at ‘critical’ or ‘super-critical’ levels of inventories, meaning their stocks are below 3 to 9 days of supply, depending how far the utility is from a coal mine.
FREIGHT
Amid this coal rush, freight rates have also surged for the larger bulk carriers, with Capesize utilisation rates now at the extremely high levels that the geared ships have been at for the last few months. The bump in demand has come on top of healthy volumes of iron ore shipments in both basins and continued congestion issues in China, which are currently sapping about 6.6% of Capesize supply. Headlines were made this week when average Cape earnings surged to $86,870 per day, levels last seen in 2009, and with rates in exponential territory, a push above the $100,000 mark is not out of the question.
Naturally the FFA market has also seen a frenzy of buying activity, though prices have wobbled over the last two days amid the extreme volatility in energy markets. October Capesize futures surged by $22,000 in the space of a week to over $80,000 on Wednesday, before easing back to $73,500 at the time of writing. Meanwhile, deferred contracts for calendar-year 2022 jumped by 12.5% WoW to $29,500, more than twice what they were trading at in January, before being knocked back down to $27,000.
Looking forward, demand for coal is likely to remain strong as winter approaches in the northern hemisphere, but it remains to be seen how much additional seaborne supply can be found. If more cargoes do emerge from smaller exporters they will continue to have a disproportionate effect on the Cape market and could push rates higher. If North American exporters, for example, can bring more supply to the water and take advantage of high prices, they could potentially insulate the market from a slowdown in iron ore shipments during the Brazilian rainy season later in the year. Per tonne of cargo, coal shipments from the US to China generate 87% more Capesize employment versus those from Russia, and 159% more than shipments from Indonesia. Similarly, if China can coax more supply out of South Africa, these volumes could peel some more ships away from the Brazil ballaster list, and help to tighten the Atlantic Market.
Source: Break Wave Advisors
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Wednesday, 20 October 21
MARKET INSIGHT - INTERMODAL
IMO 2020, Ballast Water Treatment regulations, Green Recycling, GHG emissions, EEXI, CII, ETS, Fit for 55, Carbon price/levy, the Poseidon Principl ...
Tuesday, 19 October 21
SPONGE IRON SECTOR MIGHT REPORT NEGATIVE GROWTH DUE TO COAL CRISIS: SIMA - PTI
The domestic sponge iron industry might report a negative growth in the ongoing December quarter “if the shortage of coal is allowed to conti ...
Tuesday, 19 October 21
COAL INDIA, THE FALL GUY FOR POWER CRISIS - INDIA EXPRESS
The post-Covid economic recovery has led to a major increase in the demand for power, both in India and globally. In India, coal-based power plants ...
Saturday, 16 October 21
SOLAR INSTALLATION SURGE PUTS INDIA ON TRACK TO CAP COAL-FIRED POWER AS EARLY AS 2024 - IEEFA
Recent increase in solar power installations could push coal to peak sooner than expected
If India keeps installing solar capacity a ...
Saturday, 16 October 21
DESPITE HIGHER COAL PRICES, U.S. COAL RECOVERY LOOKS WEAK BY MOST MEASURES - IEEFA
U.S. coal sector is locked into a long-term sectoral decline
Coal prices have surged to the highest level in years in the U.S., and have soare ...
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- Electricity Generating Authority of Thailand
- Iligan Light & Power Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- Baramulti Group, Indonesia
- Anglo American - United Kingdom
- Deloitte Consulting - India
- Thai Mozambique Logistica
- San Jose City I Power Corp, Philippines
- CNBM International Corporation - China
- Siam City Cement - Thailand
- Straits Asia Resources Limited - Singapore
- Electricity Authority, New Zealand
- Bayan Resources Tbk. - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Parliament of New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Port Waratah Coal Services - Australia
- McConnell Dowell - Australia
- Semirara Mining Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- Commonwealth Bank - Australia
- Indian Oil Corporation Limited
- Kohat Cement Company Ltd. - Pakistan
- The Treasury - Australian Government
- Romanian Commodities Exchange
- South Luzon Thermal Energy Corporation
- Grasim Industreis Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Sree Jayajothi Cements Limited - India
- Australian Coal Association
- Coalindo Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- New Zealand Coal & Carbon
- Oldendorff Carriers - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Rashtriya Ispat Nigam Limited - India
- Ind-Barath Power Infra Limited - India
- Planning Commission, India
- Maheswari Brothers Coal Limited - India
- Medco Energi Mining Internasional
- London Commodity Brokers - England
- Orica Mining Services - Indonesia
- OPG Power Generation Pvt Ltd - India
- Tata Chemicals Ltd - India
- SMG Consultants - Indonesia
- ICICI Bank Limited - India
- Carbofer General Trading SA - India
- India Bulls Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- ASAPP Information Group - India
- Karbindo Abesyapradhi - Indoneisa
- Aboitiz Power Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Krishnapatnam Port Company Ltd. - India
- GVK Power & Infra Limited - India
- Tamil Nadu electricity Board
- Bangladesh Power Developement Board
