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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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Wednesday, 21 June 23
CHINA'S MAY COAL IMPORTS FROM AUSTRALIA RECOVER TO PRE-BAN LEVELS - REUTERS
Australian coal sales to China increased in May, as trade resumed between them even as overall coal demand weakened against an uncertain macroecono ...
Monday, 19 June 23
DROUGHT-DEPLETED HYDROPOWER DRIVES CHINA TO TURN TO COAL - REUTERS
China has leant hard on coal-fired power plants as well as wind and solar generators to make up for a shortfall in hydroelectric generation as a re ...
Monday, 19 June 23
CHINA COAL OUTPUT UP 4.2 PCT IN MAY - XINHUA
China’s raw coal output posted steady growth in May, official data showed.
The country produced 390 million tonnes of raw coal ...
Wednesday, 24 May 23
AMMONIA-FUELLED BULK CARRIERS WITHIN FIVE YEARS - BALTIC EXCHANGE
Within five years, ships powered by clean ammonia could be a feature on the iron ore trade routes between West Australia and East Asia.
A study ...
Tuesday, 23 May 23
CHINA'S APRIL COAL OUTPUT LEAPS 11% ON YEAR, BUT DEMAND DOWNTURN LOOMS - REUTERS
China’s daily coal output in April jumped 11% from the same month a year earlier, boosted by Beijing’s order to increase supply to ensu ...
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- Global Coal Blending Company Limited - Australia
- Wood Mackenzie - Singapore
- South Luzon Thermal Energy Corporation
- Kalimantan Lumbung Energi - Indonesia
- Salva Resources Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Vedanta Resources Plc - India
- Merrill Lynch Commodities Europe
- Price Waterhouse Coopers - Russia
- Electricity Generating Authority of Thailand
- Karbindo Abesyapradhi - Indoneisa
- Attock Cement Pakistan Limited
- Wilmar Investment Holdings
- Global Business Power Corporation, Philippines
- CNBM International Corporation - China
- GAC Shipping (India) Pvt Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Posco Energy - South Korea
- Latin American Coal - Colombia
- Asmin Koalindo Tuhup - Indonesia
- Vizag Seaport Private Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Intertek Mineral Services - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Economic Council, Georgia
- Jindal Steel & Power Ltd - India
- PowerSource Philippines DevCo
- Georgia Ports Authority, United States
- Sindya Power Generating Company Private Ltd
- Marubeni Corporation - India
- Tamil Nadu electricity Board
- CIMB Investment Bank - Malaysia
- Oldendorff Carriers - Singapore
- Bangladesh Power Developement Board
- Bank of Tokyo Mitsubishi UFJ Ltd
- Central Electricity Authority - India
- Commonwealth Bank - Australia
- San Jose City I Power Corp, Philippines
- Goldman Sachs - Singapore
- Semirara Mining and Power Corporation, Philippines
- Coal and Oil Company - UAE
- Neyveli Lignite Corporation Ltd, - India
- Heidelberg Cement - Germany
- Independent Power Producers Association of India
- Binh Thuan Hamico - Vietnam
- The University of Queensland
- Manunggal Multi Energi - Indonesia
- Globalindo Alam Lestari - Indonesia
- Sojitz Corporation - Japan
- Altura Mining Limited, Indonesia
- Thai Mozambique Logistica
- London Commodity Brokers - England
- Banpu Public Company Limited - Thailand
- TeaM Sual Corporation - Philippines
- Central Java Power - Indonesia
- Singapore Mercantile Exchange
- Kartika Selabumi Mining - Indonesia
- Bharathi Cement Corporation - India
- Agrawal Coal Company - India
- MS Steel International - UAE
- Romanian Commodities Exchange
- Aboitiz Power Corporation - Philippines
- Baramulti Group, Indonesia
- The State Trading Corporation of India Ltd
- New Zealand Coal & Carbon
- Grasim Industreis Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Interocean Group of Companies - India
- Trasteel International SA, Italy
- Riau Bara Harum - Indonesia
- Cement Manufacturers Association - India
- Sakthi Sugars Limited - India
- Indika Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- White Energy Company Limited
- Meralco Power Generation, Philippines
- Semirara Mining Corp, Philippines
- McConnell Dowell - Australia
- Tata Chemicals Ltd - India
- Bayan Resources Tbk. - Indonesia
- PNOC Exploration Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- Coalindo Energy - Indonesia
- Videocon Industries ltd - India
- Mjunction Services Limited - India
- ICICI Bank Limited - India
