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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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- GAC Shipping (India) Pvt Ltd
- Holcim Trading Pte Ltd - Singapore
- Ambuja Cements Ltd - India
- Eastern Coal Council - USA
- India Bulls Power Limited - India
- MS Steel International - UAE
- McConnell Dowell - Australia
- SN Aboitiz Power Inc, Philippines
- SMG Consultants - Indonesia
- Ind-Barath Power Infra Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Meralco Power Generation, Philippines
- IHS Mccloskey Coal Group - USA
- Interocean Group of Companies - India
- Binh Thuan Hamico - Vietnam
- Mercuria Energy - Indonesia
- GVK Power & Infra Limited - India
- Makarim & Taira - Indonesia
- Iligan Light & Power Inc, Philippines
- Electricity Authority, New Zealand
- TNB Fuel Sdn Bhd - Malaysia
- Baramulti Group, Indonesia
- Pendopo Energi Batubara - Indonesia
- Bhatia International Limited - India
- Therma Luzon, Inc, Philippines
- Medco Energi Mining Internasional
- Siam City Cement - Thailand
- Indika Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Oldendorff Carriers - Singapore
- Latin American Coal - Colombia
- Karaikal Port Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Orica Australia Pty. Ltd.
- Miang Besar Coal Terminal - Indonesia
- Parry Sugars Refinery, India
- Romanian Commodities Exchange
- Directorate Of Revenue Intelligence - India
- Simpson Spence & Young - Indonesia
- European Bulk Services B.V. - Netherlands
- Toyota Tsusho Corporation, Japan
- Orica Mining Services - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Manunggal Multi Energi - Indonesia
- Bukit Baiduri Energy - Indonesia
- Sindya Power Generating Company Private Ltd
- Ministry of Transport, Egypt
- Formosa Plastics Group - Taiwan
- Indonesian Coal Mining Association
- Lanco Infratech Ltd - India
- Vedanta Resources Plc - India
- Merrill Lynch Commodities Europe
- Ministry of Mines - Canada
- Gujarat Sidhee Cement - India
- Global Coal Blending Company Limited - Australia
- Goldman Sachs - Singapore
- Jorong Barutama Greston.PT - Indonesia
- The Treasury - Australian Government
- Straits Asia Resources Limited - Singapore
- Thiess Contractors Indonesia
- Central Java Power - Indonesia
- Independent Power Producers Association of India
- Thai Mozambique Logistica
- Madhucon Powers Ltd - India
- Electricity Generating Authority of Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Uttam Galva Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- OPG Power Generation Pvt Ltd - India
- Petron Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Agrawal Coal Company - India
- Global Green Power PLC Corporation, Philippines
- Bharathi Cement Corporation - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Central Electricity Authority - India
- Intertek Mineral Services - Indonesia
- Sakthi Sugars Limited - India
- Renaissance Capital - South Africa
- Jindal Steel & Power Ltd - India
- Xindia Steels Limited - India
- Chettinad Cement Corporation Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Meenaskhi Energy Private Limited - India
- Sojitz Corporation - Japan
- The University of Queensland
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bhoruka Overseas - Indonesia
- Tata Chemicals Ltd - India
- Aditya Birla Group - India
- Star Paper Mills Limited - India
- VISA Power Limited - India
- Semirara Mining and Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- Salva Resources Pvt Ltd - India
- Australian Coal Association
- Indogreen Group - Indonesia
- Marubeni Corporation - India
- Mintek Dendrill Indonesia
- New Zealand Coal & Carbon
- AsiaOL BioFuels Corp., Philippines
- Attock Cement Pakistan Limited
- PNOC Exploration Corporation - Philippines
- Videocon Industries ltd - India
- Banpu Public Company Limited - Thailand
- Altura Mining Limited, Indonesia
