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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, 21 January 21
LNG MARKET RIDING HIGH, BUT WILL THE GAINS CONTINUE? - DREWRY
The LNG market started 2021 on a high note with Asian spot prices crossing $30 per MMBtu while LNG shipping rates recorded a high $350k per day due ...
Thursday, 21 January 21
CHINA'S SPOT THERMAL COAL PRICES REFRESH RECORD HIGH - MYSTEEL
Despite the moderate rebound in temperatures across most regions of China after late December’s deep-freeze, thermal coal prices in the count ...
Wednesday, 20 January 21
CORONAVIRUS OUTBREAK IN HEBEI HAS LIMITED IMPACT ON CHINA'S STEEL INDUSTRY - FITCH RATINGS
The recent Covid-19 outbreak in the steel producing hub Hebei will not have material impact on China’s steel industry, Fitch Ratings says.
...
Wednesday, 20 January 21
MARKET INSIGHT - INTERMODAL
While 2020 is finally behind us, its negative impacts are still hovering over the shipping market. That being said, it is still too early to even s ...
Saturday, 16 January 21
SEABORNE TRADE IN STEAM COAL DECREASED BY 11.6% FROM 937 MILLION TONNES IN 2019 TO 828 MILLION TONNES IN 2020 - COAL IMPORTERS ASSOCIATION, GERMANY
According to preliminary calculations by the German Coal Importers Association (Verein der Kohlenimporteure e. V.), global hard coal production dec ...
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- Anglo American - United Kingdom
- Globalindo Alam Lestari - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Pendopo Energi Batubara - Indonesia
- Siam City Cement PLC, Thailand
- Gujarat Mineral Development Corp Ltd - India
- London Commodity Brokers - England
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Makarim & Taira - Indonesia
- Indian Energy Exchange, India
- Barasentosa Lestari - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Singapore Mercantile Exchange
- Meenaskhi Energy Private Limited - India
- GAC Shipping (India) Pvt Ltd
- PNOC Exploration Corporation - Philippines
- Mintek Dendrill Indonesia
- Merrill Lynch Commodities Europe
- Bangladesh Power Developement Board
- Ministry of Finance - Indonesia
- Larsen & Toubro Limited - India
- Price Waterhouse Coopers - Russia
- Baramulti Group, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- Salva Resources Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Eastern Coal Council - USA
- Australian Commodity Traders Exchange
- Indika Energy - Indonesia
- Tata Chemicals Ltd - India
- Bharathi Cement Corporation - India
- Miang Besar Coal Terminal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Indogreen Group - Indonesia
- International Coal Ventures Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- PTC India Limited - India
- ASAPP Information Group - India
- Energy Development Corp, Philippines
- SMC Global Power, Philippines
- AsiaOL BioFuels Corp., Philippines
- Bukit Baiduri Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Madhucon Powers Ltd - India
- SMG Consultants - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Xindia Steels Limited - India
- Global Business Power Corporation, Philippines
- Wood Mackenzie - Singapore
- San Jose City I Power Corp, Philippines
- Antam Resourcindo - Indonesia
- Bhatia International Limited - India
- Directorate Of Revenue Intelligence - India
- Indonesian Coal Mining Association
- Therma Luzon, Inc, Philippines
- Thai Mozambique Logistica
- McConnell Dowell - Australia
- White Energy Company Limited
- Goldman Sachs - Singapore
- Mjunction Services Limited - India
- Formosa Plastics Group - Taiwan
- Parliament of New Zealand
- Karaikal Port Pvt Ltd - India
- India Bulls Power Limited - India
- Dalmia Cement Bharat India
- PetroVietnam Power Coal Import and Supply Company
- Global Coal Blending Company Limited - Australia
- Star Paper Mills Limited - India
- Petron Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Essar Steel Hazira Ltd - India
- Australian Coal Association
- Central Java Power - Indonesia
- Central Electricity Authority - India
- Banpu Public Company Limited - Thailand
- Meralco Power Generation, Philippines
- Straits Asia Resources Limited - Singapore
- Electricity Generating Authority of Thailand
- Carbofer General Trading SA - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Iligan Light & Power Inc, Philippines
- Power Finance Corporation Ltd., India
- Commonwealth Bank - Australia
- Global Green Power PLC Corporation, Philippines
- Coastal Gujarat Power Limited - India
- New Zealand Coal & Carbon
- Jorong Barutama Greston.PT - Indonesia
