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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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Monday, 08 January 24
KOSPO TO BUY 80000 MT OF INDONESIAN LOW CALORIFIC VALUE COAL FOR FEB 2024
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for the supply of Indonesian Low Calorific Value Coal from qualified suppliers for Korean ...
Monday, 08 January 24
SEABORNE TRADE REACHES 12.4BN TONNES - CLARKSONS
China will establish a back-up coal production system by 2027 to stabilise prices and secure coal supply, the state planner said on Wednesday, even ...
Monday, 08 January 24
CAPESIZES START THE NEW YEAR ON POSITIVE NOTE - BALTIC EXCHANGE
Capesize
This week the capsize market has been marked by a mix of activities and challenges. Despite a slow start following the Christmas and N ...
Friday, 05 January 24
MORGAN STANLEY SEES LOWER OIL PRICES IN 2024 ON OVERSUPPLY CONCERNS - REUTERS
Morgan Stanley sees Brent crude prices anchored near $80 per barrel in the first half in 2024 before declining towards the end of the year as it ex ...
Friday, 05 January 24
INDIA'S COAL OUTPUT RISES NEARLY 11 PC IN DEC TO 92.87 MT - PTI
India’s coal production increased by 10.75 per cent to 92.87 million tonne in December 2023 as compared to the year-ago period, an official s ...
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- Borneo Indobara - Indonesia
- Aditya Birla Group - India
- Samtan Co., Ltd - South Korea
- Maheswari Brothers Coal Limited - India
- Kepco SPC Power Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Rashtriya Ispat Nigam Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Pendopo Energi Batubara - Indonesia
- Ind-Barath Power Infra Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Chamber of Mines of South Africa
- Sinarmas Energy and Mining - Indonesia
- Kideco Jaya Agung - Indonesia
- PNOC Exploration Corporation - Philippines
- GVK Power & Infra Limited - India
- Bukit Makmur.PT - Indonesia
- Bukit Baiduri Energy - Indonesia
- White Energy Company Limited
- Bulk Trading Sa - Switzerland
- Mintek Dendrill Indonesia
- Eastern Energy - Thailand
- Australian Coal Association
- Bukit Asam (Persero) Tbk - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- SMG Consultants - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Semirara Mining and Power Corporation, Philippines
- Electricity Authority, New Zealand
- Energy Development Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Economic Council, Georgia
- Leighton Contractors Pty Ltd - Australia
- India Bulls Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- Commonwealth Bank - Australia
- Sindya Power Generating Company Private Ltd
- South Luzon Thermal Energy Corporation
- Coastal Gujarat Power Limited - India
- Global Business Power Corporation, Philippines
- Orica Mining Services - Indonesia
- IEA Clean Coal Centre - UK
- Larsen & Toubro Limited - India
- Singapore Mercantile Exchange
- The Treasury - Australian Government
- Carbofer General Trading SA - India
- Renaissance Capital - South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Toyota Tsusho Corporation, Japan
- Therma Luzon, Inc, Philippines
- Bhatia International Limited - India
- Port Waratah Coal Services - Australia
- Formosa Plastics Group - Taiwan
- The University of Queensland
- Cement Manufacturers Association - India
- Chettinad Cement Corporation Ltd - India
- ICICI Bank Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Siam City Cement PLC, Thailand
- Sarangani Energy Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Kartika Selabumi Mining - Indonesia
- Kobexindo Tractors - Indoneisa
- Krishnapatnam Port Company Ltd. - India
- Electricity Generating Authority of Thailand
- Energy Link Ltd, New Zealand
- Kapuas Tunggal Persada - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Tata Chemicals Ltd - India
- Madhucon Powers Ltd - India
- Iligan Light & Power Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- Wilmar Investment Holdings
- Indian Oil Corporation Limited
- San Jose City I Power Corp, Philippines
- Salva Resources Pvt Ltd - India
- Central Java Power - Indonesia
- GMR Energy Limited - India
- Mercuria Energy - Indonesia
- London Commodity Brokers - England
- Ministry of Mines - Canada
- Coalindo Energy - Indonesia
- Altura Mining Limited, Indonesia
- Kumho Petrochemical, South Korea
- Tamil Nadu electricity Board
- New Zealand Coal & Carbon
- Star Paper Mills Limited - India
