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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, 23 February 24
STRONG OUTLOOK FOR THE TANKER MARKET IN 2024 AND BEYOND - DNV
Several factors have aligned over the past two years to create a robust and profitable market for tanker owners, which is expected to drive newbuil ...
Friday, 23 February 24
AUSTRALIAN COAL FLOWS TO ASIA HOVER ABOVE LAST YEAR’S VOLUME TONNES - SIGNAL GROUP
In the final days of February, the dry bulk freight market appeared to maintain a relatively stable momentum, particularly evident in the large ves ...
Friday, 23 February 24
RUSSIAN COAL SHIPMENTS FALL 14% AS SANCTIONS BITE - BIMCO
During the first seven weeks of 2024, Russian coal shipments have fallen 14% y/y. Volumes have gradually declined since October 2023 when logistica ...
Thursday, 22 February 24
BIMCO PUBLISHES SHIP FINANCING FORMS TO ENSURE UNINTERRUPTED USE OF SHIPS
BIMCO has published two standard Quiet Enjoyment Letters (QELs), the first standard form QELs available to the industry, to offer a tool that can e ...
Monday, 19 February 24
METALS INVESTMENT: THE DARKEST HOUR IS JUST BEFORE THE DAWN - WOOD MACKENZIE
Things often seem at their worst just before they get better. In terms of meeting our net zero 2050 scenario, we’ve reached a watershed momen ...
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- Xindia Steels Limited - India
- Anglo American - United Kingdom
- Neyveli Lignite Corporation Ltd, - India
- Orica Australia Pty. Ltd.
- New Zealand Coal & Carbon
- ASAPP Information Group - India
- Kumho Petrochemical, South Korea
- Antam Resourcindo - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Karaikal Port Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Simpson Spence & Young - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Price Waterhouse Coopers - Russia
- SMG Consultants - Indonesia
- Wood Mackenzie - Singapore
- Chettinad Cement Corporation Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Directorate Of Revenue Intelligence - India
- Barasentosa Lestari - Indonesia
- GMR Energy Limited - India
- The University of Queensland
- South Luzon Thermal Energy Corporation
- Bukit Baiduri Energy - Indonesia
- Electricity Authority, New Zealand
- Alfred C Toepfer International GmbH - Germany
- Economic Council, Georgia
- Manunggal Multi Energi - Indonesia
- Sojitz Corporation - Japan
- Coalindo Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bangladesh Power Developement Board
- Ambuja Cements Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Billiton Holdings Pty Ltd - Australia
- London Commodity Brokers - England
- Goldman Sachs - Singapore
- Africa Commodities Group - South Africa
- Global Coal Blending Company Limited - Australia
- Therma Luzon, Inc, Philippines
- Ministry of Finance - Indonesia
- Iligan Light & Power Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indo Tambangraya Megah - Indonesia
- Formosa Plastics Group - Taiwan
- Parry Sugars Refinery, India
- OPG Power Generation Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- CNBM International Corporation - China
- Central Java Power - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Commonwealth Bank - Australia
- Asmin Koalindo Tuhup - Indonesia
- Essar Steel Hazira Ltd - India
- Sree Jayajothi Cements Limited - India
- Tata Chemicals Ltd - India
- Bukit Makmur.PT - Indonesia
- Toyota Tsusho Corporation, Japan
- Thai Mozambique Logistica
- Latin American Coal - Colombia
- CIMB Investment Bank - Malaysia
- European Bulk Services B.V. - Netherlands
- Kohat Cement Company Ltd. - Pakistan
- Indika Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- LBH Netherlands Bv - Netherlands
- Planning Commission, India
- Mercator Lines Limited - India
- Banpu Public Company Limited - Thailand
- Cigading International Bulk Terminal - Indonesia
- Renaissance Capital - South Africa
- PowerSource Philippines DevCo
- McConnell Dowell - Australia
- Romanian Commodities Exchange
- Indogreen Group - Indonesia
- Grasim Industreis Ltd - India
- Maheswari Brothers Coal Limited - India
- Globalindo Alam Lestari - Indonesia
- Larsen & Toubro Limited - India
- Carbofer General Trading SA - India
- Bulk Trading Sa - Switzerland
- Borneo Indobara - Indonesia
- Kideco Jaya Agung - Indonesia
- Jaiprakash Power Ventures ltd
- Chamber of Mines of South Africa
- Central Electricity Authority - India
- Sindya Power Generating Company Private Ltd
- Baramulti Group, Indonesia
- Savvy Resources Ltd - HongKong
