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Friday, 21 May 21
MARKET INSIGHT - INTERMODAL
 The dry bulk market’s counter seasonal surge so far into the first half of the year -in a sort of 2010 manner - and Capesize’s recent retreat from almost 11-year highs is raising the question whether a counter seasonal market drop is in the cards during the 2H of the year in the context of a broader market upcycle.
While the market is multi-factorial with fundamentals, sentiment and inter-freight correlation amongst sizes feeding one another, the current Cape market correction was exacerbated after Chinese authorities intervened to curb iron ore price speculation. A subsequent sharp reversal of iron ore and steel prices from record highs and FFAs selling off contributed to pulling the Cape market lower, while the smaller segments were unaffected. It is well known that Capesize is characterized by the highest freight volatility and even though that we expect volatility to keep up, we are not convinced that this is the turning point for a prolonged market correction. Fundamentals are likely to outlast volatility and we cannot exclude that the next leg higher will find a much higher peak over the next two quarters with cargo export seasonality emerging stronger across all commodities and particularly iron ore.
Iron Ore exports to accelerate in 2H2021; the urge for higher quality iron ore is likely to intensify: China’s iron ore inventories have been destocked by more than 8.0 million tons over the past month amid elevated demand and major iron ore miners running behind their export guidance, likely to trigger a new restocking wave. Forward iron ore prices on the curve, even if spot iron ore prices softened from here, incentivize iron ore miners to accelerate exports during the 2H2021.
So far, China’s emissions regulations on steel production were unsuccessful in containing it. Record high steel mills margins incentivized higher steel production ex. strictly regulated Tangshan with YTD Jan-Apr crude steel production up +15.6% y-o-y. If steel production controls intensify during the second half, this will further increase demand for high quality iron ore, in order to optimize the steel process. In addition, the scrap scramble from steel mills outside China could put a lid on China’s increasing scrap usage in the steel mix in the short term.
Macro indicators continue to be bullish for dry bulk demand in the next quarters: China’s Property new starts - a leading indicator of steel demand – have increased +19.0% YTD in 2021, while April’s y-o-y growth slowed down at +9.3% y-o-y. Any slow down in the growth of new floor space under construction will not immediately translate into lower steel and iron ore demand; developers are likely to accelerate property completions from now on continuing to drive demand.
Other than China, global steel production and demand conditions are robust, reflected by record high steel prices both in the US and Europe. Spot and forward steel prices have surged, giving steel mills the opportunity to hedge at profitable levels, therefore global steel production will continue to expand.
Global manufacturing PMIs are at 10 year cycle highs, despite having softened during April and lead demand for commodities. Oil prices have been lagging the rise in other commodities and are projected to increase significantly over the next two quarters, which could provide further support to the dry bulk market via - and not limited to - the bunker-$ per ton freight- speed relation. Fundamentals of other dry bulk commodities are also robust, with electricity generation set to accelerate over the summer in addition to increased industrial production, while China’s domestic coal production is underperforming amid mine safety checks.
Early signs of credit tightening: Following a record high stimulus over the previous year, latest credit growth figures in China indicate a slow-down in credit supply during April, however as long as inflation at the producers level accelerates the tightening impact is muted in our view. China’s potential deleveraging from here should not be expected to have a negative effect on dry bulk commodities demand, until credit tightening starts to interfere with producers’ profit margins.
Last but not least, China’s political tension with Australia is more likely to translate into higher ton-miles in the medium term, with Atlantic production of high-quality iron ore and coal substituting for any potential loss of Australia’s market share. In the longer term, China’s 14th year plan that calls for an increase of electric arc furnaces (scrap) in steel production to 15-20% by 2025 and self sufficiency share of iron ore above 45% will certainly have an impact in the way iron ore is procured with China having higher control over both supply and iron ore prices.
by Tamara Apostolou,
Research Analyst
Compiled by:
Intermodal Research & Valuations
Analysts:
Ms Eva Tzima
Mr.George Panagopoulos
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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Thursday, 25 March 21
'OMNIBUS LAW' REGULATION ON INDONESIA’S ENERGY AND MINING SECTORS TO BOOST COAL PROCESSING BUT ALSO RAISES QUESTIONS - ABNR
February 2021 saw the issuance of a raft of new government regulations to give effect to the reformist Job Creation Law (colloquially known as the ...