- Meenaskhi Energy Private Limited - India
- The State Trading Corporation of India Ltd
- Attock Cement Pakistan Limited
- Planning Commission, India
- Meralco Power Generation, Philippines
- Central Electricity Authority - India
- Pipit Mutiara Jaya. PT, Indonesia
- Heidelberg Cement - Germany
- SN Aboitiz Power Inc, Philippines
- TeaM Sual Corporation - Philippines
- Baramulti Group, Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Merrill Lynch Commodities Europe
- VISA Power Limited - India
- Medco Energi Mining Internasional
- Siam City Cement - Thailand
- Sakthi Sugars Limited - India
- Anglo American - United Kingdom
- Directorate Of Revenue Intelligence - India
- Riau Bara Harum - Indonesia
- Barasentosa Lestari - Indonesia
- Power Finance Corporation Ltd., India
- Goldman Sachs - Singapore
- Marubeni Corporation - India
- Cigading International Bulk Terminal - Indonesia
- CNBM International Corporation - China
- GN Power Mariveles Coal Plant, Philippines
- Mjunction Services Limited - India
- Videocon Industries ltd - India
- Romanian Commodities Exchange
- Billiton Holdings Pty Ltd - Australia
- Bharathi Cement Corporation - India
- Kohat Cement Company Ltd. - Pakistan
- Makarim & Taira - Indonesia
- Malabar Cements Ltd - India
- Indian Energy Exchange, India
- Bhoruka Overseas - Indonesia
- Dalmia Cement Bharat India
- Indonesian Coal Mining Association
- Ceylon Electricity Board - Sri Lanka
- Kaltim Prima Coal - Indonesia
- Xindia Steels Limited - India
- Independent Power Producers Association of India
- MS Steel International - UAE
- Globalindo Alam Lestari - Indonesia
- Bangladesh Power Developement Board
- Minerals Council of Australia
- Savvy Resources Ltd - HongKong
- Gujarat Sidhee Cement - India
- Metalloyd Limited - United Kingdom
- Petrochimia International Co. Ltd.- Taiwan
- ASAPP Information Group - India
- Jaiprakash Power Ventures ltd
- Indo Tambangraya Megah - Indonesia
- Edison Trading Spa - Italy
- Agrawal Coal Company - India
- Bahari Cakrawala Sebuku - Indonesia
- Thiess Contractors Indonesia
- Vizag Seaport Private Limited - India
- Eastern Coal Council - USA
- Latin American Coal - Colombia
- Uttam Galva Steels Limited - India
- Rio Tinto Coal - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Grasim Industreis Ltd - India
- Manunggal Multi Energi - Indonesia
- CIMB Investment Bank - Malaysia
- Karbindo Abesyapradhi - Indoneisa
- Antam Resourcindo - Indonesia
- Oldendorff Carriers - Singapore
- Vedanta Resources Plc - India
- AsiaOL BioFuels Corp., Philippines
- Asmin Koalindo Tuhup - Indonesia
- PTC India Limited - India
- Posco Energy - South Korea
- Karaikal Port Pvt Ltd - India
- Interocean Group of Companies - India
- Bayan Resources Tbk. - Indonesia
- IHS Mccloskey Coal Group - USA
- Coal and Oil Company - UAE
- Deloitte Consulting - India
- Sical Logistics Limited - India
- Mercator Lines Limited - India
- Semirara Mining Corp, Philippines
- Africa Commodities Group - South Africa
- Australian Commodity Traders Exchange
- Ministry of Finance - Indonesia
- PowerSource Philippines DevCo
- Jorong Barutama Greston.PT - Indonesia
- Global Coal Blending Company Limited - Australia
- Intertek Mineral Services - Indonesia
- Binh Thuan Hamico - Vietnam
- Sree Jayajothi Cements Limited - India
- Global Green Power PLC Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Georgia Ports Authority, United States
- SMC Global Power, Philippines
- OPG Power Generation Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Indogreen Group - Indonesia
- Essar Steel Hazira Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ambuja Cements Ltd - India
- GAC Shipping (India) Pvt Ltd
- Indika Energy - Indonesia
- Banpu Public Company Limited - Thailand
- McConnell Dowell - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Jindal Steel & Power Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Sojitz Corporation - Japan
- Parliament of New Zealand
- Holcim Trading Pte Ltd - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Gujarat Mineral Development Corp Ltd - India
- Petron Corporation, Philippines
- Ministry of Transport, Egypt
- Lanco Infratech Ltd - India
- Wood Mackenzie - Singapore
- European Bulk Services B.V. - Netherlands
- Thai Mozambique Logistica
- Parry Sugars Refinery, India
- Trasteel International SA, Italy
- Orica Australia Pty. Ltd.
- Standard Chartered Bank - UAE
- Bhushan Steel Limited - India
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