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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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Sunday, 16 April 23
CHINA JUGGLES FOUR MAJOR ECONOMIC CHANGES IN 2023 - WOOD MACKENZIE
Change is afoot in China. Economic growth is slowing, while rising political tensions between China and the US, coupled with global supply chain re ...
Sunday, 16 April 23
CHINA'S MARCH COAL IMPORTS JUMP TO 3-YEAR HIGH - REUTERS
China’s coal imports surged in March to their highest in any month over the past three years as utilities increased purchases on expectations ...
Sunday, 16 April 23
OPEC KEEPS WORLD OIL DEMAND GROWTH OUTLOOK UNCHANGED
The OPEC Reference Basket (ORB) declined in March by $3.43, or 4.2%, m-o-m to average $78.45/b. The ICE Brent first-month contract fell by $4.33, o ...
Sunday, 16 April 23
CHEAPER SPOT LNG PRICES TEMPT SOME ASIAN BUYERS AMID SUPPLY GAINS - REUTERS
Cheaper spot prices for liquefied natural gas (LNG) are luring price-sensitive buyers back in Asia, with China and India recording rising imports i ...
Tuesday, 11 April 23
COAL USE CLIMBS WORLDWIDE DESPITE PROMISES TO SLASH IT - AAP
The burning of coal for electricity, cement, steel and other uses went up in 2022 despite global promises to phase down the fuel that is the bigges ...
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- Central Electricity Authority - India
- Makarim & Taira - Indonesia
- New Zealand Coal & Carbon
- Bhushan Steel Limited - India
- Georgia Ports Authority, United States
- Jaiprakash Power Ventures ltd
- Australian Coal Association
- Sarangani Energy Corporation, Philippines
- Orica Australia Pty. Ltd.
- Gujarat Mineral Development Corp Ltd - India
- India Bulls Power Limited - India
- Global Business Power Corporation, Philippines
- Indonesian Coal Mining Association
- Pendopo Energi Batubara - Indonesia
- Merrill Lynch Commodities Europe
- OPG Power Generation Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Eastern Energy - Thailand
- Malabar Cements Ltd - India
- Vizag Seaport Private Limited - India
- Gujarat Sidhee Cement - India
- Trasteel International SA, Italy
- Electricity Generating Authority of Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Energy Link Ltd, New Zealand
- Ministry of Mines - Canada
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Power Finance Corporation Ltd., India
- Jindal Steel & Power Ltd - India
- Eastern Coal Council - USA
- Vijayanagar Sugar Pvt Ltd - India
- Commonwealth Bank - Australia
- Thiess Contractors Indonesia
- Binh Thuan Hamico - Vietnam
- AsiaOL BioFuels Corp., Philippines
- Bharathi Cement Corporation - India
- Singapore Mercantile Exchange
- Semirara Mining and Power Corporation, Philippines
- Parliament of New Zealand
- Riau Bara Harum - Indonesia
- PNOC Exploration Corporation - Philippines
- Meenaskhi Energy Private Limited - India
- Sical Logistics Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Australian Commodity Traders Exchange
- Wilmar Investment Holdings
- Bahari Cakrawala Sebuku - Indonesia
- Planning Commission, India
- Coastal Gujarat Power Limited - India
- Aditya Birla Group - India
- GAC Shipping (India) Pvt Ltd
- Vedanta Resources Plc - India
- Wood Mackenzie - Singapore
- Coal and Oil Company - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bhatia International Limited - India
- Therma Luzon, Inc, Philippines
- Globalindo Alam Lestari - Indonesia
- Iligan Light & Power Inc, Philippines
- Xindia Steels Limited - India
- Ceylon Electricity Board - Sri Lanka
- European Bulk Services B.V. - Netherlands
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Coal Blending Company Limited - Australia
- Videocon Industries ltd - India
- CNBM International Corporation - China
- Rashtriya Ispat Nigam Limited - India
- IHS Mccloskey Coal Group - USA
- Simpson Spence & Young - Indonesia
- Interocean Group of Companies - India
- GMR Energy Limited - India
- Leighton Contractors Pty Ltd - Australia
- Karbindo Abesyapradhi - Indoneisa
- Manunggal Multi Energi - Indonesia
- Renaissance Capital - South Africa
- Agrawal Coal Company - India
- Bangladesh Power Developement Board
- Aboitiz Power Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- Intertek Mineral Services - Indonesia
- Timah Investasi Mineral - Indoneisa
- Borneo Indobara - Indonesia
- Ministry of Transport, Egypt
- Mercator Lines Limited - India
- Minerals Council of Australia
- Petron Corporation, Philippines
- Grasim Industreis Ltd - India
