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Wednesday, 13 October 21
MARKET INSIGHT - INTERMODAL
 Following up on our insight on May 2021, where we discussed about the Capesize market outlook for the second half of the year, we are pleased to see that dry bulk Q4 high seasonality has returned after at least 3 years of underperformance, driving also the Q4’21 and Q1’22 FFA curve to multi year highs. Back in May, we had explained why we thought a higher Cape market peak during 2H2021 was in the cards, with fundamentals recently being boosted by accelerating restocking demand, near record high Capesize congestion at Pacific discharge ports and a global energy supply deficit leading to scrambling for coal supplies globally. In the present insight, we are briefly addressing some of the market points that are likely to impact the direction of freight rates looking forward.
Iron Ore restocking to be in full swing during Q4 regardless of China’s crude steel production contraction. Q1 2022 Risks: Slow-down in construction during winter and in view of China’s Winter Olympics, exacerbated by high energy costs. China’s property developers slowing down land purchases amid deleveraging efforts
The primary force behind the crude steel production decline in the short term is the severe coking coal /coke and power shortage forcing crude steel production to adjust downwards. Cuts are expected to intensify from November 15th to the end of the year as a 1st stage and then through March 2022, as per government’s pledges. Even if most of the targeted steel production cuts materializes through Sep-Dec 2021, probabilities that they will immediately translate into a decline in iron ore requirements are low, as 1) the iron ore restocking process is directly connected to iron ore seaborne supplies which are the strongest during Q4 – the decline in iron ore prices from multi year highs in May 2021 is currently facilitating the restocking process supporting the purchasing power of steel mills – steel mills margins remain strong due to the diverging trends in steel and iron ore prices, despite the surge in coking coal costs 2) Skyrocketing energy costs are likely to negatively impact more the scrap related steel production process during the quarter (Electric Arc Furnaces are higher energy consumers) vs Blast Furnaces (more iron ore requirements). When iron ore restocking will be completed, this will be a negative signal for new iron ore procurement, likely during the 1H2022. On this note, iron ore inventories at China’s ports have increased by +9.2 million tons since the end of Q2 and there is more room for them to inflate further by the end of the year.
Inflationary pressures on the energy complex supportive to dry bulk freight rates in the short-term. Q1 2022 Risks: La Nina conditions might bring a colder winter supporting coal consumption but also wetter conditions in Australia from December to April increasing risks of exports disruptions
Natural gas prices have raised the price ceiling higher for the whole energy complex and while international coal prices have hit record high levels, the price gap with natural gas continues to incentivize substitution in power generation globally and Europe particularly. The competition for securing coal supplies in both basins has inflated $ per ton freight across major coal routes to 12-year highs – which we think is sustainable - as the % of freight in coal prices is still low (approx. 13%) compared to 2009-2010 (approx. 22%).
China’s domestic coal output is expected to increase in the next months on a series of government measures to boost supplies, although the incremental volumes during Q4 are not expected to be sufficient to cover the supply deficit. The continuous decline in coal inventories at major power plants and expectations for a cold winter continue to indicate increasing thermal coal import needs for restocking in the winter heating season. Demand for coal imports is further enhanced by India’s urgency to restock as inventories at power plants have dropped to the lowest level since 2017 at 7.3 million tons but at a record low in terms of days of consumption i.e. just 4 days, as per latest data from India’s Central Electricity Authority.
High bunker prices are supportive to dry bulk freight rates as we had discussed in our May insight, likely to exacerbate fleet inefficiencies across the basins, with the Atlantic expected to benefit more in the short term. Talks about demand destruction from high oil prices will be substantiated when manufacturers’ profitability and consumers’ purchasing power starts to be negatively impacted with costs curves rising upwards. This is likely to take place at higher prices than the current $80/bbl in our view and those would have to be sustained during the quarter.
By Tamara Apostolou, Research Director
Compiled by:
Intermodal Research & Valuations
Analysts:
Yiannis Parganas
Tamara Apostolou
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, 06 September 24
REBOUND IN OIL DEMAND COULD LIFT MARKET IN LATTER HALF OF 2024 - BIMCO
Supply/demand
Based on a strong second half demand, the supply/balance is forecast to strengthen in 2024 but weaken slightly in 2025 as n ...