- Sarangani Energy Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Anglo American - United Kingdom
- Ceylon Electricity Board - Sri Lanka
- Ambuja Cements Ltd - India
- Ind-Barath Power Infra Limited - India
- IEA Clean Coal Centre - UK
- Port Waratah Coal Services - Australia
- Jorong Barutama Greston.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- Medco Energi Mining Internasional
- Makarim & Taira - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Sinarmas Energy and Mining - Indonesia
- Energy Link Ltd, New Zealand
- Ministry of Mines - Canada
- Kepco SPC Power Corporation, Philippines
- The Treasury - Australian Government
- Planning Commission, India
- Larsen & Toubro Limited - India
- Ministry of Transport, Egypt
- SMC Global Power, Philippines
- Billiton Holdings Pty Ltd - Australia
- Ministry of Finance - Indonesia
- Savvy Resources Ltd - HongKong
- Miang Besar Coal Terminal - Indonesia
- Directorate Of Revenue Intelligence - India
- SN Aboitiz Power Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Simpson Spence & Young - Indonesia
- ASAPP Information Group - India
- Star Paper Mills Limited - India
- Samtan Co., Ltd - South Korea
- Meenaskhi Energy Private Limited - India
- Formosa Plastics Group - Taiwan
- Bhushan Steel Limited - India
- Jaiprakash Power Ventures ltd
- Borneo Indobara - Indonesia
- Eastern Energy - Thailand
- AsiaOL BioFuels Corp., Philippines
- Parry Sugars Refinery, India
- Sical Logistics Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Barasentosa Lestari - Indonesia
- Australian Coal Association
- Electricity Authority, New Zealand
- Uttam Galva Steels Limited - India
- Xindia Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- VISA Power Limited - India
- Africa Commodities Group - South Africa
- Gujarat Electricity Regulatory Commission - India
- OPG Power Generation Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Bukit Baiduri Energy - Indonesia
- Eastern Coal Council - USA
- Antam Resourcindo - Indonesia
- Bukit Makmur.PT - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Alfred C Toepfer International GmbH - Germany
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Parliament of New Zealand
- Bhatia International Limited - India
- GMR Energy Limited - India
- Petron Corporation, Philippines
- Orica Australia Pty. Ltd.
- Indogreen Group - Indonesia
- Siam City Cement PLC, Thailand
- Bhoruka Overseas - Indonesia
- Kideco Jaya Agung - Indonesia
- Thiess Contractors Indonesia
- SMG Consultants - Indonesia
- Kaltim Prima Coal - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bulk Trading Sa - Switzerland
- Petrochimia International Co. Ltd.- Taiwan
- Maharashtra Electricity Regulatory Commission - India
- Rio Tinto Coal - Australia
- Global Green Power PLC Corporation, Philippines
- Therma Luzon, Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Energy Development Corp, Philippines
- Siam City Cement - Thailand
- Orica Mining Services - Indonesia
- Timah Investasi Mineral - Indoneisa
- Indian Oil Corporation Limited
- Carbofer General Trading SA - India
- Coastal Gujarat Power Limited - India
- Chamber of Mines of South Africa
- Lanco Infratech Ltd - India
- Edison Trading Spa - Italy
- Gujarat Sidhee Cement - India
- Standard Chartered Bank - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- Mercator Lines Limited - India
- Indo Tambangraya Megah - Indonesia
- Kumho Petrochemical, South Korea
- Deloitte Consulting - India
- Sree Jayajothi Cements Limited - India
- Malabar Cements Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Indian Energy Exchange, India
- Toyota Tsusho Corporation, Japan
- Chettinad Cement Corporation Ltd - India
- Pendopo Energi Batubara - Indonesia
- LBH Netherlands Bv - Netherlands
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mercuria Energy - Indonesia
- Metalloyd Limited - United Kingdom
- Dalmia Cement Bharat India
- Indonesian Coal Mining Association
- Power Finance Corporation Ltd., India
- Renaissance Capital - South Africa
- Mintek Dendrill Indonesia
- India Bulls Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- European Bulk Services B.V. - Netherlands
- Aditya Birla Group - India
- Leighton Contractors Pty Ltd - Australia
- PTC India Limited - India
- Madhucon Powers Ltd - India
- Karaikal Port Pvt Ltd - India
- Australian Commodity Traders Exchange
- Minerals Council of Australia
- GVK Power & Infra Limited - India
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