Thursday, 25 March 21
PROPOSED SWITCH FROM COAL TO LNG THREATENS RENEWABLE ENERGY DEVELOPMENT IN ASIA - IEEFA
Renewables offer an ever cheaper, financially sustainable and energy secure alternative, better able to support developing nations
A ...
Thursday, 25 March 21
MAJOR INVESTMENT ADVISORS BLACKROCK AND MEKETA PROVIDE A FIDUCIARY PATH THROUGH THE ENERGY TRANSITION - IEEFA
BlackRock and Meketa say divestment from fossil fuels improves, not weakens, investment returns
Two major financial management firms ...
Thursday, 25 March 21
EUROPE PASSES MILESTONE WITH HALF OF COAL PLANTS CLOSED OR SET TO RETIRE BY 2030 - EURACTIV
Half of Europe’s 324 coal-fueled power plants have either closed or announced a retirement date before 2030, it emerged on Monday (22 March) ...
Wednesday, 24 March 21
MARKET INSIGHT - INTERMODAL
Since the start of the pandemic, the shipping industry has efficiently responded to ensure the continuity of operations and hence the security of s ...
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- GVK Power & Infra Limited - India
- Sical Logistics Limited - India
- Central Electricity Authority - India
- European Bulk Services B.V. - Netherlands
- Ministry of Mines - Canada
- Timah Investasi Mineral - Indoneisa
- Madhucon Powers Ltd - India
- Bukit Baiduri Energy - Indonesia
- Rio Tinto Coal - Australia
- Therma Luzon, Inc, Philippines
- IHS Mccloskey Coal Group - USA
- Vedanta Resources Plc - India
- CNBM International Corporation - China
- Maheswari Brothers Coal Limited - India
- Posco Energy - South Korea
- Kohat Cement Company Ltd. - Pakistan
- White Energy Company Limited
- Alfred C Toepfer International GmbH - Germany
- Salva Resources Pvt Ltd - India
- Sakthi Sugars Limited - India
- Mintek Dendrill Indonesia
- Ambuja Cements Ltd - India
- New Zealand Coal & Carbon
- Metalloyd Limited - United Kingdom
- Bhoruka Overseas - Indonesia
- Kideco Jaya Agung - Indonesia
- Mercuria Energy - Indonesia
- Videocon Industries ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- South Luzon Thermal Energy Corporation
- MS Steel International - UAE
- Makarim & Taira - Indonesia
- Attock Cement Pakistan Limited
- PTC India Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Marubeni Corporation - India
- Meenaskhi Energy Private Limited - India
- Port Waratah Coal Services - Australia
- Ministry of Finance - Indonesia
- Interocean Group of Companies - India
- Mjunction Services Limited - India
- Global Business Power Corporation, Philippines
- Baramulti Group, Indonesia
- Eastern Energy - Thailand
- Planning Commission, India
- Bayan Resources Tbk. - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Aboitiz Power Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- SMC Global Power, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Grasim Industreis Ltd - India
- CIMB Investment Bank - Malaysia
- Singapore Mercantile Exchange
- Economic Council, Georgia
- Petrochimia International Co. Ltd.- Taiwan
- Africa Commodities Group - South Africa
- AsiaOL BioFuels Corp., Philippines
- Wilmar Investment Holdings
- Sarangani Energy Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Sree Jayajothi Cements Limited - India
- Oldendorff Carriers - Singapore
- Kepco SPC Power Corporation, Philippines
- Commonwealth Bank - Australia
- London Commodity Brokers - England
- Karaikal Port Pvt Ltd - India
- The University of Queensland
- Rashtriya Ispat Nigam Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Jaiprakash Power Ventures ltd
- Iligan Light & Power Inc, Philippines
- SMG Consultants - Indonesia
- Cement Manufacturers Association - India
- Savvy Resources Ltd - HongKong
- Banpu Public Company Limited - Thailand
- Leighton Contractors Pty Ltd - Australia
- Semirara Mining Corp, Philippines
- Agrawal Coal Company - India
- Petron Corporation, Philippines
- ASAPP Information Group - India
- Formosa Plastics Group - Taiwan
- VISA Power Limited - India
- Intertek Mineral Services - Indonesia
- Electricity Authority, New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Gujarat Mineral Development Corp Ltd - India
- Indonesian Coal Mining Association
- SN Aboitiz Power Inc, Philippines
- Orica Australia Pty. Ltd.