Friday, 06 September 24
GLOBAL SEABORNE LNG TRADE HAS CONTINUED TO INCREASE LAST YEAR - BANCHERO COSTA
Global seaborne LNG trade has continued to increase last year, helped also by the events in Ukraine which forced Europe to diversify away from Russ ...
Wednesday, 28 August 24
SEABORNE COAL IMPORTS INTO INDIA INCREASED BY +9.9% Y-O-Y TO 146.6 MLN T - BANCHERO COSTA
Global coal trade has really picked up pace over the past year, and is now fully back to pre-Covid levels said Banchero Costa Research in its lates ...
Tuesday, 06 August 24
EXERCISE CAUTION WITH AMMONIA SWITCH - BALTIC EXCHANGE
A new study from the Massachusetts Institute of Technology (MIT) has thrown a spanner into the plan to transition ships from diesel fuel to ammonia ...
Friday, 02 August 24
ENERGY MARKET DEVELOPMENTS: COAL AND NATURAL GAS PRICES REACH RECORD HIGHS - WORLD BANK
The recent surge in natural gas and coal prices has been so swift that the main benchmarks were roughly three times higher in 2022Q2 compared to a ...
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- SMG Consultants - Indonesia
- Kumho Petrochemical, South Korea
- Jaiprakash Power Ventures ltd
- Indogreen Group - Indonesia
- Sree Jayajothi Cements Limited - India
- Goldman Sachs - Singapore
- Wood Mackenzie - Singapore
- Central Electricity Authority - India
- IEA Clean Coal Centre - UK
- Maharashtra Electricity Regulatory Commission - India
- Samtan Co., Ltd - South Korea
- LBH Netherlands Bv - Netherlands
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Port Waratah Coal Services - Australia
- Straits Asia Resources Limited - Singapore
- Globalindo Alam Lestari - Indonesia
- Electricity Authority, New Zealand
- Ministry of Finance - Indonesia
- GMR Energy Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Marubeni Corporation - India
- San Jose City I Power Corp, Philippines
- Agrawal Coal Company - India
- Meenaskhi Energy Private Limited - India
- Star Paper Mills Limited - India
- Banpu Public Company Limited - Thailand
- Jorong Barutama Greston.PT - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Vedanta Resources Plc - India
- Petrochimia International Co. Ltd.- Taiwan
- Georgia Ports Authority, United States
- Iligan Light & Power Inc, Philippines
- Africa Commodities Group - South Africa
- Gujarat Sidhee Cement - India
- CIMB Investment Bank - Malaysia
- Asmin Koalindo Tuhup - Indonesia
- Orica Australia Pty. Ltd.
- PetroVietnam Power Coal Import and Supply Company
- Mercuria Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ambuja Cements Ltd - India
- Ministry of Mines - Canada
- The Treasury - Australian Government
- India Bulls Power Limited - India
- ASAPP Information Group - India
- Standard Chartered Bank - UAE
- Formosa Plastics Group - Taiwan
- Anglo American - United Kingdom
- Semirara Mining and Power Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- South Luzon Thermal Energy Corporation
- Ceylon Electricity Board - Sri Lanka
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Altura Mining Limited, Indonesia
- Bhatia International Limited - India
- Central Java Power - Indonesia
- Mintek Dendrill Indonesia
- Metalloyd Limited - United Kingdom
- Parry Sugars Refinery, India
- Posco Energy - South Korea
- ICICI Bank Limited - India
- Bulk Trading Sa - Switzerland
- Tata Chemicals Ltd - India
- Grasim Industreis Ltd - India
- Cigading International Bulk Terminal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- European Bulk Services B.V. - Netherlands
- Heidelberg Cement - Germany
- McConnell Dowell - Australia
- Binh Thuan Hamico - Vietnam
- GN Power Mariveles Coal Plant, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Gujarat Electricity Regulatory Commission - India
- Planning Commission, India
- Mercator Lines Limited - India
- Toyota Tsusho Corporation, Japan
- Makarim & Taira - Indonesia
- New Zealand Coal & Carbon
- Tamil Nadu electricity Board
- TeaM Sual Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Baramulti Group, Indonesia
- Deloitte Consulting - India
- Bahari Cakrawala Sebuku - Indonesia
- Bhushan Steel Limited - India
- Eastern Coal Council - USA
- PowerSource Philippines DevCo
- Trasteel International SA, Italy
- Meralco Power Generation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Australian Coal Association
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Thiess Contractors Indonesia
