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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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Friday, 23 February 24
STRONG OUTLOOK FOR THE TANKER MARKET IN 2024 AND BEYOND - DNV
Several factors have aligned over the past two years to create a robust and profitable market for tanker owners, which is expected to drive newbuil ...
Friday, 23 February 24
AUSTRALIAN COAL FLOWS TO ASIA HOVER ABOVE LAST YEAR’S VOLUME TONNES - SIGNAL GROUP
In the final days of February, the dry bulk freight market appeared to maintain a relatively stable momentum, particularly evident in the large ves ...
Friday, 23 February 24
RUSSIAN COAL SHIPMENTS FALL 14% AS SANCTIONS BITE - BIMCO
During the first seven weeks of 2024, Russian coal shipments have fallen 14% y/y. Volumes have gradually declined since October 2023 when logistica ...
Thursday, 22 February 24
BIMCO PUBLISHES SHIP FINANCING FORMS TO ENSURE UNINTERRUPTED USE OF SHIPS
BIMCO has published two standard Quiet Enjoyment Letters (QELs), the first standard form QELs available to the industry, to offer a tool that can e ...
Monday, 19 February 24
METALS INVESTMENT: THE DARKEST HOUR IS JUST BEFORE THE DAWN - WOOD MACKENZIE
Things often seem at their worst just before they get better. In terms of meeting our net zero 2050 scenario, we’ve reached a watershed momen ...
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- Mercator Lines Limited - India
- The University of Queensland
- Carbofer General Trading SA - India
- PTC India Limited - India
- Thiess Contractors Indonesia
- Ambuja Cements Ltd - India
- Aditya Birla Group - India
- Jorong Barutama Greston.PT - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Salva Resources Pvt Ltd - India
- Orica Mining Services - Indonesia
- Minerals Council of Australia
- Power Finance Corporation Ltd., India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Krishnapatnam Port Company Ltd. - India
- MS Steel International - UAE
- Uttam Galva Steels Limited - India
- The State Trading Corporation of India Ltd
- Billiton Holdings Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- CIMB Investment Bank - Malaysia
- Kapuas Tunggal Persada - Indonesia
- Barasentosa Lestari - Indonesia
- Chettinad Cement Corporation Ltd - India
- OPG Power Generation Pvt Ltd - India
- Bhushan Steel Limited - India
- Alfred C Toepfer International GmbH - Germany
- Sarangani Energy Corporation, Philippines
- Indonesian Coal Mining Association
- Electricity Authority, New Zealand
- IHS Mccloskey Coal Group - USA
- Mercuria Energy - Indonesia
- Independent Power Producers Association of India
- Rashtriya Ispat Nigam Limited - India
- South Luzon Thermal Energy Corporation
- GMR Energy Limited - India
- Xindia Steels Limited - India
- Energy Link Ltd, New Zealand
- Lanco Infratech Ltd - India
- Goldman Sachs - Singapore
- Bukit Makmur.PT - Indonesia
- Videocon Industries ltd - India
- Ceylon Electricity Board - Sri Lanka
- Directorate Of Revenue Intelligence - India
- Sindya Power Generating Company Private Ltd
- Standard Chartered Bank - UAE
- Gujarat Electricity Regulatory Commission - India
- Vijayanagar Sugar Pvt Ltd - India
- Star Paper Mills Limited - India
- Kumho Petrochemical, South Korea
- Heidelberg Cement - Germany
- VISA Power Limited - India
- Central Electricity Authority - India
- PNOC Exploration Corporation - Philippines
- Vedanta Resources Plc - India
- Neyveli Lignite Corporation Ltd, - India
- Maharashtra Electricity Regulatory Commission - India
- Banpu Public Company Limited - Thailand
- Wilmar Investment Holdings
- Antam Resourcindo - Indonesia
- Siam City Cement PLC, Thailand
- Port Waratah Coal Services - Australia
- Gujarat Sidhee Cement - India
- Bhoruka Overseas - Indonesia
- Indogreen Group - Indonesia
- Dalmia Cement Bharat India
- SMG Consultants - Indonesia
- Tamil Nadu electricity Board
- European Bulk Services B.V. - Netherlands
- Australian Commodity Traders Exchange
- Kepco SPC Power Corporation, Philippines
- Planning Commission, India
- Global Coal Blending Company Limited - Australia
- Sical Logistics Limited - India
- Tata Chemicals Ltd - India
- Eastern Energy - Thailand
- ASAPP Information Group - India
- Maheswari Brothers Coal Limited - India
- Siam City Cement - Thailand
- Ministry of Mines - Canada
- Deloitte Consulting - India
- Renaissance Capital - South Africa
- Iligan Light & Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Borneo Indobara - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Madhucon Powers Ltd - India
