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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, 17 July 23
APPROVED AMMONIA-FUELED CONTAINERSHIP - BENEFITS AND RISKS: REED SMITH
Following the news in Offshore Energy that Korea Maritime Consultants has secured approval in principle from the American Bureau of Shipping for it ...
Friday, 14 July 23
CLEAN COAL USE KEY TO DEEP CUTS IN EMISSIONS, STABLE ELECTRICITY SUPPLY - CHINA DAILY
China must push for the clean use of coal and step up integration of the dirty fuel with carbon capture, utilization and storage to achieve sustain ...
Thursday, 13 July 23
VIETNAM'S COAL EMISSIONS PRIMED FOR SURGE AFTER IMPORTS JUMP - REUTERS
Vietnam’s thermal power emissions are primed for a steep climb this summer after the country’s imports of thermal coal soared to their ...
Monday, 26 June 23
COAL PRODUCTION AND CONSUMPTION UP IN 2022 - EUROSTAT
In 2022, EU coal production and consumption continued to increase, reaching 349 million tonnes (+5% compared with the previous year) and 454 millio ...
Wednesday, 21 June 23
QATAR STRIKES SECOND BIG LNG SUPPLY DEAL WITH CHINA - REUTERS
Qatar on Tuesday secured its second large gas supply deal with a Chinese state-controlled company in less than a year, putting Asia clearly ahead i ...
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- Heidelberg Cement - Germany
- Directorate General of MIneral and Coal - Indonesia
- Bhoruka Overseas - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Edison Trading Spa - Italy
- Kartika Selabumi Mining - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Independent Power Producers Association of India
- Meralco Power Generation, Philippines
- Renaissance Capital - South Africa
- CNBM International Corporation - China
- Therma Luzon, Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Ambuja Cements Ltd - India
- Mjunction Services Limited - India
- IHS Mccloskey Coal Group - USA
- Bharathi Cement Corporation - India
- Coalindo Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Energy Development Corp, Philippines
- VISA Power Limited - India
- Formosa Plastics Group - Taiwan
- ASAPP Information Group - India
- Mintek Dendrill Indonesia
- Samtan Co., Ltd - South Korea
- McConnell Dowell - Australia
- Chettinad Cement Corporation Ltd - India
- MS Steel International - UAE
- Kumho Petrochemical, South Korea
- Sinarmas Energy and Mining - Indonesia
- Borneo Indobara - Indonesia
- Videocon Industries ltd - India
- Sical Logistics Limited - India
- Leighton Contractors Pty Ltd - Australia
- Timah Investasi Mineral - Indoneisa
- India Bulls Power Limited - India
- Semirara Mining and Power Corporation, Philippines
- Standard Chartered Bank - UAE
- Minerals Council of Australia
- Star Paper Mills Limited - India
- Aditya Birla Group - India
- Ministry of Mines - Canada
- San Jose City I Power Corp, Philippines
- Semirara Mining Corp, Philippines
- Latin American Coal - Colombia
- Mercator Lines Limited - India
- Indo Tambangraya Megah - Indonesia
- Indian Energy Exchange, India
- Kobexindo Tractors - Indoneisa
- Economic Council, Georgia
- Bhatia International Limited - India
- GAC Shipping (India) Pvt Ltd
- Ministry of Finance - Indonesia
- Metalloyd Limited - United Kingdom
- South Luzon Thermal Energy Corporation
- Bukit Makmur.PT - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- PowerSource Philippines DevCo
- Bhushan Steel Limited - India
- Ind-Barath Power Infra Limited - India
- Sojitz Corporation - Japan
- SN Aboitiz Power Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Karaikal Port Pvt Ltd - India
- Wood Mackenzie - Singapore
- Gujarat Electricity Regulatory Commission - India
- Tamil Nadu electricity Board
- GVK Power & Infra Limited - India
- Wilmar Investment Holdings
- Australian Commodity Traders Exchange
- LBH Netherlands Bv - Netherlands
- The State Trading Corporation of India Ltd
- PTC India Limited - India
- Power Finance Corporation Ltd., India
- Makarim & Taira - Indonesia
- Sarangani Energy Corporation, Philippines
- White Energy Company Limited
- Anglo American - United Kingdom
- Trasteel International SA, Italy
- Jorong Barutama Greston.PT - Indonesia
- SMG Consultants - Indonesia
- European Bulk Services B.V. - Netherlands
- Cigading International Bulk Terminal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Sakthi Sugars Limited - India
- Singapore Mercantile Exchange
- Directorate Of Revenue Intelligence - India