- Xindia Steels Limited - India
- Billiton Holdings Pty Ltd - Australia
- Renaissance Capital - South Africa
- Gujarat Mineral Development Corp Ltd - India
- Kaltim Prima Coal - Indonesia
- Price Waterhouse Coopers - Russia
- Economic Council, Georgia
- Cement Manufacturers Association - India
- Bhoruka Overseas - Indonesia
- VISA Power Limited - India
- Kobexindo Tractors - Indoneisa
- Intertek Mineral Services - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Kideco Jaya Agung - Indonesia
- Coalindo Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Salva Resources Pvt Ltd - India
- Lanco Infratech Ltd - India
- Petron Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Energy Link Ltd, New Zealand
- Chamber of Mines of South Africa
- Siam City Cement - Thailand
- Thai Mozambique Logistica
- Dalmia Cement Bharat India
- Oldendorff Carriers - Singapore
- Krishnapatnam Port Company Ltd. - India
- White Energy Company Limited
- Sarangani Energy Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- CNBM International Corporation - China
- Karbindo Abesyapradhi - Indoneisa
- IHS Mccloskey Coal Group - USA
- GAC Shipping (India) Pvt Ltd
- Australian Commodity Traders Exchange
- Aditya Birla Group - India
- Commonwealth Bank - Australia
- Maheswari Brothers Coal Limited - India
- Kartika Selabumi Mining - Indonesia
- Mjunction Services Limited - India
- Leighton Contractors Pty Ltd - Australia
- Barasentosa Lestari - Indonesia
- MS Steel International - UAE
- Sojitz Corporation - Japan
- Alfred C Toepfer International GmbH - Germany
- Sical Logistics Limited - India
- Wilmar Investment Holdings
- Coal and Oil Company - UAE
- Uttam Galva Steels Limited - India
- Sakthi Sugars Limited - India
- GVK Power & Infra Limited - India
- Latin American Coal - Colombia
- Semirara Mining Corp, Philippines
- Madhucon Powers Ltd - India
- Global Green Power PLC Corporation, Philippines
- The State Trading Corporation of India Ltd
- Kalimantan Lumbung Energi - Indonesia
- Karaikal Port Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Rio Tinto Coal - Australia
- Borneo Indobara - Indonesia
- Global Business Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Bayan Resources Tbk. - Indonesia
- Chettinad Cement Corporation Ltd - India
- Savvy Resources Ltd - HongKong
- Indian Oil Corporation Limited
- Bangladesh Power Developement Board
- Coastal Gujarat Power Limited - India
- Ind-Barath Power Infra Limited - India
- Videocon Industries ltd - India
- Simpson Spence & Young - Indonesia
- Ministry of Transport, Egypt
- Edison Trading Spa - Italy
- Rashtriya Ispat Nigam Limited - India
- Independent Power Producers Association of India
- Directorate Of Revenue Intelligence - India
- Directorate General of MIneral and Coal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Minerals Council of Australia
- Aboitiz Power Corporation - Philippines
- Attock Cement Pakistan Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Siam City Cement PLC, Thailand
- Singapore Mercantile Exchange
- Parliament of New Zealand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Medco Energi Mining Internasional
- Global Coal Blending Company Limited - Australia
- Vizag Seaport Private Limited - India
- Carbofer General Trading SA - India
- Indika Energy - Indonesia
- Sinarmas Energy and Mining - Indonesia
- SN Aboitiz Power Inc, Philippines
- SMC Global Power, Philippines
- Therma Luzon, Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Indonesian Coal Mining Association
- Larsen & Toubro Limited - India
- Manunggal Multi Energi - Indonesia
- Essar Steel Hazira Ltd - India
- PTC India Limited - India
- Timah Investasi Mineral - Indoneisa
- Sindya Power Generating Company Private Ltd
- Interocean Group of Companies - India
- Vijayanagar Sugar Pvt Ltd - India
- Indian Energy Exchange, India
- The University of Queensland
- Electricity Generating Authority of Thailand
- Kepco SPC Power Corporation, Philippines
- Romanian Commodities Exchange
- Antam Resourcindo - Indonesia
- Merrill Lynch Commodities Europe
- OPG Power Generation Pvt Ltd - India
- London Commodity Brokers - England
- Orica Mining Services - Indonesia
- Bharathi Cement Corporation - India
- Malabar Cements Ltd - India
- Energy Development Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Eastern Energy - Thailand
- Kapuas Tunggal Persada - Indonesia
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