- Eastern Coal Council - USA
- Attock Cement Pakistan Limited
- Indo Tambangraya Megah - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- TeaM Sual Corporation - Philippines
- Toyota Tsusho Corporation, Japan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Wood Mackenzie - Singapore
- International Coal Ventures Pvt Ltd - India
- Anglo American - United Kingdom
- Posco Energy - South Korea
- Bahari Cakrawala Sebuku - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Semirara Mining and Power Corporation, Philippines
- Interocean Group of Companies - India
- Economic Council, Georgia
- Ind-Barath Power Infra Limited - India
- London Commodity Brokers - England
- Semirara Mining Corp, Philippines
- Straits Asia Resources Limited - Singapore
- Petron Corporation, Philippines
- Meralco Power Generation, Philippines
- Singapore Mercantile Exchange
- Directorate General of MIneral and Coal - Indonesia
- Bukit Baiduri Energy - Indonesia
- PowerSource Philippines DevCo
- Bayan Resources Tbk. - Indonesia
- Coal and Oil Company - UAE
- San Jose City I Power Corp, Philippines
- Jaiprakash Power Ventures ltd
- Commonwealth Bank - Australia
- Energy Development Corp, Philippines
- Rio Tinto Coal - Australia
- Baramulti Group, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Essar Steel Hazira Ltd - India
- Global Business Power Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Edison Trading Spa - Italy
- Kaltim Prima Coal - Indonesia
- Parliament of New Zealand
- Oldendorff Carriers - Singapore
- Grasim Industreis Ltd - India
- Vizag Seaport Private Limited - India
- Chamber of Mines of South Africa
- Cement Manufacturers Association - India
- Karaikal Port Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Bharathi Cement Corporation - India
- Sojitz Corporation - Japan
- LBH Netherlands Bv - Netherlands
- Savvy Resources Ltd - HongKong
- Sakthi Sugars Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Pendopo Energi Batubara - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indian Energy Exchange, India
- Altura Mining Limited, Indonesia
- Simpson Spence & Young - Indonesia
- Orica Australia Pty. Ltd.
- Leighton Contractors Pty Ltd - Australia
- Georgia Ports Authority, United States
- Kartika Selabumi Mining - Indonesia
- Mintek Dendrill Indonesia
- Bulk Trading Sa - Switzerland
- GVK Power & Infra Limited - India
- Romanian Commodities Exchange
- New Zealand Coal & Carbon
- Ministry of Transport, Egypt
- Formosa Plastics Group - Taiwan
- ICICI Bank Limited - India
- CNBM International Corporation - China
- Central Java Power - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kobexindo Tractors - Indoneisa
- Jindal Steel & Power Ltd - India
- Meenaskhi Energy Private Limited - India
- Bangladesh Power Developement Board
- Coalindo Energy - Indonesia
- Makarim & Taira - Indonesia
- Therma Luzon, Inc, Philippines
- Africa Commodities Group - South Africa
- Indian Oil Corporation Limited
- Price Waterhouse Coopers - Russia
- Malabar Cements Ltd - India
- Aboitiz Power Corporation - Philippines
- Merrill Lynch Commodities Europe
- Global Green Power PLC Corporation, Philippines
- Indika Energy - Indonesia
- Sree Jayajothi Cements Limited - India
- Mjunction Services Limited - India
- Bhatia International Limited - India
- Larsen & Toubro Limited - India
- Kideco Jaya Agung - Indonesia
- White Energy Company Limited
- Electricity Generating Authority of Thailand
- Agrawal Coal Company - India
- IEA Clean Coal Centre - UK
- Parry Sugars Refinery, India
- Timah Investasi Mineral - Indoneisa
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Finance - Indonesia
- Trasteel International SA, Italy
- GN Power Mariveles Coal Plant, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Coastal Gujarat Power Limited - India
- The Treasury - Australian Government
- GAC Shipping (India) Pvt Ltd
- Asmin Koalindo Tuhup - Indonesia
- Thai Mozambique Logistica
- Metalloyd Limited - United Kingdom
- Medco Energi Mining Internasional
- Riau Bara Harum - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Manunggal Multi Energi - Indonesia
- Samtan Co., Ltd - South Korea
- Australian Coal Association
- Bukit Asam (Persero) Tbk - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Marubeni Corporation - India
- McConnell Dowell - Australia
- Sinarmas Energy and Mining - Indonesia
- India Bulls Power Limited - India
- Latin American Coal - Colombia
- SMC Global Power, Philippines
- Intertek Mineral Services - Indonesia
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