- Global Green Power PLC Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Krishnapatnam Port Company Ltd. - India
- Minerals Council of Australia
- The Treasury - Australian Government
- Eastern Energy - Thailand
- Meenaskhi Energy Private Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Kobexindo Tractors - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Holcim Trading Pte Ltd - Singapore
- Gujarat Sidhee Cement - India
- White Energy Company Limited
- TNB Fuel Sdn Bhd - Malaysia
- Standard Chartered Bank - UAE
- India Bulls Power Limited - India
- Mjunction Services Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Salva Resources Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Mercuria Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Merrill Lynch Commodities Europe
- Indonesian Coal Mining Association
- TeaM Sual Corporation - Philippines
- Orica Mining Services - Indonesia
- Attock Cement Pakistan Limited
- Samtan Co., Ltd - South Korea
- Bhoruka Overseas - Indonesia
- Wilmar Investment Holdings
- International Coal Ventures Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Siam City Cement - Thailand
- Malabar Cements Ltd - India
- Agrawal Coal Company - India
- Posco Energy - South Korea
- Intertek Mineral Services - Indonesia
- Ministry of Mines - Canada
- Australian Coal Association
- Interocean Group of Companies - India
- Riau Bara Harum - Indonesia
- Kartika Selabumi Mining - Indonesia
- Bharathi Cement Corporation - India
- PNOC Exploration Corporation - Philippines
- Uttam Galva Steels Limited - India
- Bayan Resources Tbk. - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Parliament of New Zealand
- Sakthi Sugars Limited - India
- Trasteel International SA, Italy
- Metalloyd Limited - United Kingdom
- The State Trading Corporation of India Ltd
- Medco Energi Mining Internasional
- Oldendorff Carriers - Singapore
- Global Business Power Corporation, Philippines
- MS Steel International - UAE
- VISA Power Limited - India
- Mintek Dendrill Indonesia
- Independent Power Producers Association of India
- Star Paper Mills Limited - India
- Kapuas Tunggal Persada - Indonesia
- Heidelberg Cement - Germany
- AsiaOL BioFuels Corp., Philippines
- Kepco SPC Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Petron Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Vizag Seaport Private Limited - India
- Energy Development Corp, Philippines
- Thiess Contractors Indonesia
- Sical Logistics Limited - India
- Georgia Ports Authority, United States
- Petrochimia International Co. Ltd.- Taiwan
- Dalmia Cement Bharat India
- IHS Mccloskey Coal Group - USA
- IEA Clean Coal Centre - UK
- GVK Power & Infra Limited - India
- Port Waratah Coal Services - Australia
- Energy Link Ltd, New Zealand
- Aditya Birla Group - India
- Maharashtra Electricity Regulatory Commission - India
- Bahari Cakrawala Sebuku - Indonesia
- Madhucon Powers Ltd - India
- Lanco Infratech Ltd - India
- SN Aboitiz Power Inc, Philippines
- Coal and Oil Company - UAE
- Power Finance Corporation Ltd., India
- Indian Oil Corporation Limited
- Marubeni Corporation - India
- Bhatia International Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Transport, Egypt
- Australian Commodity Traders Exchange
- Ceylon Electricity Board - Sri Lanka
- Jindal Steel & Power Ltd - India
- Rio Tinto Coal - Australia
- Meralco Power Generation, Philippines
- Deloitte Consulting - India
- Sinarmas Energy and Mining - Indonesia
- Singapore Mercantile Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Makarim & Taira - Indonesia
- Videocon Industries ltd - India
- Rashtriya Ispat Nigam Limited - India
- Sarangani Energy Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Ind-Barath Power Infra Limited - India
- Vedanta Resources Plc - India
- Binh Thuan Hamico - Vietnam
- Pendopo Energi Batubara - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Cement Manufacturers Association - India
- ICICI Bank Limited - India
- Miang Besar Coal Terminal - Indonesia
- Tamil Nadu electricity Board
- Indian Energy Exchange, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PTC India Limited - India
- SMC Global Power, Philippines
- Edison Trading Spa - Italy
- San Jose City I Power Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GAC Shipping (India) Pvt Ltd
- Eastern Coal Council - USA
- Bhushan Steel Limited - India
- Electricity Generating Authority of Thailand
- Semirara Mining Corp, Philippines
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