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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, 28 June 24
INDIAN POWER STATIONS STOCKED WITH BUMPER COAL SUPPLY AS TRANSPORT WOES EASE - BUSINESS STANDARD
Even as power demand has touched a historic high of 250 gigawatts (Gw) amid sweltering heat this June, India’s power stations are stocked wit ...
Friday, 28 June 24
INDIA'S CY23 COAL USE LARGER THAN NORTH AMERICA, EUROPE COMBINED - THE HINDU
For the first time, India’s coal consumption surpassed that of North America and Europe combined in the calendar year 2023, said Energy Insti ...
Monday, 24 June 24
PLN'S FINANCIAL SUSTAINABILITY RESTS ON ACCELERATED COAL RETIREMENT AND RENEWABLES DEPLOYMENT - MUTYA YUSTIKA
On 28 May 2024, Indonesia’s national electricity utility, PT Perusahaan Listrik Negara (PLN), released its financial report for 2023. Althoug ...
Monday, 24 June 24
INDIA'S COAL-BASED POWER DEMAND AT ALL-TIME HIGH, GOVERNMENT SAYS - REUTERS
India’s demand for coal-based power has risen by 7.3% this fiscal year to an all-time high, the government said in a statement on Wednesday.
...
Monday, 24 June 24
CHINA'S COAL INDUSTRY TURNS GREENER THROUGH INNOVATIVE APPROACHES - PEOPLE'S DAILY
At an opencast mine operated by Inner Mongolia Pingzhuang Coal Group Co. Ltd., a subsidiary of CHN Energy Investment Group (CHN Energy), a 14-meter ...
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- Bulk Trading Sa - Switzerland
- The Treasury - Australian Government
- Eastern Coal Council - USA
- Gujarat Electricity Regulatory Commission - India
- GN Power Mariveles Coal Plant, Philippines
- Salva Resources Pvt Ltd - India
- Agrawal Coal Company - India
- Jindal Steel & Power Ltd - India
- Grasim Industreis Ltd - India
- Energy Development Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Port Waratah Coal Services - Australia
- Indogreen Group - Indonesia
- Rio Tinto Coal - Australia
- Vedanta Resources Plc - India
- Borneo Indobara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Georgia Ports Authority, United States
- Carbofer General Trading SA - India
- Sindya Power Generating Company Private Ltd
- Xindia Steels Limited - India
- ICICI Bank Limited - India
- Star Paper Mills Limited - India
- Mjunction Services Limited - India
- Siam City Cement PLC, Thailand
- Planning Commission, India
- Toyota Tsusho Corporation, Japan
- Iligan Light & Power Inc, Philippines
- Metalloyd Limited - United Kingdom
- Maharashtra Electricity Regulatory Commission - India
- Miang Besar Coal Terminal - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Coalindo Energy - Indonesia
- Altura Mining Limited, Indonesia
- Orica Mining Services - Indonesia
- Savvy Resources Ltd - HongKong
- PNOC Exploration Corporation - Philippines
- Chamber of Mines of South Africa
- Thai Mozambique Logistica
- TeaM Sual Corporation - Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Essar Steel Hazira Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Binh Thuan Hamico - Vietnam
- Uttam Galva Steels Limited - India
- Intertek Mineral Services - Indonesia
- Aditya Birla Group - India
- Trasteel International SA, Italy
- ASAPP Information Group - India
- Sinarmas Energy and Mining - Indonesia
- Indo Tambangraya Megah - Indonesia
- Directorate Of Revenue Intelligence - India
- Timah Investasi Mineral - Indoneisa
- Mercuria Energy - Indonesia
- Australian Coal Association
- IHS Mccloskey Coal Group - USA
- White Energy Company Limited
- Chettinad Cement Corporation Ltd - India
- Medco Energi Mining Internasional
- Directorate General of MIneral and Coal - Indonesia
- Parry Sugars Refinery, India
- Baramulti Group, Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Maheswari Brothers Coal Limited - India
- Gujarat Sidhee Cement - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bhushan Steel Limited - India
- Madhucon Powers Ltd - India
- Semirara Mining and Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Romanian Commodities Exchange
- Banpu Public Company Limited - Thailand
- Therma Luzon, Inc, Philippines
- Coal and Oil Company - UAE
- Commonwealth Bank - Australia
- Oldendorff Carriers - Singapore
- Mintek Dendrill Indonesia
- Bangladesh Power Developement Board
- PowerSource Philippines DevCo
- Asmin Koalindo Tuhup - Indonesia
- Petron Corporation, Philippines
- Indian Energy Exchange, India
- Bukit Asam (Persero) Tbk - Indonesia
- Larsen & Toubro Limited - India
- Siam City Cement - Thailand
- Rashtriya Ispat Nigam Limited - India
- Antam Resourcindo - Indonesia
- VISA Power Limited - India
- Edison Trading Spa - Italy
- Independent Power Producers Association of India
- Orica Australia Pty. Ltd.