- Thiess Contractors Indonesia
- IEA Clean Coal Centre - UK
- TeaM Sual Corporation - Philippines
- Indogreen Group - Indonesia
- Banpu Public Company Limited - Thailand
- Straits Asia Resources Limited - Singapore
- Carbofer General Trading SA - India
- Bulk Trading Sa - Switzerland
- Essar Steel Hazira Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Electricity Generating Authority of Thailand
- Siam City Cement PLC, Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Indika Energy - Indonesia
- New Zealand Coal & Carbon
- Meenaskhi Energy Private Limited - India
- Globalindo Alam Lestari - Indonesia
- Interocean Group of Companies - India
- Medco Energi Mining Internasional
- GMR Energy Limited - India
- Merrill Lynch Commodities Europe
- Tata Chemicals Ltd - India
- Antam Resourcindo - Indonesia
- Central Electricity Authority - India
- The Treasury - Australian Government
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Billiton Holdings Pty Ltd - Australia
- Rashtriya Ispat Nigam Limited - India
- Bangladesh Power Developement Board
- Simpson Spence & Young - Indonesia
- Grasim Industreis Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- PetroVietnam Power Coal Import and Supply Company
- TNB Fuel Sdn Bhd - Malaysia
- Australian Coal Association
- Posco Energy - South Korea
- Eastern Energy - Thailand
- Electricity Authority, New Zealand
- Mercuria Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Malabar Cements Ltd - India
- Central Java Power - Indonesia
- Salva Resources Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Chamber of Mines of South Africa
- Price Waterhouse Coopers - Russia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Miang Besar Coal Terminal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- OPG Power Generation Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Eastern Coal Council - USA
- The University of Queensland
- Deloitte Consulting - India
- Attock Cement Pakistan Limited
- Gujarat Mineral Development Corp Ltd - India
- Marubeni Corporation - India
- Cement Manufacturers Association - India
- Maheswari Brothers Coal Limited - India
- Parry Sugars Refinery, India
- CIMB Investment Bank - Malaysia
- Goldman Sachs - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Savvy Resources Ltd - HongKong
- Energy Link Ltd, New Zealand
- Dalmia Cement Bharat India
- PNOC Exploration Corporation - Philippines
- Rio Tinto Coal - Australia
- Siam City Cement - Thailand
- Planning Commission, India
- Baramulti Group, Indonesia
- Jaiprakash Power Ventures ltd
- International Coal Ventures Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Jindal Steel & Power Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Indonesian Coal Mining Association
- Ministry of Transport, Egypt
- Thai Mozambique Logistica
- Altura Mining Limited, Indonesia
- Romanian Commodities Exchange
- Intertek Mineral Services - Indonesia
- Toyota Tsusho Corporation, Japan
- Global Green Power PLC Corporation, Philippines
- Uttam Galva Steels Limited - India
- Barasentosa Lestari - Indonesia
- Iligan Light & Power Inc, Philippines
- Oldendorff Carriers - Singapore
- Larsen & Toubro Limited - India
- Kapuas Tunggal Persada - Indonesia
- Bayan Resources Tbk. - Indonesia
- SMC Global Power, Philippines
- Gujarat Sidhee Cement - India
- Commonwealth Bank - Australia
- Manunggal Multi Energi - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Coal and Oil Company - UAE
- Xindia Steels Limited - India
- Petron Corporation, Philippines
- ICICI Bank Limited - India
- Africa Commodities Group - South Africa
- Orica Australia Pty. Ltd.
- Sree Jayajothi Cements Limited - India
- London Commodity Brokers - England
- Vedanta Resources Plc - India
- Parliament of New Zealand
- Sindya Power Generating Company Private Ltd
- Vizag Seaport Private Limited - India
- Kepco SPC Power Corporation, Philippines
- Georgia Ports Authority, United States
- Binh Thuan Hamico - Vietnam
- Global Coal Blending Company Limited - Australia
- Bukit Baiduri Energy - Indonesia
- Lanco Infratech Ltd - India
- Agrawal Coal Company - India
- Maharashtra Electricity Regulatory Commission - India
- Indian Oil Corporation Limited
- Orica Mining Services - Indonesia
- Madhucon Powers Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Global Business Power Corporation, Philippines
- Port Waratah Coal Services - Australia
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