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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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Tuesday, 29 November 22
SEABORNE COAL FLOWS IN 2022 - SIGNAL
This year is crucial for the energy mix in European countries, as the EU has imposed new sanctions on Russia. It is important to emphasize that the ...
Friday, 25 November 22
APAC THERMAL COAL PRICES CORRECT FROM RECORD HIGH - FITCH RATINGS
Prices of Newcastle 6,000kcal/kg coal have corrected following falling European gas and coal prices, and more supply from Australia could help miti ...
Thursday, 24 November 22
VIETNAM BOOSTS COAL USE PLAN FOR 2030 AS G7 CLIMATE OFFER STALLS - REUTERS
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THE GENCON 2022 CHARTERPARTY - GARD
KNOWLEDGE TO ELEVATE
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Tuesday, 22 November 22
INDIA POWER BINGES ON COAL, OUTPACES ASIA - REUTERS
India’s coal-fired power output has increased much faster than any other country in the Asia Pacific since Russia’s invasion of Ukraine ...
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- Tata Chemicals Ltd - India
- Parliament of New Zealand
- Mjunction Services Limited - India
- Gujarat Electricity Regulatory Commission - India
- VISA Power Limited - India
- Interocean Group of Companies - India
- Grasim Industreis Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- Kumho Petrochemical, South Korea
- Uttam Galva Steels Limited - India
- Mercator Lines Limited - India
- Agrawal Coal Company - India
- Gujarat Mineral Development Corp Ltd - India
- Larsen & Toubro Limited - India
- Price Waterhouse Coopers - Russia
- Deloitte Consulting - India
- CIMB Investment Bank - Malaysia
- Jorong Barutama Greston.PT - Indonesia
- The Treasury - Australian Government
- Metalloyd Limited - United Kingdom
- Therma Luzon, Inc, Philippines
- Indika Energy - Indonesia
- Attock Cement Pakistan Limited
- GAC Shipping (India) Pvt Ltd
- Kobexindo Tractors - Indoneisa
- Minerals Council of Australia
- Kepco SPC Power Corporation, Philippines
- Wood Mackenzie - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Alfred C Toepfer International GmbH - Germany
- Salva Resources Pvt Ltd - India
- Ministry of Transport, Egypt
- Rio Tinto Coal - Australia
- Bhatia International Limited - India
- Ind-Barath Power Infra Limited - India
- GMR Energy Limited - India
- Gujarat Sidhee Cement - India
- India Bulls Power Limited - India
- MS Steel International - UAE
- Posco Energy - South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- Trasteel International SA, Italy
- Orica Australia Pty. Ltd.
- Iligan Light & Power Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Economic Council, Georgia
- AsiaOL BioFuels Corp., Philippines
- Meralco Power Generation, Philippines
- Makarim & Taira - Indonesia
- ICICI Bank Limited - India
- Standard Chartered Bank - UAE
- Malabar Cements Ltd - India
- Antam Resourcindo - Indonesia
- Singapore Mercantile Exchange
- South Luzon Thermal Energy Corporation
- Central Java Power - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Africa Commodities Group - South Africa
- Miang Besar Coal Terminal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Eastern Energy - Thailand
- Mintek Dendrill Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Indogreen Group - Indonesia
- Borneo Indobara - Indonesia
- Simpson Spence & Young - Indonesia
- The University of Queensland
- Bukit Baiduri Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Anglo American - United Kingdom
- Siam City Cement - Thailand
- Cement Manufacturers Association - India
- Globalindo Alam Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Indo Tambangraya Megah - Indonesia
- Savvy Resources Ltd - HongKong
- Neyveli Lignite Corporation Ltd, - India
- Bahari Cakrawala Sebuku - Indonesia
- Sakthi Sugars Limited - India
- Oldendorff Carriers - Singapore
- Sarangani Energy Corporation, Philippines
- PowerSource Philippines DevCo
- European Bulk Services B.V. - Netherlands
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indonesian Coal Mining Association
- Pipit Mutiara Jaya. PT, Indonesia
- Vedanta Resources Plc - India
- TNB Fuel Sdn Bhd - Malaysia
- Aditya Birla Group - India
- PTC India Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Orica Mining Services - Indonesia