- Coastal Gujarat Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kepco SPC Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Gujarat Mineral Development Corp Ltd - India
- New Zealand Coal & Carbon
- Meralco Power Generation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Semirara Mining Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Power Finance Corporation Ltd., India
- Latin American Coal - Colombia
- Ambuja Cements Ltd - India
- Africa Commodities Group - South Africa
- Minerals Council of Australia
- Parliament of New Zealand
- SN Aboitiz Power Inc, Philippines
- Goldman Sachs - Singapore
- Marubeni Corporation - India
- Sarangani Energy Corporation, Philippines
- Australian Commodity Traders Exchange
- GAC Shipping (India) Pvt Ltd
- Krishnapatnam Port Company Ltd. - India
- Kideco Jaya Agung - Indonesia
- Indika Energy - Indonesia
- Tamil Nadu electricity Board
- Riau Bara Harum - Indonesia
- Alfred C Toepfer International GmbH - Germany
- IEA Clean Coal Centre - UK
- Bahari Cakrawala Sebuku - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Ministry of Finance - Indonesia
- Bayan Resources Tbk. - Indonesia
- Deloitte Consulting - India
- Bukit Makmur.PT - Indonesia
- PTC India Limited - India
- Sical Logistics Limited - India
- Ceylon Electricity Board - Sri Lanka
- Bukit Baiduri Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Electricity Authority, New Zealand
- South Luzon Thermal Energy Corporation
- Singapore Mercantile Exchange
- Formosa Plastics Group - Taiwan
- European Bulk Services B.V. - Netherlands
- Renaissance Capital - South Africa
- London Commodity Brokers - England
- Ministry of Transport, Egypt
- Central Java Power - Indonesia
- Eastern Energy - Thailand
- SMC Global Power, Philippines
- Lanco Infratech Ltd - India
- Sakthi Sugars Limited - India
- Interocean Group of Companies - India
- CNBM International Corporation - China
- Sojitz Corporation - Japan
- Videocon Industries ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Heidelberg Cement - Germany
- Karaikal Port Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Globalindo Alam Lestari - Indonesia
- Price Waterhouse Coopers - Russia
- Attock Cement Pakistan Limited
- Bharathi Cement Corporation - India
- PetroVietnam Power Coal Import and Supply Company
- Posco Energy - South Korea
- McConnell Dowell - Australia
- Merrill Lynch Commodities Europe
- Anglo American - United Kingdom
- Global Coal Blending Company Limited - Australia
- Economic Council, Georgia
- Pendopo Energi Batubara - Indonesia
- Bhatia International Limited - India
- Kobexindo Tractors - Indoneisa
- Aboitiz Power Corporation - Philippines
- Electricity Generating Authority of Thailand
- Mercator Lines Limited - India
- Samtan Co., Ltd - South Korea
- Global Green Power PLC Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Wilmar Investment Holdings
- Sree Jayajothi Cements Limited - India
- Energy Link Ltd, New Zealand
- Indonesian Coal Mining Association
- Standard Chartered Bank - UAE
- International Coal Ventures Pvt Ltd - India
- Malabar Cements Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- GVK Power & Infra Limited - India
- Dalmia Cement Bharat India
- Kaltim Prima Coal - Indonesia
- CIMB Investment Bank - Malaysia
- GMR Energy Limited - India
- Cement Manufacturers Association - India
- Neyveli Lignite Corporation Ltd, - India
- The State Trading Corporation of India Ltd
- Global Business Power Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- India Bulls Power Limited - India
- Indian Oil Corporation Limited
- SMG Consultants - Indonesia
- Central Electricity Authority - India
- Holcim Trading Pte Ltd - Singapore
- Manunggal Multi Energi - Indonesia
- Ind-Barath Power Infra Limited - India
- Tata Chemicals Ltd - India
- Barasentosa Lestari - Indonesia
- LBH Netherlands Bv - Netherlands
- Straits Asia Resources Limited - Singapore
- Meenaskhi Energy Private Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- MS Steel International - UAE
- Makarim & Taira - Indonesia
- Simpson Spence & Young - Indonesia
- Wood Mackenzie - Singapore
- Ministry of Mines - Canada
- Petrochimia International Co. Ltd.- Taiwan
- Kartika Selabumi Mining - Indonesia
- San Jose City I Power Corp, Philippines
- Vizag Seaport Private Limited - India
- The University of Queensland
- Thiess Contractors Indonesia
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