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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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Monday, 24 June 24
PHILIPPINES COAL SUPPLY ENOUGH UNTIL 2030 - PHILSTAR GLOBAL
The country’s existing coal-fired power plants are sufficient to ensure enough base load capacity in the next six years, Energy Secretary Rap ...
Friday, 14 June 24
NEXTDECADE, SAUDI ARAMCO SIGN 20-YEAR LNG SUPPLY DEAL - REUTERS
U.S. liquefied natural gas (LNG) provider NextDecade has signed a non-binding agreement with Saudi Aramco 2222.SE to supply 1.2 million tonnes per ...
Friday, 14 June 24
NEWBUILDING PRICES CLIMB 3% TO HIGHEST LEVEL IN 16 YEARS - NIELS RASMUSSEN
“Since the start of the year, newbuilding prices have risen 3% to their highest level since 2008. Compared to their most recent low in late 2 ...
Friday, 14 June 24
INDIA TARGETS HIGHER DOMESTIC COAL PRODUCTION, REDUCED IMPORTS: GOVT - REUTERS
India wants to reduce coal imports and increase domestic production, federal coal minister G. Kishan Reddy said on Thursday.
The cou ...
Thursday, 13 June 24
US LNG TO ASIA FOR POWER GENERATION EXPECTED TO CUT EMISSIONS VERSUS COAL - RYSTAD ENERGY
The value-chain emissions of liquified natural gas (LNG) are lower on average than for coal-fired power generation, even when the fuel is shipp ...
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- Global Business Power Corporation, Philippines
- Sojitz Corporation - Japan
- Vijayanagar Sugar Pvt Ltd - India
- Borneo Indobara - Indonesia
- Edison Trading Spa - Italy
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Billiton Holdings Pty Ltd - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Coalindo Energy - Indonesia
- Thiess Contractors Indonesia
- Parliament of New Zealand
- Global Coal Blending Company Limited - Australia
- Bhoruka Overseas - Indonesia
- ASAPP Information Group - India
- The Treasury - Australian Government
- Sical Logistics Limited - India
- Altura Mining Limited, Indonesia
- Miang Besar Coal Terminal - Indonesia
- Meralco Power Generation, Philippines
- Indo Tambangraya Megah - Indonesia
- Bhushan Steel Limited - India
- Vizag Seaport Private Limited - India
- Sinarmas Energy and Mining - Indonesia
- CNBM International Corporation - China
- VISA Power Limited - India
- Bayan Resources Tbk. - Indonesia
- Directorate Of Revenue Intelligence - India
- Aditya Birla Group - India
- Kideco Jaya Agung - Indonesia
- The State Trading Corporation of India Ltd
- Sindya Power Generating Company Private Ltd
- IEA Clean Coal Centre - UK
- Eastern Energy - Thailand
- Rio Tinto Coal - Australia
- AsiaOL BioFuels Corp., Philippines
- Interocean Group of Companies - India
- LBH Netherlands Bv - Netherlands
- TNB Fuel Sdn Bhd - Malaysia
- Leighton Contractors Pty Ltd - Australia
- Cigading International Bulk Terminal - Indonesia
- Economic Council, Georgia
- CIMB Investment Bank - Malaysia
- San Jose City I Power Corp, Philippines
- MS Steel International - UAE
- Planning Commission, India
- Larsen & Toubro Limited - India
- Marubeni Corporation - India
- PNOC Exploration Corporation - Philippines
- Chettinad Cement Corporation Ltd - India
- Eastern Coal Council - USA
- Anglo American - United Kingdom
- Ambuja Cements Ltd - India
- Orica Australia Pty. Ltd.
