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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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Saturday, 18 February 23
PAKISTAN PLANS TO QUADRUPLE DOMESTIC COAL-FIRED POWER, MOVE AWAY FROM GAS - REUTERS
Pakistan plans to quadruple its domestic coal-fired capacity to reduce power generation costs and will not build new gas-fired plants in the coming ...
Saturday, 18 February 23
2023 MARINE FUEL MARKET PREDICTIONS - JOHN BERGMAN, AURAMARINE
The drive for decarbonisation we witnessed in 2022 has continued into 2023, demonstrating the shipping’s industry positive strides in the fas ...
Saturday, 28 January 23
COAL GROWTH BLIP NOT TO BE REPEATED - BALTIC EXCHANGE
As 2022 drew to a close, global coal demand looked set to end the year just 1.2% up on the previous year. But that small increase was enough to pus ...
Thursday, 26 January 23
CHINA'S COAL OUTPUT INCREASES IN DECEMBER 2022 - XINHUA
China’s raw coal output posted stable expansion in December 2022, official data showed.
The country produced 400 million tonne ...
Thursday, 26 January 23
COKING COAL NARROWS THE GAP ON THERMAL AS CHINA REOPENS - REUTERS
The premium of high-grade thermal coal over coking coal in Asia is shrinking as China’s re-opening and ending of a ban on imports from Austra ...
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- OPG Power Generation Pvt Ltd - India
- Posco Energy - South Korea
- Krishnapatnam Port Company Ltd. - India
- Indika Energy - Indonesia
- Central Electricity Authority - India
- McConnell Dowell - Australia
- Indo Tambangraya Megah - Indonesia
- Jaiprakash Power Ventures ltd
- Renaissance Capital - South Africa
- ICICI Bank Limited - India
- Ministry of Mines - Canada
- Therma Luzon, Inc, Philippines
- Borneo Indobara - Indonesia
- Kaltim Prima Coal - Indonesia
- San Jose City I Power Corp, Philippines
- Toyota Tsusho Corporation, Japan
- Wood Mackenzie - Singapore
- Pendopo Energi Batubara - Indonesia
- Tata Chemicals Ltd - India
- Mercuria Energy - Indonesia
- Standard Chartered Bank - UAE
- Indian Oil Corporation Limited
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indogreen Group - Indonesia
- Bukit Makmur.PT - Indonesia
- London Commodity Brokers - England
- Directorate Of Revenue Intelligence - India
- Bahari Cakrawala Sebuku - Indonesia
- Star Paper Mills Limited - India
- Simpson Spence & Young - Indonesia
- Sojitz Corporation - Japan
- Manunggal Multi Energi - Indonesia
- Bukit Baiduri Energy - Indonesia
- Mjunction Services Limited - India
- Parliament of New Zealand
- Africa Commodities Group - South Africa
- PTC India Limited - India
- Commonwealth Bank - Australia
- European Bulk Services B.V. - Netherlands
- Kepco SPC Power Corporation, Philippines
- Ministry of Finance - Indonesia
- The University of Queensland
- Coastal Gujarat Power Limited - India
- Latin American Coal - Colombia
- Oldendorff Carriers - Singapore
- Holcim Trading Pte Ltd - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Port Waratah Coal Services - Australia
- Carbofer General Trading SA - India
- MS Steel International - UAE
- LBH Netherlands Bv - Netherlands
- GMR Energy Limited - India
- Mercator Lines Limited - India
- Larsen & Toubro Limited - India
- Eastern Coal Council - USA
- Formosa Plastics Group - Taiwan
- Ceylon Electricity Board - Sri Lanka
- Videocon Industries ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Kideco Jaya Agung - Indonesia
- Sindya Power Generating Company Private Ltd
- Straits Asia Resources Limited - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Karbindo Abesyapradhi - Indoneisa
- Dalmia Cement Bharat India
- Orica Mining Services - Indonesia
- Petron Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Rio Tinto Coal - Australia
- Edison Trading Spa - Italy
- Ambuja Cements Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Indian Energy Exchange, India
- Medco Energi Mining Internasional
- Coalindo Energy - Indonesia
- Interocean Group of Companies - India
- Leighton Contractors Pty Ltd - Australia
- Sical Logistics Limited - India
- Agrawal Coal Company - India
- Meralco Power Generation, Philippines
- Meenaskhi Energy Private Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- White Energy Company Limited
- Economic Council, Georgia
- Independent Power Producers Association of India
- India Bulls Power Limited - India
- Kobexindo Tractors - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Mintek Dendrill Indonesia
- Siam City Cement PLC, Thailand
- Samtan Co., Ltd - South Korea
- Savvy Resources Ltd - HongKong
- Cement Manufacturers Association - India
- Kartika Selabumi Mining - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Kumho Petrochemical, South Korea
- Aditya Birla Group - India
- Malabar Cements Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Makarim & Taira - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Vedanta Resources Plc - India
- SMG Consultants - Indonesia
- Power Finance Corporation Ltd., India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bhatia International Limited - India
- Sarangani Energy Corporation, Philippines
- SMC Global Power, Philippines
- Orica Australia Pty. Ltd.
