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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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Sunday, 10 September 23
CHINA AUGUST COAL IMPORTS OF 44.3 MLN T HIT RECORD - REUTERS
China, the world’s top coal consumer, imported 44.3 million metric tons of the fuel last month, customs data showed, the highest amount in an ...
Tuesday, 22 August 23
CHINA'S COAL PRODUCTION LOGS STEADY GROWTH IN JANUARY-JULY: XINHUA
China’s output of raw coal went up 3.6 percent year on year in the first seven months of this year, official data showed.
The ...
Sunday, 13 August 23
THE COMMODITIES FEED: LNG SUPPLY RISKS LINGER - ING
Energy – OPEC sees deficit over remainder of 2023
Oil prices came under some pressure yesterday with ICE Brent settling a litt ...
Wednesday, 09 August 23
COAL TRADE TO RETURN TO 2019 LEVELS - BALTIC EXCHANGE
The International Energy Agency’s mid-year Coal Market Update for 2023 brings both positive and concerning news for the global coal industry. ...
Sunday, 23 July 23
ANALYSIS-INDIA'S COAL MINING BET STUMBLES AS WARY BANKS WEIGH RISING RISKS - REUTERS
India’s drive to ramp up coal output to meet growing energy demand is faltering due to banks’ reluctance to finance newly auctioned min ...
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- GN Power Mariveles Coal Plant, Philippines
- Ministry of Mines - Canada
- Pipit Mutiara Jaya. PT, Indonesia
- Karaikal Port Pvt Ltd - India
- Cement Manufacturers Association - India
- Timah Investasi Mineral - Indoneisa
- Attock Cement Pakistan Limited
- Borneo Indobara - Indonesia
- Siam City Cement PLC, Thailand
- Billiton Holdings Pty Ltd - Australia
- Ind-Barath Power Infra Limited - India
- IEA Clean Coal Centre - UK
- Star Paper Mills Limited - India
- Renaissance Capital - South Africa
- ASAPP Information Group - India
- Kideco Jaya Agung - Indonesia
- Indogreen Group - Indonesia
- Central Java Power - Indonesia
- Savvy Resources Ltd - HongKong
- Bangladesh Power Developement Board
- Deloitte Consulting - India
- Pendopo Energi Batubara - Indonesia
- Ministry of Transport, Egypt
- PowerSource Philippines DevCo
- Maheswari Brothers Coal Limited - India
- Holcim Trading Pte Ltd - Singapore
- Bukit Makmur.PT - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Electricity Generating Authority of Thailand
- Sindya Power Generating Company Private Ltd
- Oldendorff Carriers - Singapore
- Semirara Mining and Power Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- India Bulls Power Limited - India
- Eastern Coal Council - USA
- SMC Global Power, Philippines
- Jindal Steel & Power Ltd - India
- Edison Trading Spa - Italy
- ICICI Bank Limited - India
- Chamber of Mines of South Africa
- Bulk Trading Sa - Switzerland
- Grasim Industreis Ltd - India
- Price Waterhouse Coopers - Russia
- Formosa Plastics Group - Taiwan
- Makarim & Taira - Indonesia
- GVK Power & Infra Limited - India
- Anglo American - United Kingdom
- Kumho Petrochemical, South Korea
- Indonesian Coal Mining Association
- Toyota Tsusho Corporation, Japan
- Port Waratah Coal Services - Australia
- Jaiprakash Power Ventures ltd
- Chettinad Cement Corporation Ltd - India
- Global Coal Blending Company Limited - Australia
- Bharathi Cement Corporation - India
- PTC India Limited - India
- Baramulti Group, Indonesia
- Sinarmas Energy and Mining - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Latin American Coal - Colombia
- MS Steel International - UAE
- Siam City Cement - Thailand
- Dalmia Cement Bharat India
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Sidhee Cement - India
- Ministry of Finance - Indonesia
- Intertek Mineral Services - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Iligan Light & Power Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Energy - Thailand
- Salva Resources Pvt Ltd - India
- Georgia Ports Authority, United States
- Aditya Birla Group - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Directorate Of Revenue Intelligence - India
- IHS Mccloskey Coal Group - USA
- Aboitiz Power Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- SMG Consultants - Indonesia
- Videocon Industries ltd - India
- International Coal Ventures Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Meralco Power Generation, Philippines
- Bhoruka Overseas - Indonesia
- Merrill Lynch Commodities Europe
- Planning Commission, India
- Energy Link Ltd, New Zealand
