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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, 22 December 22
RUSSIAN OIL EXPORTS CRATER BY 54% IN THE FIRST FULL WEEK OF THE EU'S EMBARGO AMID A SHORTAGE OF TANKERS WILLING TO CARRY CARGOES - BUSINESS INSIDER
Since the European Union imposed its seaborne crude sanctions, Russian oil exports have tumbled by more than half, according to data compiled by Bl ...
Thursday, 22 December 22
CHINA TIGHTENS VERIFICATION OF SHIPS’ ENERGY CONSUMPTION DATA - GARD
From 22 December 2022, ships trading to Chinese ports must record their energy consumption data in accordance with the requirements of their Ship E ...
Thursday, 22 December 22
AN OVERVIEW OF THE LNG MARKET - VESSELSVALUE
LNG values have continued to strengthen, spurred by skyrocketing earnings that have surpassed last year’s record breaking peaks. In November, ...
Thursday, 22 December 22
COKING COAL SLUMPS AS TALKS ON AUSTRALIA-CHINA TRADE RIFT LOOM - REUTERS
Chinese coking coal futures dropped more than 3 per cent on Tuesday (Dec 20), extending losses, as supply of the steelmaking input might increase i ...
Thursday, 22 December 22
COAL AND GAS PRICE CAPS MAY COMPOUND POLITICAL RISK FOR AUSTRALIAN CORPORATES - FITCH RATINGS
Australia’s introduction of temporary price caps on domestic sales of gas and coal used for electricity generation will probably have limited ...
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- Uttam Galva Steels Limited - India
- Standard Chartered Bank - UAE
- Meenaskhi Energy Private Limited - India
- Meralco Power Generation, Philippines
- The University of Queensland
- Tamil Nadu electricity Board
- Semirara Mining and Power Corporation, Philippines
- Indogreen Group - Indonesia
- Formosa Plastics Group - Taiwan
- Commonwealth Bank - Australia
- SN Aboitiz Power Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- ASAPP Information Group - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Heidelberg Cement - Germany
- LBH Netherlands Bv - Netherlands
- Thiess Contractors Indonesia
- Simpson Spence & Young - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Semirara Mining Corp, Philippines
- Vedanta Resources Plc - India
- Wood Mackenzie - Singapore
- Bayan Resources Tbk. - Indonesia
- San Jose City I Power Corp, Philippines
- Sindya Power Generating Company Private Ltd
- Indo Tambangraya Megah - Indonesia
- Trasteel International SA, Italy
- Thai Mozambique Logistica
- Gujarat Mineral Development Corp Ltd - India
- Medco Energi Mining Internasional
- Kepco SPC Power Corporation, Philippines
- Indika Energy - Indonesia
- Malabar Cements Ltd - India
- IHS Mccloskey Coal Group - USA
- Intertek Mineral Services - Indonesia
- Globalindo Alam Lestari - Indonesia
- ICICI Bank Limited - India
- Star Paper Mills Limited - India
- Indonesian Coal Mining Association
- Bukit Makmur.PT - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Electricity Generating Authority of Thailand
- Salva Resources Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Eastern Coal Council - USA
- Mintek Dendrill Indonesia
- Georgia Ports Authority, United States
- Siam City Cement - Thailand
- Interocean Group of Companies - India
- Ceylon Electricity Board - Sri Lanka
- Bhatia International Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Coal Blending Company Limited - Australia
- PTC India Limited - India
- Makarim & Taira - Indonesia
- Larsen & Toubro Limited - India
- PNOC Exploration Corporation - Philippines
- Carbofer General Trading SA - India
- Toyota Tsusho Corporation, Japan
- AsiaOL BioFuels Corp., Philippines
- Sakthi Sugars Limited - India
- Independent Power Producers Association of India
- Krishnapatnam Port Company Ltd. - India
- Directorate Of Revenue Intelligence - India
- IEA Clean Coal Centre - UK
- Chamber of Mines of South Africa
- Neyveli Lignite Corporation Ltd, - India
- Asmin Koalindo Tuhup - Indonesia
- Grasim Industreis Ltd - India
- Africa Commodities Group - South Africa
- CNBM International Corporation - China
- Altura Mining Limited, Indonesia
- Eastern Energy - Thailand
- Pendopo Energi Batubara - Indonesia
- Bhoruka Overseas - Indonesia
- Latin American Coal - Colombia
- CIMB Investment Bank - Malaysia
- Sical Logistics Limited - India
- Holcim Trading Pte Ltd - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- India Bulls Power Limited - India
- Coastal Gujarat Power Limited - India
- Tata Chemicals Ltd - India
- European Bulk Services B.V. - Netherlands
- Maheswari Brothers Coal Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Indian Oil Corporation Limited