- Star Paper Mills Limited - India
- Kapuas Tunggal Persada - Indonesia
- Thai Mozambique Logistica
- Formosa Plastics Group - Taiwan
- Bangladesh Power Developement Board
- Offshore Bulk Terminal Pte Ltd, Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Bukit Makmur.PT - Indonesia
- Bulk Trading Sa - Switzerland
- Kepco SPC Power Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Jindal Steel & Power Ltd - India
- Australian Coal Association
- Asmin Koalindo Tuhup - Indonesia
- Metalloyd Limited - United Kingdom
- Mercuria Energy - Indonesia
- GMR Energy Limited - India
- OPG Power Generation Pvt Ltd - India
- London Commodity Brokers - England
- Attock Cement Pakistan Limited
- Baramulti Group, Indonesia
- Simpson Spence & Young - Indonesia
- Cement Manufacturers Association - India
- GN Power Mariveles Coal Plant, Philippines
- Antam Resourcindo - Indonesia
- Malabar Cements Ltd - India
- Binh Thuan Hamico - Vietnam
- South Luzon Thermal Energy Corporation
- Price Waterhouse Coopers - Russia
- Semirara Mining and Power Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Kumho Petrochemical, South Korea
- Makarim & Taira - Indonesia
- Port Waratah Coal Services - Australia
- SMG Consultants - Indonesia
- Vedanta Resources Plc - India
- Ministry of Finance - Indonesia
- Samtan Co., Ltd - South Korea
- Manunggal Multi Energi - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Neyveli Lignite Corporation Ltd, - India
- Indika Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Parry Sugars Refinery, India
- Ceylon Electricity Board - Sri Lanka
- Karaikal Port Pvt Ltd - India
- Chamber of Mines of South Africa
- Alfred C Toepfer International GmbH - Germany
- Singapore Mercantile Exchange
- Indian Oil Corporation Limited
- Meenaskhi Energy Private Limited - India
- New Zealand Coal & Carbon
- Videocon Industries ltd - India
- Straits Asia Resources Limited - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Sarangani Energy Corporation, Philippines
- Orica Mining Services - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- PowerSource Philippines DevCo
- Aboitiz Power Corporation - Philippines
- Siam City Cement PLC, Thailand
- Coal and Oil Company - UAE
- Kartika Selabumi Mining - Indonesia
- Kaltim Prima Coal - Indonesia
- Trasteel International SA, Italy
- Commonwealth Bank - Australia
- Bharathi Cement Corporation - India
- IHS Mccloskey Coal Group - USA
- Maheswari Brothers Coal Limited - India
- Wood Mackenzie - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Petron Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Essar Steel Hazira Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Karbindo Abesyapradhi - Indoneisa
- Toyota Tsusho Corporation, Japan
- Gujarat Sidhee Cement - India
- Medco Energi Mining Internasional
- Heidelberg Cement - Germany
- Merrill Lynch Commodities Europe
- PetroVietnam Power Coal Import and Supply Company
- PTC India Limited - India
- SMC Global Power, Philippines
- Indogreen Group - Indonesia
- Grasim Industreis Ltd - India
- Independent Power Producers Association of India
- Central Electricity Authority - India
- Xindia Steels Limited - India
- Mercator Lines Limited - India
- Romanian Commodities Exchange
- Riau Bara Harum - Indonesia
- GVK Power & Infra Limited - India
- European Bulk Services B.V. - Netherlands
- Electricity Generating Authority of Thailand
- Africa Commodities Group - South Africa
- Deloitte Consulting - India
- Indonesian Coal Mining Association
- Tata Chemicals Ltd - India
- Renaissance Capital - South Africa
- Sree Jayajothi Cements Limited - India
- Therma Luzon, Inc, Philippines
- Salva Resources Pvt Ltd - India
- Australian Commodity Traders Exchange
- Iligan Light & Power Inc, Philippines
- Sakthi Sugars Limited - India
- Banpu Public Company Limited - Thailand
- Semirara Mining Corp, Philippines
- Bhatia International Limited - India
- Energy Link Ltd, New Zealand
- India Bulls Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Georgia Ports Authority, United States
- Energy Development Corp, Philippines
- Oldendorff Carriers - Singapore
- Savvy Resources Ltd - HongKong
- Pendopo Energi Batubara - Indonesia
- GAC Shipping (India) Pvt Ltd
- Mjunction Services Limited - India
- Bukit Baiduri Energy - Indonesia
- Posco Energy - South Korea
- Jaiprakash Power Ventures ltd
- Power Finance Corporation Ltd., India
- Minerals Council of Australia
- Tamil Nadu electricity Board
- Mintek Dendrill Indonesia
- Ministry of Transport, Egypt
- Agrawal Coal Company - India
- Indian Energy Exchange, India
- Jorong Barutama Greston.PT - Indonesia
- Uttam Galva Steels Limited - India
- TeaM Sual Corporation - Philippines
- Standard Chartered Bank - UAE
- Barasentosa Lestari - Indonesia
- Ministry of Mines - Canada
- Wilmar Investment Holdings
- Timah Investasi Mineral - Indoneisa
- McConnell Dowell - Australia
- Madhucon Powers Ltd - India
- Holcim Trading Pte Ltd - Singapore
- The University of Queensland
- Coastal Gujarat Power Limited - India
- International Coal Ventures Pvt Ltd - India
- Goldman Sachs - Singapore
- Krishnapatnam Port Company Ltd. - India
- Carbofer General Trading SA - India
- Kobexindo Tractors - Indoneisa
- Lanco Infratech Ltd - India
- ICICI Bank Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- White Energy Company Limited
- Kohat Cement Company Ltd. - Pakistan
- Central Java Power - Indonesia
- Intertek Mineral Services - Indonesia
- Latin American Coal - Colombia
- Rashtriya Ispat Nigam Limited - India
- Dalmia Cement Bharat India
- Siam City Cement - Thailand
- SN Aboitiz Power Inc, Philippines
- Electricity Authority, New Zealand
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