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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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Thursday, 02 March 23
DRY BULK MARKET: THE WAY CHINA GOES, SO GOES THE MARKET - BIMCO
We expect demand growth within the 1.5-2.5% range in 2023, driven by China’s economic recovery. Improvements in consumer sentiment should hel ...
Thursday, 02 March 23
INDIA, CHINA DEMAND BOOST LOW-RANK THERMAL COAL PRICES IN ASIA - RUSSELL, REUTERS
Signs of stronger import demand from India have arrested the decline in price of the thermal coal grades most commonly sought by the world’s ...
Thursday, 02 March 23
INDIA CHEERS THE RETURN OF ‘KING COAL’ AS INDUSTRY SEES BUOYANT FUTURE - REUTERS
India’s coal industry celebrated the return of its major conference after a three-year pandemic hiatus by presenting a bullish view of demand ...
Wednesday, 01 March 23
GEO CONNECT ASIA RETURNS IN MARCH TO ACCELERATE THE REGION’S GEOSPATIAL AND LOCATION INTELLIGENCE CAPABILITIES
Press Release: The third edition of GCA will be held in conjunction with Digital Construction Asia and the inaugural Drones Asia – an event d ...
Wednesday, 01 March 23
THE DECLINE IN THE COAL PRICE SINCE THE BEGINNING OF THE YEAR HAS BEEN SIGNIFICANT - INTERMODAL
Last week, the front-month API2 future rose by 3.5%, but since the beginning of the year the future has fallen by 39% to $136.65/t, while the Newca ...
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- Karbindo Abesyapradhi - Indoneisa
- Videocon Industries ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Ceylon Electricity Board - Sri Lanka
- Central Electricity Authority - India
- Indika Energy - Indonesia
- Economic Council, Georgia
- Eastern Energy - Thailand
- ICICI Bank Limited - India
- Gujarat Sidhee Cement - India
- Alfred C Toepfer International GmbH - Germany
- Essar Steel Hazira Ltd - India
- GVK Power & Infra Limited - India
- Pendopo Energi Batubara - Indonesia
- Port Waratah Coal Services - Australia
- Mintek Dendrill Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Electricity Generating Authority of Thailand
- Asmin Koalindo Tuhup - Indonesia
- PTC India Limited - India
- Semirara Mining Corp, Philippines
- Global Coal Blending Company Limited - Australia
- Sojitz Corporation - Japan
- Karaikal Port Pvt Ltd - India
- Bharathi Cement Corporation - India
- GN Power Mariveles Coal Plant, Philippines
- Meralco Power Generation, Philippines
- Malabar Cements Ltd - India
- Aditya Birla Group - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Deloitte Consulting - India
- Vizag Seaport Private Limited - India
- Kapuas Tunggal Persada - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- International Coal Ventures Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Planning Commission, India
- Sical Logistics Limited - India
- Baramulti Group, Indonesia
- Latin American Coal - Colombia
- India Bulls Power Limited - India
- South Luzon Thermal Energy Corporation
- Star Paper Mills Limited - India
- Timah Investasi Mineral - Indoneisa
- VISA Power Limited - India
- Romanian Commodities Exchange
- Singapore Mercantile Exchange
- Renaissance Capital - South Africa
- White Energy Company Limited
- Vedanta Resources Plc - India
- PNOC Exploration Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Sakthi Sugars Limited - India
- Coalindo Energy - Indonesia
- Oldendorff Carriers - Singapore
- Commonwealth Bank - Australia
- Africa Commodities Group - South Africa
- Parliament of New Zealand
- Rashtriya Ispat Nigam Limited - India
- Kaltim Prima Coal - Indonesia
- Kobexindo Tractors - Indoneisa
- Savvy Resources Ltd - HongKong
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sarangani Energy Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Standard Chartered Bank - UAE
- Orica Australia Pty. Ltd.
