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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, 02 August 24
COAL MARKET DEVELOPMENTS: FALLING PRICES AMID RECORD-HIGH OUTPUT - WORLD BANK
Coal prices inched up in May (m/m) following an 8 percent decline in 2024Q1. The Australian and South African benchmarks have plummeted more ...
Friday, 26 July 24
FUELEU MARITME IS COMING. IS YOUR CHARTERPARTY READY? - GARD
With less than six months to implementation of FuelEU Maritime in EU and EEA trades, there has been little published advice regarding how to alloca ...
Thursday, 04 July 24
INDIA'S COAL PRODUCTION RISES 14% IN JUNE - PTI
The country’s coal production rose by 14.49% to 84.63 million tonne (MT) in June. The country’s coal output was 73.92 MT in June last f ...
Tuesday, 02 July 24
NTPC CAPTIVE COAL OUTPUT GROWS 15% IN Q1; DESPATCH RISES 17%
State-owned NTPC on Monday reported a 15 per cent year-on-year increase in the production of coal from captives mines to 9.862 metric million tonne ...
Friday, 28 June 24
KOSPO INVITED BIDS FOR 400,000 MT OF MINIMUM 4000 NCV COAL FOR FIVE YEARS
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for total 400,000 MT of Low Calorific Value Coal for 5 years starting from July 2024 until ...
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- Global Green Power PLC Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Heidelberg Cement - Germany
- SN Aboitiz Power Inc, Philippines
- IHS Mccloskey Coal Group - USA
- Madhucon Powers Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Ministry of Mines - Canada
- Bayan Resources Tbk. - Indonesia
- Indian Oil Corporation Limited
- Indo Tambangraya Megah - Indonesia
- The Treasury - Australian Government
- GAC Shipping (India) Pvt Ltd
- Price Waterhouse Coopers - Russia
- Electricity Authority, New Zealand
- Renaissance Capital - South Africa
- Aditya Birla Group - India
- Bharathi Cement Corporation - India
- VISA Power Limited - India
- Petron Corporation, Philippines
- Georgia Ports Authority, United States
- AsiaOL BioFuels Corp., Philippines
- Standard Chartered Bank - UAE
- Savvy Resources Ltd - HongKong
- Mercuria Energy - Indonesia
- Goldman Sachs - Singapore
- Tata Chemicals Ltd - India
- Meralco Power Generation, Philippines
- Uttam Galva Steels Limited - India
- Energy Link Ltd, New Zealand
- Timah Investasi Mineral - Indoneisa
- ASAPP Information Group - India
- Neyveli Lignite Corporation Ltd, - India
- Power Finance Corporation Ltd., India
- The University of Queensland
- Singapore Mercantile Exchange
- India Bulls Power Limited - India
- Thai Mozambique Logistica
- ICICI Bank Limited - India
- Rashtriya Ispat Nigam Limited - India
- Manunggal Multi Energi - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Ministry of Transport, Egypt
- Borneo Indobara - Indonesia
- Riau Bara Harum - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Formosa Plastics Group - Taiwan
- Australian Coal Association
- GN Power Mariveles Coal Plant, Philippines
- Banpu Public Company Limited - Thailand
- Energy Development Corp, Philippines
- Bulk Trading Sa - Switzerland
- Essar Steel Hazira Ltd - India
- Oldendorff Carriers - Singapore
- Latin American Coal - Colombia
- Minerals Council of Australia
- IEA Clean Coal Centre - UK
- Globalindo Alam Lestari - Indonesia
- Mjunction Services Limited - India
- Kumho Petrochemical, South Korea
- SMG Consultants - Indonesia
- Coalindo Energy - Indonesia
- Thiess Contractors Indonesia
- Siam City Cement - Thailand
- SMC Global Power, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bukit Makmur.PT - Indonesia
- Anglo American - United Kingdom
- Kohat Cement Company Ltd. - Pakistan
- Jorong Barutama Greston.PT - Indonesia
- Krishnapatnam Port Company Ltd. - India
- PTC India Limited - India
- Bhushan Steel Limited - India
- Marubeni Corporation - India
- PowerSource Philippines DevCo
- Videocon Industries ltd - India
- Binh Thuan Hamico - Vietnam
- Sindya Power Generating Company Private Ltd
- Bhatia International Limited - India
- Chettinad Cement Corporation Ltd - India
- Australian Commodity Traders Exchange
- Kepco SPC Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Xindia Steels Limited - India
- South Luzon Thermal Energy Corporation
- Sojitz Corporation - Japan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- New Zealand Coal & Carbon
- Indogreen Group - Indonesia
- Star Paper Mills Limited - India
- Independent Power Producers Association of India
