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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, 16 April 23
CHINA JUGGLES FOUR MAJOR ECONOMIC CHANGES IN 2023 - WOOD MACKENZIE
Change is afoot in China. Economic growth is slowing, while rising political tensions between China and the US, coupled with global supply chain re ...
Sunday, 16 April 23
CHINA'S MARCH COAL IMPORTS JUMP TO 3-YEAR HIGH - REUTERS
China’s coal imports surged in March to their highest in any month over the past three years as utilities increased purchases on expectations ...
Sunday, 16 April 23
OPEC KEEPS WORLD OIL DEMAND GROWTH OUTLOOK UNCHANGED
The OPEC Reference Basket (ORB) declined in March by $3.43, or 4.2%, m-o-m to average $78.45/b. The ICE Brent first-month contract fell by $4.33, o ...
Sunday, 16 April 23
CHEAPER SPOT LNG PRICES TEMPT SOME ASIAN BUYERS AMID SUPPLY GAINS - REUTERS
Cheaper spot prices for liquefied natural gas (LNG) are luring price-sensitive buyers back in Asia, with China and India recording rising imports i ...
Tuesday, 11 April 23
COAL USE CLIMBS WORLDWIDE DESPITE PROMISES TO SLASH IT - AAP
The burning of coal for electricity, cement, steel and other uses went up in 2022 despite global promises to phase down the fuel that is the bigges ...
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- The Treasury - Australian Government
- Alfred C Toepfer International GmbH - Germany
- Bukit Asam (Persero) Tbk - Indonesia
- Tata Chemicals Ltd - India
- Price Waterhouse Coopers - Russia
- Krishnapatnam Port Company Ltd. - India
- IHS Mccloskey Coal Group - USA
- India Bulls Power Limited - India
- Kaltim Prima Coal - Indonesia
- Orica Mining Services - Indonesia
- LBH Netherlands Bv - Netherlands
- Malabar Cements Ltd - India
- Carbofer General Trading SA - India
- Indian Energy Exchange, India
- GVK Power & Infra Limited - India
- Antam Resourcindo - Indonesia
- Singapore Mercantile Exchange
- Wilmar Investment Holdings
- Eastern Coal Council - USA
- Vedanta Resources Plc - India
- Electricity Generating Authority of Thailand
- Formosa Plastics Group - Taiwan
- Bhoruka Overseas - Indonesia
- Kideco Jaya Agung - Indonesia
- Bulk Trading Sa - Switzerland
- Bhushan Steel Limited - India
- Thiess Contractors Indonesia
- Intertek Mineral Services - Indonesia
- PTC India Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indian Oil Corporation Limited
- Chettinad Cement Corporation Ltd - India
- Bhatia International Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Salva Resources Pvt Ltd - India
- Energy Link Ltd, New Zealand
- OPG Power Generation Pvt Ltd - India
- Edison Trading Spa - Italy
- Baramulti Group, Indonesia
- Bangladesh Power Developement Board
- Essar Steel Hazira Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Aboitiz Power Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Sidhee Cement - India
- Vijayanagar Sugar Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Tamil Nadu electricity Board
- Thai Mozambique Logistica
- PNOC Exploration Corporation - Philippines
- SMG Consultants - Indonesia
- IEA Clean Coal Centre - UK
- TeaM Sual Corporation - Philippines
- Parliament of New Zealand
- Romanian Commodities Exchange
- Star Paper Mills Limited - India
- Central Electricity Authority - India
- Holcim Trading Pte Ltd - Singapore
- Central Java Power - Indonesia
- Ind-Barath Power Infra Limited - India
- Miang Besar Coal Terminal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Uttam Galva Steels Limited - India
- Minerals Council of Australia
- Aditya Birla Group - India
- Anglo American - United Kingdom
- Riau Bara Harum - Indonesia
- Latin American Coal - Colombia
- Port Waratah Coal Services - Australia
- White Energy Company Limited
- Iligan Light & Power Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- TNB Fuel Sdn Bhd - Malaysia
- Mintek Dendrill Indonesia
- Petron Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Meralco Power Generation, Philippines
- Kumho Petrochemical, South Korea
- Australian Commodity Traders Exchange
- Indonesian Coal Mining Association
- Pipit Mutiara Jaya. PT, Indonesia
- Kepco SPC Power Corporation, Philippines
- Rio Tinto Coal - Australia
- Ambuja Cements Ltd - India
- Renaissance Capital - South Africa
- Mercuria Energy - Indonesia
- Mjunction Services Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Global Coal Blending Company Limited - Australia
- Sarangani Energy Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Kapuas Tunggal Persada - Indonesia