- Vijayanagar Sugar Pvt Ltd - India
- Interocean Group of Companies - India
- Gujarat Mineral Development Corp Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Electricity Authority, New Zealand
- The State Trading Corporation of India Ltd
- Cigading International Bulk Terminal - Indonesia
- Mjunction Services Limited - India
- Krishnapatnam Port Company Ltd. - India
- Bukit Makmur.PT - Indonesia
- Ministry of Transport, Egypt
- Samtan Co., Ltd - South Korea
- Petron Corporation, Philippines
- ASAPP Information Group - India
- Bhatia International Limited - India
- Directorate Of Revenue Intelligence - India
- Antam Resourcindo - Indonesia
- IHS Mccloskey Coal Group - USA
- Siam City Cement - Thailand
- Central Java Power - Indonesia
- Bukit Baiduri Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- OPG Power Generation Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Leighton Contractors Pty Ltd - Australia
- Georgia Ports Authority, United States
- SMC Global Power, Philippines
- Ministry of Mines - Canada
- Kohat Cement Company Ltd. - Pakistan
- Salva Resources Pvt Ltd - India
- Eastern Coal Council - USA
- Marubeni Corporation - India
- Indogreen Group - Indonesia
- Cement Manufacturers Association - India
- Neyveli Lignite Corporation Ltd, - India
- Ambuja Cements Ltd - India
- Ministry of Finance - Indonesia
- Jindal Steel & Power Ltd - India
- Wood Mackenzie - Singapore
- Chettinad Cement Corporation Ltd - India
- Manunggal Multi Energi - Indonesia
- Minerals Council of Australia
- Ind-Barath Power Infra Limited - India
- Anglo American - United Kingdom
- Carbofer General Trading SA - India
- Kideco Jaya Agung - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- London Commodity Brokers - England
- Xindia Steels Limited - India
- Indian Oil Corporation Limited
- Pipit Mutiara Jaya. PT, Indonesia
- Sree Jayajothi Cements Limited - India
- PowerSource Philippines DevCo
- Bangladesh Power Developement Board
- Bulk Trading Sa - Switzerland
- Directorate General of MIneral and Coal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- LBH Netherlands Bv - Netherlands
- IEA Clean Coal Centre - UK
- Australian Commodity Traders Exchange
- Altura Mining Limited, Indonesia
- Aboitiz Power Corporation - Philippines
- Attock Cement Pakistan Limited
- MS Steel International - UAE
- Barasentosa Lestari - Indonesia
- Bhoruka Overseas - Indonesia
- Mercator Lines Limited - India
- Global Business Power Corporation, Philippines
- Thai Mozambique Logistica
- Coastal Gujarat Power Limited - India
- Siam City Cement PLC, Thailand
- Kepco SPC Power Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- McConnell Dowell - Australia
- Binh Thuan Hamico - Vietnam
- Bayan Resources Tbk. - Indonesia
- Heidelberg Cement - Germany
- Bank of Tokyo Mitsubishi UFJ Ltd
- Thiess Contractors Indonesia
- Kartika Selabumi Mining - Indonesia
- Tata Chemicals Ltd - India
- Dalmia Cement Bharat India
- Borneo Indobara - Indonesia
- Goldman Sachs - Singapore
- Price Waterhouse Coopers - Russia
- Indonesian Coal Mining Association
- Energy Development Corp, Philippines
- TeaM Sual Corporation - Philippines
- CNBM International Corporation - China
- Miang Besar Coal Terminal - Indonesia
- GMR Energy Limited - India
- Riau Bara Harum - Indonesia
- Mercuria Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Kumho Petrochemical, South Korea
- The Treasury - Australian Government
- Kalimantan Lumbung Energi - Indonesia
- Tamil Nadu electricity Board
- Iligan Light & Power Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- SMG Consultants - Indonesia
- GAC Shipping (India) Pvt Ltd
- Jaiprakash Power Ventures ltd
- Medco Energi Mining Internasional
- Chamber of Mines of South Africa
- Merrill Lynch Commodities Europe
- Banpu Public Company Limited - Thailand
- Lanco Infratech Ltd - India
- Larsen & Toubro Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- The University of Queensland
- Metalloyd Limited - United Kingdom
- Globalindo Alam Lestari - Indonesia
- Trasteel International SA, Italy
- Bhushan Steel Limited - India
- Rio Tinto Coal - Australia
- Sinarmas Energy and Mining - Indonesia
- Energy Link Ltd, New Zealand
- Australian Coal Association
- Power Finance Corporation Ltd., India
- Toyota Tsusho Corporation, Japan
- Meenaskhi Energy Private Limited - India
- Indian Energy Exchange, India
- Sindya Power Generating Company Private Ltd
- Edison Trading Spa - Italy
- Madhucon Powers Ltd - India
- Orica Mining Services - Indonesia
- Posco Energy - South Korea
- Agrawal Coal Company - India
- Wilmar Investment Holdings
- Makarim & Taira - Indonesia
- Grasim Industreis Ltd - India
- New Zealand Coal & Carbon
- Billiton Holdings Pty Ltd - Australia
- Simpson Spence & Young - Indonesia
- European Bulk Services B.V. - Netherlands
- Parry Sugars Refinery, India
- Maharashtra Electricity Regulatory Commission - India
- Semirara Mining and Power Corporation, Philippines
- Independent Power Producers Association of India
- San Jose City I Power Corp, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Intertek Mineral Services - Indonesia
- Coal and Oil Company - UAE
- Therma Luzon, Inc, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- Formosa Plastics Group - Taiwan
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