- Therma Luzon, Inc, Philippines
- Cement Manufacturers Association - India
- The State Trading Corporation of India Ltd
- Kartika Selabumi Mining - Indonesia
- Carbofer General Trading SA - India
- Gujarat Mineral Development Corp Ltd - India
- PNOC Exploration Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Antam Resourcindo - Indonesia
- Attock Cement Pakistan Limited
- Vizag Seaport Private Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Bahari Cakrawala Sebuku - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bhoruka Overseas - Indonesia
- Meenaskhi Energy Private Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Commonwealth Bank - Australia
- OPG Power Generation Pvt Ltd - India
- Posco Energy - South Korea
- Indika Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- Semirara Mining Corp, Philippines
- Sarangani Energy Corporation, Philippines
- Larsen & Toubro Limited - India
- Cigading International Bulk Terminal - Indonesia
- Vedanta Resources Plc - India
- Kalimantan Lumbung Energi - Indonesia
- Sical Logistics Limited - India
- Alfred C Toepfer International GmbH - Germany
- Sakthi Sugars Limited - India
- Orica Mining Services - Indonesia
- Bukit Baiduri Energy - Indonesia
- Mercator Lines Limited - India
- Ministry of Finance - Indonesia
- Eastern Energy - Thailand
- Kapuas Tunggal Persada - Indonesia
- Pendopo Energi Batubara - Indonesia
- Miang Besar Coal Terminal - Indonesia
- TeaM Sual Corporation - Philippines
- Lanco Infratech Ltd - India
- Medco Energi Mining Internasional
- Holcim Trading Pte Ltd - Singapore
- Coastal Gujarat Power Limited - India
- Siam City Cement PLC, Thailand
- Tamil Nadu electricity Board
- CIMB Investment Bank - Malaysia
- Edison Trading Spa - Italy
- Billiton Holdings Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Global Business Power Corporation, Philippines
- GMR Energy Limited - India
- Central Electricity Authority - India
- Straits Asia Resources Limited - Singapore
- Port Waratah Coal Services - Australia
- Indonesian Coal Mining Association
- Leighton Contractors Pty Ltd - Australia
- Baramulti Group, Indonesia
- Deloitte Consulting - India
- Chamber of Mines of South Africa
- Makarim & Taira - Indonesia
- Romanian Commodities Exchange
- Kobexindo Tractors - Indoneisa
- Trasteel International SA, Italy
- Gujarat Electricity Regulatory Commission - India
- Mintek Dendrill Indonesia
- Sinarmas Energy and Mining - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- International Coal Ventures Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Bangladesh Power Developement Board
- Economic Council, Georgia
- Barasentosa Lestari - Indonesia
- Grasim Industreis Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Rio Tinto Coal - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Jindal Steel & Power Ltd - India
- Eastern Coal Council - USA
- Parliament of New Zealand
- Merrill Lynch Commodities Europe
- Indian Energy Exchange, India
- Electricity Generating Authority of Thailand
- Aboitiz Power Corporation - Philippines
- San Jose City I Power Corp, Philippines
- MS Steel International - UAE
- Africa Commodities Group - South Africa
- Samtan Co., Ltd - South Korea
- Parry Sugars Refinery, India
- Orica Australia Pty. Ltd.
- Toyota Tsusho Corporation, Japan
- Jaiprakash Power Ventures ltd
- Dalmia Cement Bharat India
- Altura Mining Limited, Indonesia
- Maheswari Brothers Coal Limited - India
- McConnell Dowell - Australia
- Wilmar Investment Holdings
- LBH Netherlands Bv - Netherlands
- Agrawal Coal Company - India
- Ambuja Cements Ltd - India
- White Energy Company Limited
- TNB Fuel Sdn Bhd - Malaysia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Intertek Mineral Services - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Salva Resources Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- European Bulk Services B.V. - Netherlands
- Sree Jayajothi Cements Limited - India
- Global Coal Blending Company Limited - Australia
- Central Java Power - Indonesia
- London Commodity Brokers - England
- GVK Power & Infra Limited - India
- CNBM International Corporation - China
- Gujarat Sidhee Cement - India
- Metalloyd Limited - United Kingdom
- Kideco Jaya Agung - Indonesia
- Coal and Oil Company - UAE
- Planning Commission, India
- Wood Mackenzie - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Interocean Group of Companies - India
- Malabar Cements Ltd - India
- Simpson Spence & Young - Indonesia
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