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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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Wednesday, 20 October 21
CHINA COAL HITS RECORD HIGH AMID TIGHT SUPPLIES - REUTERS
China coal prices hit a record high on Tuesday buoyed by a widening power crunch and cold weather despite Beijing’s efforts to bolster supply ...
Wednesday, 20 October 21
MARKET INSIGHT - INTERMODAL
IMO 2020, Ballast Water Treatment regulations, Green Recycling, GHG emissions, EEXI, CII, ETS, Fit for 55, Carbon price/levy, the Poseidon Principl ...
Tuesday, 19 October 21
SPONGE IRON SECTOR MIGHT REPORT NEGATIVE GROWTH DUE TO COAL CRISIS: SIMA - PTI
The domestic sponge iron industry might report a negative growth in the ongoing December quarter “if the shortage of coal is allowed to conti ...
Tuesday, 19 October 21
COAL INDIA, THE FALL GUY FOR POWER CRISIS - INDIA EXPRESS
The post-Covid economic recovery has led to a major increase in the demand for power, both in India and globally. In India, coal-based power plants ...
Saturday, 16 October 21
SOLAR INSTALLATION SURGE PUTS INDIA ON TRACK TO CAP COAL-FIRED POWER AS EARLY AS 2024 - IEEFA
Recent increase in solar power installations could push coal to peak sooner than expected
If India keeps installing solar capacity a ...
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- CNBM International Corporation - China
- Bhoruka Overseas - Indonesia
- Posco Energy - South Korea
- Ind-Barath Power Infra Limited - India
- Minerals Council of Australia
- The State Trading Corporation of India Ltd
- Power Finance Corporation Ltd., India
- Parliament of New Zealand
- Ministry of Mines - Canada
- Eastern Coal Council - USA
- Chettinad Cement Corporation Ltd - India
- GVK Power & Infra Limited - India
- Energy Development Corp, Philippines
- Jaiprakash Power Ventures ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Simpson Spence & Young - Indonesia
- Samtan Co., Ltd - South Korea
- Georgia Ports Authority, United States
- Billiton Holdings Pty Ltd - Australia
- Orica Australia Pty. Ltd.
- Kobexindo Tractors - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- Indo Tambangraya Megah - Indonesia
- Meralco Power Generation, Philippines
- Grasim Industreis Ltd - India
- Thai Mozambique Logistica
- Vijayanagar Sugar Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Ministry of Finance - Indonesia
- Malabar Cements Ltd - India
- Orica Mining Services - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Electricity Generating Authority of Thailand
- Commonwealth Bank - Australia
- MS Steel International - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Latin American Coal - Colombia
- Thiess Contractors Indonesia
- Straits Asia Resources Limited - Singapore
- Mjunction Services Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Videocon Industries ltd - India
- Altura Mining Limited, Indonesia
- IEA Clean Coal Centre - UK
- Coal and Oil Company - UAE
- The Treasury - Australian Government
- Rashtriya Ispat Nigam Limited - India
- Global Green Power PLC Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- Barasentosa Lestari - Indonesia
- Indian Oil Corporation Limited
- Karaikal Port Pvt Ltd - India
- India Bulls Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- New Zealand Coal & Carbon
- GMR Energy Limited - India
- San Jose City I Power Corp, Philippines
- Agrawal Coal Company - India
- Kideco Jaya Agung - Indonesia
- Edison Trading Spa - Italy
- Carbofer General Trading SA - India
- Tamil Nadu electricity Board
- SMC Global Power, Philippines
- IHS Mccloskey Coal Group - USA
- Bharathi Cement Corporation - India
- Siam City Cement - Thailand
- Maheswari Brothers Coal Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Trasteel International SA, Italy
- Holcim Trading Pte Ltd - Singapore
- CIMB Investment Bank - Malaysia
- OPG Power Generation Pvt Ltd - India
- ICICI Bank Limited - India
- Cement Manufacturers Association - India
- Sree Jayajothi Cements Limited - India
- Riau Bara Harum - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Mercator Lines Limited - India
- Port Waratah Coal Services - Australia
- Dalmia Cement Bharat India
- Wilmar Investment Holdings
- Directorate Of Revenue Intelligence - India
- Ambuja Cements Ltd - India
- Global Business Power Corporation, Philippines
- Xindia Steels Limited - India
- Intertek Mineral Services - Indonesia
- SN Aboitiz Power Inc, Philippines