- Riau Bara Harum - Indonesia
- Parry Sugars Refinery, India
- Planning Commission, India
- IEA Clean Coal Centre - UK
- Bhoruka Overseas - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sindya Power Generating Company Private Ltd
- Global Green Power PLC Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Energy Link Ltd, New Zealand
- Intertek Mineral Services - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bangladesh Power Developement Board
- ASAPP Information Group - India
- Lanco Infratech Ltd - India
- Merrill Lynch Commodities Europe
- Wilmar Investment Holdings
- The State Trading Corporation of India Ltd
- White Energy Company Limited
- Essar Steel Hazira Ltd - India
- Baramulti Group, Indonesia
- Aboitiz Power Corporation - Philippines
- Ambuja Cements Ltd - India
- Australian Coal Association
- Barasentosa Lestari - Indonesia
- Dalmia Cement Bharat India
- IHS Mccloskey Coal Group - USA
- Indian Energy Exchange, India
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Finance - Indonesia
- Coastal Gujarat Power Limited - India
- Commonwealth Bank - Australia
- Coal and Oil Company - UAE
- Edison Trading Spa - Italy
- Eastern Coal Council - USA
- Bukit Asam (Persero) Tbk - Indonesia
- Chamber of Mines of South Africa
- Indian Oil Corporation Limited
- Xindia Steels Limited - India
- PNOC Exploration Corporation - Philippines
- International Coal Ventures Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Vizag Seaport Private Limited - India
- Bukit Makmur.PT - Indonesia
- Manunggal Multi Energi - Indonesia
- Energy Development Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Global Business Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Madhucon Powers Ltd - India
- Binh Thuan Hamico - Vietnam
- Coalindo Energy - Indonesia
- Power Finance Corporation Ltd., India
- London Commodity Brokers - England
- Carbofer General Trading SA - India
- Altura Mining Limited, Indonesia
- Tamil Nadu electricity Board
- Star Paper Mills Limited - India
- Siam City Cement PLC, Thailand
- Marubeni Corporation - India
- Kaltim Prima Coal - Indonesia
- Central Electricity Authority - India
- CNBM International Corporation - China
- Kapuas Tunggal Persada - Indonesia
- McConnell Dowell - Australia
- Goldman Sachs - Singapore
- Bulk Trading Sa - Switzerland
- SMC Global Power, Philippines
- Toyota Tsusho Corporation, Japan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mercuria Energy - Indonesia
- Samtan Co., Ltd - South Korea
- PetroVietnam Power Coal Import and Supply Company
- Kohat Cement Company Ltd. - Pakistan
- Thai Mozambique Logistica
- Bharathi Cement Corporation - India
- Formosa Plastics Group - Taiwan
- Bhushan Steel Limited - India
- Billiton Holdings Pty Ltd - Australia
- Straits Asia Resources Limited - Singapore
- Global Coal Blending Company Limited - Australia
- GVK Power & Infra Limited - India
- New Zealand Coal & Carbon
- Cigading International Bulk Terminal - Indonesia
- Heidelberg Cement - Germany
- Sojitz Corporation - Japan
- GN Power Mariveles Coal Plant, Philippines
- Romanian Commodities Exchange
- Directorate General of MIneral and Coal - Indonesia
- TeaM Sual Corporation - Philippines
- Georgia Ports Authority, United States
- Independent Power Producers Association of India
- Sical Logistics Limited - India
- Videocon Industries ltd - India
- LBH Netherlands Bv - Netherlands
- Medco Energi Mining Internasional
- Electricity Generating Authority of Thailand
- OPG Power Generation Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Semirara Mining Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Banpu Public Company Limited - Thailand
- Kideco Jaya Agung - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Australian Commodity Traders Exchange
- SMG Consultants - Indonesia
- Latin American Coal - Colombia
- Meenaskhi Energy Private Limited - India
- Maheswari Brothers Coal Limited - India
- Petron Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Chettinad Cement Corporation Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Port Waratah Coal Services - Australia
- Electricity Authority, New Zealand
- Jindal Steel & Power Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Renaissance Capital - South Africa
- Thiess Contractors Indonesia
- Ministry of Mines - Canada
- San Jose City I Power Corp, Philippines
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