- Indo Tambangraya Megah - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Bukit Makmur.PT - Indonesia
- Krishnapatnam Port Company Ltd. - India
- SN Aboitiz Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Chettinad Cement Corporation Ltd - India
- Kobexindo Tractors - Indoneisa
- Bayan Resources Tbk. - Indonesia
- The State Trading Corporation of India Ltd
- Banpu Public Company Limited - Thailand
- Indogreen Group - Indonesia
- Mercuria Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Baramulti Group, Indonesia
- Kideco Jaya Agung - Indonesia
- Chamber of Mines of South Africa
- Central Java Power - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- San Jose City I Power Corp, Philippines
- Cement Manufacturers Association - India
- Dalmia Cement Bharat India
- Bulk Trading Sa - Switzerland
- Parry Sugars Refinery, India
- Medco Energi Mining Internasional
- Latin American Coal - Colombia
- Jorong Barutama Greston.PT - Indonesia
- Kumho Petrochemical, South Korea
- The Treasury - Australian Government
- PTC India Limited - India
- Coalindo Energy - Indonesia
- Energy Development Corp, Philippines
- Barasentosa Lestari - Indonesia
- MS Steel International - UAE
- Marubeni Corporation - India
- Directorate General of MIneral and Coal - Indonesia
- Ministry of Finance - Indonesia
- Formosa Plastics Group - Taiwan
- Attock Cement Pakistan Limited
- Economic Council, Georgia
- Ind-Barath Power Infra Limited - India
- Sinarmas Energy and Mining - Indonesia
- Meralco Power Generation, Philippines
- Karaikal Port Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- ICICI Bank Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kaltim Prima Coal - Indonesia
- London Commodity Brokers - England
- Sakthi Sugars Limited - India
- Goldman Sachs - Singapore
- Siam City Cement PLC, Thailand
- Kepco SPC Power Corporation, Philippines
- Indian Energy Exchange, India
- Altura Mining Limited, Indonesia
- TeaM Sual Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- Maheswari Brothers Coal Limited - India
- Tata Chemicals Ltd - India
- Global Green Power PLC Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Madhucon Powers Ltd - India
- Larsen & Toubro Limited - India
- Posco Energy - South Korea
- CIMB Investment Bank - Malaysia
- Essar Steel Hazira Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- PowerSource Philippines DevCo
- Salva Resources Pvt Ltd - India
- Standard Chartered Bank - UAE
- Rio Tinto Coal - Australia
- Semirara Mining Corp, Philippines
- Ambuja Cements Ltd - India
- Bhoruka Overseas - Indonesia
- Thai Mozambique Logistica
- Romanian Commodities Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Oldendorff Carriers - Singapore
- Mintek Dendrill Indonesia
- Indika Energy - Indonesia
- VISA Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Orica Mining Services - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Independent Power Producers Association of India
- Deloitte Consulting - India
- Tamil Nadu electricity Board
- Price Waterhouse Coopers - Russia
- Star Paper Mills Limited - India
- Directorate Of Revenue Intelligence - India
- Bukit Baiduri Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- White Energy Company Limited
- Port Waratah Coal Services - Australia
- Siam City Cement - Thailand
- McConnell Dowell - Australia
- Indian Oil Corporation Limited
- Toyota Tsusho Corporation, Japan
- Kartika Selabumi Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- IEA Clean Coal Centre - UK
- Kapuas Tunggal Persada - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Carbofer General Trading SA - India
- Samtan Co., Ltd - South Korea
- Mjunction Services Limited - India
- Savvy Resources Ltd - HongKong
- Lanco Infratech Ltd - India
- Heidelberg Cement - Germany
- Uttam Galva Steels Limited - India
- GVK Power & Infra Limited - India
- Sojitz Corporation - Japan
- Holcim Trading Pte Ltd - Singapore
- International Coal Ventures Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- The University of Queensland
- SMC Global Power, Philippines
- Alfred C Toepfer International GmbH - Germany
- Straits Asia Resources Limited - Singapore
- Anglo American - United Kingdom
- SMG Consultants - Indonesia
- Gujarat Electricity Regulatory Commission - India
- ASAPP Information Group - India
- Electricity Authority, New Zealand
- Miang Besar Coal Terminal - Indonesia
- Edison Trading Spa - Italy
- Africa Commodities Group - South Africa
- Antam Resourcindo - Indonesia
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