- Ministry of Transport, Egypt
- Global Green Power PLC Corporation, Philippines
- Heidelberg Cement - Germany
- GVK Power & Infra Limited - India
- Planning Commission, India
- Price Waterhouse Coopers - Russia
- Siam City Cement - Thailand
- PetroVietnam Power Coal Import and Supply Company
- The Treasury - Australian Government
- Iligan Light & Power Inc, Philippines
- Grasim Industreis Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Salva Resources Pvt Ltd - India
- Wilmar Investment Holdings
- Barasentosa Lestari - Indonesia
- Metalloyd Limited - United Kingdom
- New Zealand Coal & Carbon
- Baramulti Group, Indonesia
- Chamber of Mines of South Africa
- Gujarat Sidhee Cement - India
- Sree Jayajothi Cements Limited - India
- Anglo American - United Kingdom
- Globalindo Alam Lestari - Indonesia
- Karaikal Port Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Georgia Ports Authority, United States
- Minerals Council of Australia
- Central Java Power - Indonesia
- Aboitiz Power Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Intertek Mineral Services - Indonesia
- Attock Cement Pakistan Limited
- VISA Power Limited - India
- South Luzon Thermal Energy Corporation
- Thai Mozambique Logistica
- Sakthi Sugars Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Thiess Contractors Indonesia
- Uttam Galva Steels Limited - India
- Altura Mining Limited, Indonesia
- AsiaOL BioFuels Corp., Philippines
- Parry Sugars Refinery, India
- Electricity Authority, New Zealand
- Gujarat Electricity Regulatory Commission - India
- Ind-Barath Power Infra Limited - India
- ASAPP Information Group - India
- Merrill Lynch Commodities Europe
- PNOC Exploration Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Coal and Oil Company - UAE
- Eastern Energy - Thailand
- Binh Thuan Hamico - Vietnam
- Timah Investasi Mineral - Indoneisa
- CIMB Investment Bank - Malaysia
- Semirara Mining Corp, Philippines
- Vizag Seaport Private Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Bank of Tokyo Mitsubishi UFJ Ltd
- IHS Mccloskey Coal Group - USA
- Australian Commodity Traders Exchange
- Bangladesh Power Developement Board
- Madhucon Powers Ltd - India
- International Coal Ventures Pvt Ltd - India
- Bharathi Cement Corporation - India
- Billiton Holdings Pty Ltd - Australia
- Gujarat Mineral Development Corp Ltd - India
- Antam Resourcindo - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- IEA Clean Coal Centre - UK
- Romanian Commodities Exchange
- PowerSource Philippines DevCo
- CNBM International Corporation - China
- Australian Coal Association
- Energy Link Ltd, New Zealand
- Global Coal Blending Company Limited - Australia
- Deloitte Consulting - India
- Riau Bara Harum - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Energy Development Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- Bhoruka Overseas - Indonesia
- Tamil Nadu electricity Board
- Bulk Trading Sa - Switzerland
- Indonesian Coal Mining Association
- GAC Shipping (India) Pvt Ltd
- Bayan Resources Tbk. - Indonesia
- Marubeni Corporation - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Essar Steel Hazira Ltd - India
- Chettinad Cement Corporation Ltd - India
- Sinarmas Energy and Mining - Indonesia
- The State Trading Corporation of India Ltd
- Semirara Mining and Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Lanco Infratech Ltd - India
- Global Business Power Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Electricity Generating Authority of Thailand
- Bhushan Steel Limited - India
- Banpu Public Company Limited - Thailand
- Goldman Sachs - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Singapore Mercantile Exchange
- Xindia Steels Limited - India
- Trasteel International SA, Italy
- TeaM Sual Corporation - Philippines
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