- IEA Clean Coal Centre - UK
- Anglo American - United Kingdom
- TNB Fuel Sdn Bhd - Malaysia
- Siam City Cement - Thailand
- San Jose City I Power Corp, Philippines
- Kartika Selabumi Mining - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Barasentosa Lestari - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Meralco Power Generation, Philippines
- Medco Energi Mining Internasional
- GN Power Mariveles Coal Plant, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Renaissance Capital - South Africa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Borneo Indobara - Indonesia
- Manunggal Multi Energi - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Xindia Steels Limited - India
- Malabar Cements Ltd - India
- Energy Link Ltd, New Zealand
- Dalmia Cement Bharat India
- Edison Trading Spa - Italy
- Minerals Council of Australia
- Vijayanagar Sugar Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- GAC Shipping (India) Pvt Ltd
- Independent Power Producers Association of India
- PowerSource Philippines DevCo
- Standard Chartered Bank - UAE
- Ind-Barath Power Infra Limited - India
- Parry Sugars Refinery, India
- Indogreen Group - Indonesia
- Australian Coal Association
- Bhatia International Limited - India
- GMR Energy Limited - India
- International Coal Ventures Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Chamber of Mines of South Africa
- Globalindo Alam Lestari - Indonesia
- Coal and Oil Company - UAE
- Siam City Cement PLC, Thailand
- Directorate Of Revenue Intelligence - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Altura Mining Limited, Indonesia
- Tata Chemicals Ltd - India
- Simpson Spence & Young - Indonesia
- ICICI Bank Limited - India
- Lanco Infratech Ltd - India
- Coastal Gujarat Power Limited - India
- Parliament of New Zealand
- Kobexindo Tractors - Indoneisa
- Riau Bara Harum - Indonesia
- Vizag Seaport Private Limited - India
- Star Paper Mills Limited - India
- Kaltim Prima Coal - Indonesia
- Uttam Galva Steels Limited - India
- Bukit Makmur.PT - Indonesia
- Deloitte Consulting - India
- Sojitz Corporation - Japan
- TeaM Sual Corporation - Philippines
- Bhushan Steel Limited - India
- Romanian Commodities Exchange
- Toyota Tsusho Corporation, Japan
- PNOC Exploration Corporation - Philippines
- Sindya Power Generating Company Private Ltd
- Price Waterhouse Coopers - Russia
- Kumho Petrochemical, South Korea
- Gujarat Electricity Regulatory Commission - India
- Chettinad Cement Corporation Ltd - India
- India Bulls Power Limited - India
- Indian Energy Exchange, India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Georgia Ports Authority, United States
- Bulk Trading Sa - Switzerland
- Energy Development Corp, Philippines
- Central Java Power - Indonesia
- Jindal Steel & Power Ltd - India
- The State Trading Corporation of India Ltd
- Heidelberg Cement - Germany
- Antam Resourcindo - Indonesia
- Straits Asia Resources Limited - Singapore
- Merrill Lynch Commodities Europe
- Orica Mining Services - Indonesia
- Eastern Coal Council - USA
- Miang Besar Coal Terminal - Indonesia
- Electricity Generating Authority of Thailand
- Tamil Nadu electricity Board
- Coalindo Energy - Indonesia
- Trasteel International SA, Italy
- OPG Power Generation Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Carbofer General Trading SA - India
- LBH Netherlands Bv - Netherlands
- Essar Steel Hazira Ltd - India
- The Treasury - Australian Government
- Karbindo Abesyapradhi - Indoneisa
- Wood Mackenzie - Singapore
- Pendopo Energi Batubara - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Bangladesh Power Developement Board
- Kapuas Tunggal Persada - Indonesia
- Samtan Co., Ltd - South Korea
- Thiess Contractors Indonesia
- McConnell Dowell - Australia
- Cigading International Bulk Terminal - Indonesia
- Indika Energy - Indonesia
- Mercator Lines Limited - India
- Latin American Coal - Colombia
- Ceylon Electricity Board - Sri Lanka
- Goldman Sachs - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Global Coal Blending Company Limited - Australia
- Ministry of Transport, Egypt
- PetroVietnam Power Coal Import and Supply Company
- Bharathi Cement Corporation - India
- Thai Mozambique Logistica
- Billiton Holdings Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- Larsen & Toubro Limited - India
- Global Green Power PLC Corporation, Philippines
- Indian Oil Corporation Limited
- Australian Commodity Traders Exchange
- Aditya Birla Group - India
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