- Bukit Makmur.PT - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Minerals Council of Australia
- Mercuria Energy - Indonesia
- Chamber of Mines of South Africa
- Kalimantan Lumbung Energi - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- AsiaOL BioFuels Corp., Philippines
- Ministry of Transport, Egypt
- Sical Logistics Limited - India
- Barasentosa Lestari - Indonesia
- Indogreen Group - Indonesia
- Globalindo Alam Lestari - Indonesia
- LBH Netherlands Bv - Netherlands
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Parry Sugars Refinery, India
- Indian Energy Exchange, India
- Ministry of Finance - Indonesia
- Therma Luzon, Inc, Philippines
- Dalmia Cement Bharat India
- Central Java Power - Indonesia
- Star Paper Mills Limited - India
- International Coal Ventures Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Sarangani Energy Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Petron Corporation, Philippines
- Goldman Sachs - Singapore
- Meenaskhi Energy Private Limited - India
- CIMB Investment Bank - Malaysia
- Economic Council, Georgia
- Indonesian Coal Mining Association
- Karaikal Port Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Salva Resources Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Bulk Trading Sa - Switzerland
- Sakthi Sugars Limited - India
- Trasteel International SA, Italy
- Meralco Power Generation, Philippines
- Simpson Spence & Young - Indonesia
- Xindia Steels Limited - India
- Semirara Mining and Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Makarim & Taira - Indonesia
- SMC Global Power, Philippines
- Alfred C Toepfer International GmbH - Germany
- Directorate Of Revenue Intelligence - India
- Global Green Power PLC Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Energy Link Ltd, New Zealand
- Banpu Public Company Limited - Thailand
- Cigading International Bulk Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Bhushan Steel Limited - India
- Interocean Group of Companies - India
- Global Business Power Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Eastern Energy - Thailand
- Independent Power Producers Association of India
- Thiess Contractors Indonesia
- Bharathi Cement Corporation - India
- IHS Mccloskey Coal Group - USA
- Indo Tambangraya Megah - Indonesia
- Mjunction Services Limited - India
- Videocon Industries ltd - India
- TeaM Sual Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Wood Mackenzie - Singapore
- Mercator Lines Limited - India
- Standard Chartered Bank - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sinarmas Energy and Mining - Indonesia
- Mintek Dendrill Indonesia
- Coastal Gujarat Power Limited - India
- Sindya Power Generating Company Private Ltd
- Vizag Seaport Private Limited - India
- Orica Australia Pty. Ltd.
- Australian Commodity Traders Exchange
- Bukit Baiduri Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Latin American Coal - Colombia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GMR Energy Limited - India
- The State Trading Corporation of India Ltd
- Miang Besar Coal Terminal - Indonesia
- Vedanta Resources Plc - India
- Larsen & Toubro Limited - India
- Jaiprakash Power Ventures ltd
- Kumho Petrochemical, South Korea
- Bhatia International Limited - India
- Energy Development Corp, Philippines
- Heidelberg Cement - Germany
- Attock Cement Pakistan Limited
- Timah Investasi Mineral - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Renaissance Capital - South Africa
- Samtan Co., Ltd - South Korea
- Bhoruka Overseas - Indonesia
- PTC India Limited - India
- Merrill Lynch Commodities Europe
- Chettinad Cement Corporation Ltd - India
- Malabar Cements Ltd - India
- Madhucon Powers Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Binh Thuan Hamico - Vietnam
- Billiton Holdings Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- MS Steel International - UAE
- Ministry of Mines - Canada
- Kaltim Prima Coal - Indonesia
- IEA Clean Coal Centre - UK
- Savvy Resources Ltd - HongKong
- Edison Trading Spa - Italy
- Borneo Indobara - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Formosa Plastics Group - Taiwan
- Power Finance Corporation Ltd., India
- Riau Bara Harum - Indonesia
- PNOC Exploration Corporation - Philippines
- Coal and Oil Company - UAE
- Antam Resourcindo - Indonesia
- Ambuja Cements Ltd - India
- Georgia Ports Authority, United States
- Vijayanagar Sugar Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Altura Mining Limited, Indonesia
- Kideco Jaya Agung - Indonesia
- European Bulk Services B.V. - Netherlands
- Central Electricity Authority - India
- Singapore Mercantile Exchange
- Aditya Birla Group - India
- PetroVietnam Power Coal Import and Supply Company
- Jorong Barutama Greston.PT - Indonesia
- Sojitz Corporation - Japan
- VISA Power Limited - India
- Wilmar Investment Holdings
- TNB Fuel Sdn Bhd - Malaysia
- Pendopo Energi Batubara - Indonesia
- Indika Energy - Indonesia
- Rio Tinto Coal - Australia
- Africa Commodities Group - South Africa
- Agrawal Coal Company - India
- Uttam Galva Steels Limited - India
- Gujarat Sidhee Cement - India
- Cement Manufacturers Association - India
- Manunggal Multi Energi - Indonesia
- PowerSource Philippines DevCo
- Kartika Selabumi Mining - Indonesia
- Eastern Coal Council - USA
- Kapuas Tunggal Persada - Indonesia
- Marubeni Corporation - India
- White Energy Company Limited
- Posco Energy - South Korea
- The University of Queensland
- Lanco Infratech Ltd - India
- Kobexindo Tractors - Indoneisa
- Price Waterhouse Coopers - Russia
- Metalloyd Limited - United Kingdom
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