- SMG Consultants - Indonesia
- Ministry of Mines - Canada
- South Luzon Thermal Energy Corporation
- New Zealand Coal & Carbon
- Energy Development Corp, Philippines
- Central Java Power - Indonesia
- Central Electricity Authority - India
- Energy Link Ltd, New Zealand
- Ambuja Cements Ltd - India
- Oldendorff Carriers - Singapore
- Videocon Industries ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Singapore Mercantile Exchange
- Price Waterhouse Coopers - Russia
- McConnell Dowell - Australia
- Marubeni Corporation - India
- Riau Bara Harum - Indonesia
- Samtan Co., Ltd - South Korea
- Bukit Baiduri Energy - Indonesia
- Wilmar Investment Holdings
- Goldman Sachs - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Agrawal Coal Company - India
- Kartika Selabumi Mining - Indonesia
- Jaiprakash Power Ventures ltd
- Kohat Cement Company Ltd. - Pakistan
- Binh Thuan Hamico - Vietnam
- GMR Energy Limited - India
- Coalindo Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Orica Mining Services - Indonesia
- Sarangani Energy Corporation, Philippines
- TeaM Sual Corporation - Philippines
- The State Trading Corporation of India Ltd
- Mercuria Energy - Indonesia
- Mjunction Services Limited - India
- Jindal Steel & Power Ltd - India
- Orica Australia Pty. Ltd.
- Attock Cement Pakistan Limited
- Karbindo Abesyapradhi - Indoneisa
- GVK Power & Infra Limited - India
- Global Green Power PLC Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Manunggal Multi Energi - Indonesia
- Anglo American - United Kingdom
- Mercator Lines Limited - India
- Bharathi Cement Corporation - India
- Global Business Power Corporation, Philippines
- Electricity Authority, New Zealand
- Sinarmas Energy and Mining - Indonesia
- Cement Manufacturers Association - India
- Cigading International Bulk Terminal - Indonesia
- Ministry of Transport, Egypt
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement PLC, Thailand
- Sojitz Corporation - Japan
- TNB Fuel Sdn Bhd - Malaysia
- Economic Council, Georgia
- Leighton Contractors Pty Ltd - Australia
- Port Waratah Coal Services - Australia
- Borneo Indobara - Indonesia
- Metalloyd Limited - United Kingdom
- Xindia Steels Limited - India
- The Treasury - Australian Government
- Aboitiz Power Corporation - Philippines
- Aditya Birla Group - India
- GAC Shipping (India) Pvt Ltd
- Parliament of New Zealand
- Gujarat Sidhee Cement - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Lanco Infratech Ltd - India
- Rio Tinto Coal - Australia
- Rashtriya Ispat Nigam Limited - India
- Vizag Seaport Private Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Karaikal Port Pvt Ltd - India
- Antam Resourcindo - Indonesia
- SMC Global Power, Philippines
- Dalmia Cement Bharat India
- OPG Power Generation Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Timah Investasi Mineral - Indoneisa
- PowerSource Philippines DevCo
- Bukit Asam (Persero) Tbk - Indonesia
- Romanian Commodities Exchange
- Posco Energy - South Korea
- Minerals Council of Australia
- Kobexindo Tractors - Indoneisa
- VISA Power Limited - India
- MS Steel International - UAE
- Straits Asia Resources Limited - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Kalimantan Lumbung Energi - Indonesia
- White Energy Company Limited
- Renaissance Capital - South Africa
- Bangladesh Power Developement Board
- Alfred C Toepfer International GmbH - Germany
- Deloitte Consulting - India
- Essar Steel Hazira Ltd - India
- Australian Commodity Traders Exchange
- International Coal Ventures Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Indian Energy Exchange, India
- Iligan Light & Power Inc, Philippines
- Planning Commission, India
- Chettinad Cement Corporation Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Merrill Lynch Commodities Europe
- Sree Jayajothi Cements Limited - India
- Billiton Holdings Pty Ltd - Australia
- Coal and Oil Company - UAE
- Savvy Resources Ltd - HongKong
- Bulk Trading Sa - Switzerland
- Baramulti Group, Indonesia
- Bhushan Steel Limited - India
- Madhucon Powers Ltd - India
- Kideco Jaya Agung - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Finance - Indonesia
- London Commodity Brokers - England
- Barasentosa Lestari - Indonesia
- Ind-Barath Power Infra Limited - India
- Petron Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Edison Trading Spa - Italy
- Parry Sugars Refinery, India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Australian Coal Association
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