- Binh Thuan Hamico - Vietnam
- Economic Council, Georgia
- Banpu Public Company Limited - Thailand
- Globalindo Alam Lestari - Indonesia
- Indika Energy - Indonesia
- The Treasury - Australian Government
- Standard Chartered Bank - UAE
- AsiaOL BioFuels Corp., Philippines
- Australian Commodity Traders Exchange
- White Energy Company Limited
- Kalimantan Lumbung Energi - Indonesia
- Minerals Council of Australia
- Kapuas Tunggal Persada - Indonesia
- Romanian Commodities Exchange
- Ambuja Cements Ltd - India
- Madhucon Powers Ltd - India
- Sakthi Sugars Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Petron Corporation, Philippines
- Posco Energy - South Korea
- Vizag Seaport Private Limited - India
- Carbofer General Trading SA - India
- Tata Chemicals Ltd - India
- Kartika Selabumi Mining - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Maharashtra Electricity Regulatory Commission - India
- Africa Commodities Group - South Africa
- GAC Shipping (India) Pvt Ltd
- Sarangani Energy Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Larsen & Toubro Limited - India
- Antam Resourcindo - Indonesia
- Coal and Oil Company - UAE
- New Zealand Coal & Carbon
- Altura Mining Limited, Indonesia
- GMR Energy Limited - India
- Tamil Nadu electricity Board
- Thai Mozambique Logistica
- Barasentosa Lestari - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Power Finance Corporation Ltd., India
- Mercuria Energy - Indonesia
- Malabar Cements Ltd - India
- Agrawal Coal Company - India
- Commonwealth Bank - Australia
- Wilmar Investment Holdings
- Mjunction Services Limited - India
- PNOC Exploration Corporation - Philippines
- Bhatia International Limited - India
- Independent Power Producers Association of India
- Goldman Sachs - Singapore
- Essar Steel Hazira Ltd - India
- Rio Tinto Coal - Australia
- Global Green Power PLC Corporation, Philippines
- McConnell Dowell - Australia
- OPG Power Generation Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Therma Luzon, Inc, Philippines
- Coalindo Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- CIMB Investment Bank - Malaysia
- Simpson Spence & Young - Indonesia
- Sojitz Corporation - Japan
- Interocean Group of Companies - India
- Karbindo Abesyapradhi - Indoneisa
- Sical Logistics Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Parliament of New Zealand
- Kaltim Prima Coal - Indonesia
- Kepco SPC Power Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Heidelberg Cement - Germany
- Indian Oil Corporation Limited
- Gujarat Electricity Regulatory Commission - India
- Thiess Contractors Indonesia
- Bukit Baiduri Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Uttam Galva Steels Limited - India
- Xindia Steels Limited - India
- Semirara Mining Corp, Philippines
- Indo Tambangraya Megah - Indonesia
- London Commodity Brokers - England
- Directorate General of MIneral and Coal - Indonesia
- Trasteel International SA, Italy
- San Jose City I Power Corp, Philippines
- Meenaskhi Energy Private Limited - India
- South Luzon Thermal Energy Corporation
- LBH Netherlands Bv - Netherlands
- Singapore Mercantile Exchange
- Metalloyd Limited - United Kingdom
- Central Electricity Authority - India
- The University of Queensland
- Petrochimia International Co. Ltd.- Taiwan
- Mercator Lines Limited - India
- Alfred C Toepfer International GmbH - Germany
- Asmin Koalindo Tuhup - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Krishnapatnam Port Company Ltd. - India
- CNBM International Corporation - China
- Global Business Power Corporation, Philippines
- VISA Power Limited - India
- Indian Energy Exchange, India
- Marubeni Corporation - India
- Medco Energi Mining Internasional
- Parry Sugars Refinery, India
- Mintek Dendrill Indonesia
- Coastal Gujarat Power Limited - India
- Orica Mining Services - Indonesia
- Lanco Infratech Ltd - India
- Energy Development Corp, Philippines
- Orica Australia Pty. Ltd.
- Samtan Co., Ltd - South Korea
- SN Aboitiz Power Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Riau Bara Harum - Indonesia
- Vedanta Resources Plc - India
- Gujarat Mineral Development Corp Ltd - India
- Wood Mackenzie - Singapore
- The State Trading Corporation of India Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Australian Coal Association
- Bhushan Steel Limited - India
- Electricity Authority, New Zealand
- Sree Jayajothi Cements Limited - India
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