- Vedanta Resources Plc - India
- Bulk Trading Sa - Switzerland
- Medco Energi Mining Internasional
- Coastal Gujarat Power Limited - India
- Central Java Power - Indonesia
- Baramulti Group, Indonesia
- Interocean Group of Companies - India
- GN Power Mariveles Coal Plant, Philippines
- PNOC Exploration Corporation - Philippines
- Banpu Public Company Limited - Thailand
- PowerSource Philippines DevCo
- Therma Luzon, Inc, Philippines
- Semirara Mining and Power Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Indonesian Coal Mining Association
- Offshore Bulk Terminal Pte Ltd, Singapore
- Parry Sugars Refinery, India
- Romanian Commodities Exchange
- Meenaskhi Energy Private Limited - India
- Australian Commodity Traders Exchange
- Krishnapatnam Port Company Ltd. - India
- AsiaOL BioFuels Corp., Philippines
- Essar Steel Hazira Ltd - India
- Aditya Birla Group - India
- Anglo American - United Kingdom
- Kohat Cement Company Ltd. - Pakistan
- Oldendorff Carriers - Singapore
- Bukit Makmur.PT - Indonesia
- Global Coal Blending Company Limited - Australia
- Independent Power Producers Association of India
- Madhucon Powers Ltd - India
- Price Waterhouse Coopers - Russia
- Ministry of Transport, Egypt
- GAC Shipping (India) Pvt Ltd
- Toyota Tsusho Corporation, Japan
- Planning Commission, India
- Bukit Baiduri Energy - Indonesia
- Australian Coal Association
- Mercuria Energy - Indonesia
- Sical Logistics Limited - India
- Electricity Authority, New Zealand
- White Energy Company Limited
- Formosa Plastics Group - Taiwan
- Pipit Mutiara Jaya. PT, Indonesia
- Uttam Galva Steels Limited - India
- Makarim & Taira - Indonesia
- Marubeni Corporation - India
- Mintek Dendrill Indonesia
- Vizag Seaport Private Limited - India
- Kepco SPC Power Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- SMG Consultants - Indonesia
- Tata Chemicals Ltd - India
- Sakthi Sugars Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Star Paper Mills Limited - India
- Borneo Indobara - Indonesia
- Renaissance Capital - South Africa
- European Bulk Services B.V. - Netherlands
- Larsen & Toubro Limited - India
- Standard Chartered Bank - UAE
- Binh Thuan Hamico - Vietnam
- Cigading International Bulk Terminal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- McConnell Dowell - Australia
- Indika Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bhushan Steel Limited - India
- Singapore Mercantile Exchange
- The University of Queensland
- PTC India Limited - India
- London Commodity Brokers - England
- Kapuas Tunggal Persada - Indonesia
- Semirara Mining Corp, Philippines
- Coalindo Energy - Indonesia
- ASAPP Information Group - India
- Deloitte Consulting - India
- LBH Netherlands Bv - Netherlands
- Antam Resourcindo - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhatia International Limited - India
- Indian Energy Exchange, India
- Central Electricity Authority - India
- Leighton Contractors Pty Ltd - Australia
- Economic Council, Georgia
- Heidelberg Cement - Germany
- Rio Tinto Coal - Australia
- Metalloyd Limited - United Kingdom
- Wood Mackenzie - Singapore
- Alfred C Toepfer International GmbH - Germany
- Kaltim Prima Coal - Indonesia
- Attock Cement Pakistan Limited
- Petron Corporation, Philippines
- Gujarat Sidhee Cement - India
- Bukit Asam (Persero) Tbk - Indonesia
- VISA Power Limited - India
- Bayan Resources Tbk. - Indonesia
- Lanco Infratech Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Merrill Lynch Commodities Europe
- Savvy Resources Ltd - HongKong
- Eastern Energy - Thailand
- Manunggal Multi Energi - Indonesia
- Bangladesh Power Developement Board
- Salva Resources Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Timah Investasi Mineral - Indoneisa
- Sojitz Corporation - Japan
- Siam City Cement PLC, Thailand
- Directorate General of MIneral and Coal - Indonesia
- Kumho Petrochemical, South Korea
- South Luzon Thermal Energy Corporation
- Karbindo Abesyapradhi - Indoneisa
- TNB Fuel Sdn Bhd - Malaysia
- Iligan Light & Power Inc, Philippines
- Indogreen Group - Indonesia
- Jindal Steel & Power Ltd - India
- Africa Commodities Group - South Africa
- Energy Link Ltd, New Zealand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kartika Selabumi Mining - Indonesia
- TeaM Sual Corporation - Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Chamber of Mines of South Africa
- Goldman Sachs - Singapore
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