- Medco Energi Mining Internasional
- Tamil Nadu electricity Board
- PowerSource Philippines DevCo
- The University of Queensland
- Oldendorff Carriers - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Africa Commodities Group - South Africa
- Coal and Oil Company - UAE
- Vedanta Resources Plc - India
- Trasteel International SA, Italy
- Eastern Energy - Thailand
- Bukit Makmur.PT - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Kobexindo Tractors - Indoneisa
- Port Waratah Coal Services - Australia
- Planning Commission, India
- Bukit Asam (Persero) Tbk - Indonesia
- Manunggal Multi Energi - Indonesia
- Aditya Birla Group - India
- Renaissance Capital - South Africa
- Kepco SPC Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Romanian Commodities Exchange
- Asmin Koalindo Tuhup - Indonesia
- Jaiprakash Power Ventures ltd
- Aboitiz Power Corporation - Philippines
- IEA Clean Coal Centre - UK
- Kumho Petrochemical, South Korea
- Maheswari Brothers Coal Limited - India
- Sindya Power Generating Company Private Ltd
- Indo Tambangraya Megah - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- The State Trading Corporation of India Ltd
- Metalloyd Limited - United Kingdom
- Sical Logistics Limited - India
- Electricity Authority, New Zealand
- Wilmar Investment Holdings
- Uttam Galva Steels Limited - India
- Interocean Group of Companies - India
- Chamber of Mines of South Africa
- Ambuja Cements Ltd - India
- Posco Energy - South Korea
- Vizag Seaport Private Limited - India
- Energy Link Ltd, New Zealand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bulk Trading Sa - Switzerland
- Videocon Industries ltd - India
- Semirara Mining Corp, Philippines
- Sarangani Energy Corporation, Philippines
- TeaM Sual Corporation - Philippines
- OPG Power Generation Pvt Ltd - India
- Mercator Lines Limited - India
- Kaltim Prima Coal - Indonesia
- Lanco Infratech Ltd - India
- ICICI Bank Limited - India
- Kapuas Tunggal Persada - Indonesia
- GVK Power & Infra Limited - India
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement - Thailand
- Ministry of Transport, Egypt
- Ceylon Electricity Board - Sri Lanka
- Directorate General of MIneral and Coal - Indonesia
- Riau Bara Harum - Indonesia
- IHS Mccloskey Coal Group - USA
- VISA Power Limited - India
- Heidelberg Cement - Germany
- Sakthi Sugars Limited - India
- Chettinad Cement Corporation Ltd - India
- Malabar Cements Ltd - India
- Krishnapatnam Port Company Ltd. - India
- TNB Fuel Sdn Bhd - Malaysia
- Neyveli Lignite Corporation Ltd, - India
- LBH Netherlands Bv - Netherlands
- Independent Power Producers Association of India
- Jindal Steel & Power Ltd - India
- CIMB Investment Bank - Malaysia
- Kideco Jaya Agung - Indonesia
- Georgia Ports Authority, United States
- Orica Australia Pty. Ltd.
- Cigading International Bulk Terminal - Indonesia
- Savvy Resources Ltd - HongKong
- Latin American Coal - Colombia
- Borneo Indobara - Indonesia
- Indian Oil Corporation Limited
- Simpson Spence & Young - Indonesia
- GMR Energy Limited - India
- Agrawal Coal Company - India
- Mercuria Energy - Indonesia
- Grasim Industreis Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Karbindo Abesyapradhi - Indoneisa
- Standard Chartered Bank - UAE
- Altura Mining Limited, Indonesia
- Gujarat Sidhee Cement - India
- Toyota Tsusho Corporation, Japan
- The Treasury - Australian Government
- Billiton Holdings Pty Ltd - Australia
- Parry Sugars Refinery, India
- Coalindo Energy - Indonesia
- Orica Mining Services - Indonesia
- Ind-Barath Power Infra Limited - India
- Rio Tinto Coal - Australia
- Edison Trading Spa - Italy
- SN Aboitiz Power Inc, Philippines
- MS Steel International - UAE
- Intertek Mineral Services - Indonesia
- Timah Investasi Mineral - Indoneisa
- Sinarmas Energy and Mining - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Cement Manufacturers Association - India
- Thiess Contractors Indonesia
- Deloitte Consulting - India
- Sree Jayajothi Cements Limited - India
- European Bulk Services B.V. - Netherlands
- Bhushan Steel Limited - India
- Binh Thuan Hamico - Vietnam
- Sojitz Corporation - Japan
- Attock Cement Pakistan Limited
- CNBM International Corporation - China
- Vijayanagar Sugar Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Minerals Council of Australia
- Economic Council, Georgia
- Bahari Cakrawala Sebuku - Indonesia
- Kartika Selabumi Mining - Indonesia
- Ministry of Mines - Canada
- Maharashtra Electricity Regulatory Commission - India
- Marubeni Corporation - India
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