- Kumho Petrochemical, South Korea
- IEA Clean Coal Centre - UK
- Bukit Asam (Persero) Tbk - Indonesia
- Wilmar Investment Holdings
- Energy Development Corp, Philippines
- Grasim Industreis Ltd - India
- Jaiprakash Power Ventures ltd
- Planning Commission, India
- Dalmia Cement Bharat India
- PTC India Limited - India
- Deloitte Consulting - India
- Cement Manufacturers Association - India
- Billiton Holdings Pty Ltd - Australia
- Kaltim Prima Coal - Indonesia
- PowerSource Philippines DevCo
- Kartika Selabumi Mining - Indonesia
- Metalloyd Limited - United Kingdom
- Economic Council, Georgia
- Kalimantan Lumbung Energi - Indonesia
- TeaM Sual Corporation - Philippines
- LBH Netherlands Bv - Netherlands
- Borneo Indobara - Indonesia
- Singapore Mercantile Exchange
- Gujarat Mineral Development Corp Ltd - India
- Mjunction Services Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Price Waterhouse Coopers - Russia
- Maharashtra Electricity Regulatory Commission - India
- Kobexindo Tractors - Indoneisa
- Cigading International Bulk Terminal - Indonesia
- Riau Bara Harum - Indonesia
- Savvy Resources Ltd - HongKong
- San Jose City I Power Corp, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Barasentosa Lestari - Indonesia
- Coalindo Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- International Coal Ventures Pvt Ltd - India
- Coal and Oil Company - UAE
- Heidelberg Cement - Germany
- London Commodity Brokers - England
- Georgia Ports Authority, United States
- Aboitiz Power Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Chamber of Mines of South Africa
- Leighton Contractors Pty Ltd - Australia
- Malabar Cements Ltd - India
- Bangladesh Power Developement Board
- Tamil Nadu electricity Board
- Larsen & Toubro Limited - India
- Mercator Lines Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- CIMB Investment Bank - Malaysia
- Minerals Council of Australia
- Wood Mackenzie - Singapore
- Sree Jayajothi Cements Limited - India
- Ministry of Finance - Indonesia
- Parliament of New Zealand
- Power Finance Corporation Ltd., India
- Indian Oil Corporation Limited
- Alfred C Toepfer International GmbH - Germany
- Energy Link Ltd, New Zealand
- Sical Logistics Limited - India
- Edison Trading Spa - Italy
- Ceylon Electricity Board - Sri Lanka
- Rashtriya Ispat Nigam Limited - India
- Vizag Seaport Private Limited - India
- Siam City Cement PLC, Thailand
- Rio Tinto Coal - Australia
- Krishnapatnam Port Company Ltd. - India
- Bhushan Steel Limited - India
- Posco Energy - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- The State Trading Corporation of India Ltd
- Australian Commodity Traders Exchange
- Port Waratah Coal Services - Australia
- CNBM International Corporation - China
- ASAPP Information Group - India
- Coastal Gujarat Power Limited - India
- White Energy Company Limited
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Globalindo Alam Lestari - Indonesia
- Indo Tambangraya Megah - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indian Energy Exchange, India
- Commonwealth Bank - Australia
- Trasteel International SA, Italy
- Neyveli Lignite Corporation Ltd, - India
- Global Business Power Corporation, Philippines
- GMR Energy Limited - India
- Sarangani Energy Corporation, Philippines
- ICICI Bank Limited - India
- Antam Resourcindo - Indonesia
- Maheswari Brothers Coal Limited - India
- Anglo American - United Kingdom
- Africa Commodities Group - South Africa
- Bukit Makmur.PT - Indonesia
- Kideco Jaya Agung - Indonesia
- Standard Chartered Bank - UAE
- Carbofer General Trading SA - India
- Kapuas Tunggal Persada - Indonesia
- SMC Global Power, Philippines
- Bulk Trading Sa - Switzerland
- Essar Steel Hazira Ltd - India
- Eastern Energy - Thailand
- Kepco SPC Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Karbindo Abesyapradhi - Indoneisa
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