- South Luzon Thermal Energy Corporation
- Coal and Oil Company - UAE
- Lanco Infratech Ltd - India
- Posco Energy - South Korea
- SN Aboitiz Power Inc, Philippines
- Therma Luzon, Inc, Philippines
- ICICI Bank Limited - India
- Savvy Resources Ltd - HongKong
- GAC Shipping (India) Pvt Ltd
- CIMB Investment Bank - Malaysia
- Sical Logistics Limited - India
- Rashtriya Ispat Nigam Limited - India
- PowerSource Philippines DevCo
- Xindia Steels Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Eastern Energy - Thailand
- Africa Commodities Group - South Africa
- Jaiprakash Power Ventures ltd
- Semirara Mining and Power Corporation, Philippines
- Heidelberg Cement - Germany
- Directorate General of MIneral and Coal - Indonesia
- Planning Commission, India
- GN Power Mariveles Coal Plant, Philippines
- Global Green Power PLC Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- Maheswari Brothers Coal Limited - India
- Kobexindo Tractors - Indoneisa
- Trasteel International SA, Italy
- Ministry of Mines - Canada
- Indogreen Group - Indonesia
- Agrawal Coal Company - India
- Chamber of Mines of South Africa
- Toyota Tsusho Corporation, Japan
- Directorate Of Revenue Intelligence - India
- AsiaOL BioFuels Corp., Philippines
- London Commodity Brokers - England
- Bahari Cakrawala Sebuku - Indonesia
- Bayan Resources Tbk. - Indonesia
- Manunggal Multi Energi - Indonesia
- Vizag Seaport Private Limited - India
- SMC Global Power, Philippines
- Grasim Industreis Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Commonwealth Bank - Australia
- Videocon Industries ltd - India
- Deloitte Consulting - India
- Binh Thuan Hamico - Vietnam
- Pendopo Energi Batubara - Indonesia
- International Coal Ventures Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Kartika Selabumi Mining - Indonesia
- Marubeni Corporation - India
- Petrochimia International Co. Ltd.- Taiwan
- Globalindo Alam Lestari - Indonesia
- Merrill Lynch Commodities Europe
- CNBM International Corporation - China
- Indo Tambangraya Megah - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- New Zealand Coal & Carbon
- Gujarat Electricity Regulatory Commission - India
- Neyveli Lignite Corporation Ltd, - India
- Billiton Holdings Pty Ltd - Australia
- Simpson Spence & Young - Indonesia
- Power Finance Corporation Ltd., India
- Semirara Mining Corp, Philippines
- Indika Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Parry Sugars Refinery, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Australian Coal Association
- Sinarmas Energy and Mining - Indonesia
- Makarim & Taira - Indonesia
- The State Trading Corporation of India Ltd
- Orica Australia Pty. Ltd.
- Attock Cement Pakistan Limited
- The University of Queensland
- Leighton Contractors Pty Ltd - Australia
- Energy Development Corp, Philippines
- Mercator Lines Limited - India
- Standard Chartered Bank - UAE
- Cigading International Bulk Terminal - Indonesia
- Interocean Group of Companies - India
- MS Steel International - UAE
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- McConnell Dowell - Australia
- Samtan Co., Ltd - South Korea
- Madhucon Powers Ltd - India
- Metalloyd Limited - United Kingdom
- Medco Energi Mining Internasional
- Ministry of Transport, Egypt
- Bukit Baiduri Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Banpu Public Company Limited - Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bharathi Cement Corporation - India
- Straits Asia Resources Limited - Singapore
- GMR Energy Limited - India
- Larsen & Toubro Limited - India
- Coalindo Energy - Indonesia
- Siam City Cement - Thailand
- Sojitz Corporation - Japan
- Borneo Indobara - Indonesia
- Goldman Sachs - Singapore
- Karaikal Port Pvt Ltd - India
- Economic Council, Georgia
- VISA Power Limited - India
- Cement Manufacturers Association - India
- Global Business Power Corporation, Philippines
- Dalmia Cement Bharat India
- San Jose City I Power Corp, Philippines
- Altura Mining Limited, Indonesia
- Electricity Authority, New Zealand
- Independent Power Producers Association of India
- Coastal Gujarat Power Limited - India
- ASAPP Information Group - India
- Jindal Steel & Power Ltd - India
- Georgia Ports Authority, United States
- European Bulk Services B.V. - Netherlands
- Offshore Bulk Terminal Pte Ltd, Singapore
- Wood Mackenzie - Singapore
- Siam City Cement PLC, Thailand
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Finance - Indonesia
- Sakthi Sugars Limited - India
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