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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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- Electricity Generating Authority of Thailand
- Kohat Cement Company Ltd. - Pakistan
- McConnell Dowell - Australia
- Sree Jayajothi Cements Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Thiess Contractors Indonesia
- Kaltim Prima Coal - Indonesia
- Maheswari Brothers Coal Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement - Thailand
- The University of Queensland
- Binh Thuan Hamico - Vietnam
- Sical Logistics Limited - India
- Xindia Steels Limited - India
- Riau Bara Harum - Indonesia
- Coal and Oil Company - UAE
- Port Waratah Coal Services - Australia
- Vedanta Resources Plc - India
- Vizag Seaport Private Limited - India
- Borneo Indobara - Indonesia
- Bhushan Steel Limited - India
- Siam City Cement PLC, Thailand
- Salva Resources Pvt Ltd - India
- Indian Oil Corporation Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Eastern Coal Council - USA
- ASAPP Information Group - India
- PTC India Limited - India
- Simpson Spence & Young - Indonesia
- Mercator Lines Limited - India
- Minerals Council of Australia
- South Luzon Thermal Energy Corporation
- Parliament of New Zealand
- Videocon Industries ltd - India
- Tata Chemicals Ltd - India
- Aboitiz Power Corporation - Philippines
- Ambuja Cements Ltd - India
- Orica Mining Services - Indonesia
- Ministry of Transport, Egypt
- Merrill Lynch Commodities Europe
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Edison Trading Spa - Italy
- GMR Energy Limited - India
- PNOC Exploration Corporation - Philippines
- Tamil Nadu electricity Board
- International Coal Ventures Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Toyota Tsusho Corporation, Japan
- European Bulk Services B.V. - Netherlands
- Leighton Contractors Pty Ltd - Australia
- Oldendorff Carriers - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Malabar Cements Ltd - India
- Rio Tinto Coal - Australia
- ICICI Bank Limited - India
- Manunggal Multi Energi - Indonesia
- Ministry of Mines - Canada
- Neyveli Lignite Corporation Ltd, - India
- Directorate General of MIneral and Coal - Indonesia
- Independent Power Producers Association of India
- Metalloyd Limited - United Kingdom
- Dalmia Cement Bharat India
- Bulk Trading Sa - Switzerland
- Eastern Energy - Thailand
- Romanian Commodities Exchange
- GN Power Mariveles Coal Plant, Philippines
- GVK Power & Infra Limited - India
- Indian Energy Exchange, India
- Samtan Co., Ltd - South Korea
- Electricity Authority, New Zealand
- Jorong Barutama Greston.PT - Indonesia
- Posco Energy - South Korea
- Interocean Group of Companies - India
- Bukit Makmur.PT - Indonesia
- Renaissance Capital - South Africa
- Coastal Gujarat Power Limited - India
- PowerSource Philippines DevCo
- Asmin Koalindo Tuhup - Indonesia
- Sakthi Sugars Limited - India
- Baramulti Group, Indonesia
- Miang Besar Coal Terminal - Indonesia
- SN Aboitiz Power Inc, Philippines
- The Treasury - Australian Government
- Central Electricity Authority - India
- SMG Consultants - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Pendopo Energi Batubara - Indonesia
- Central Java Power - Indonesia
- Mintek Dendrill Indonesia
- Globalindo Alam Lestari - Indonesia
- Heidelberg Cement - Germany
- Chamber of Mines of South Africa
- Directorate Of Revenue Intelligence - India
- Agrawal Coal Company - India
- Semirara Mining and Power Corporation, Philippines
- Wilmar Investment Holdings
- Gujarat Sidhee Cement - India
- Goldman Sachs - Singapore
- Global Business Power Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- LBH Netherlands Bv - Netherlands
- Carbofer General Trading SA - India
- Formosa Plastics Group - Taiwan
- Bayan Resources Tbk. - Indonesia
- Altura Mining Limited, Indonesia
- Savvy Resources Ltd - HongKong
- VISA Power Limited - India
- Mercuria Energy - Indonesia
- Madhucon Powers Ltd - India
- Ministry of Finance - Indonesia
- CIMB Investment Bank - Malaysia
- Therma Luzon, Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Trasteel International SA, Italy
- Straits Asia Resources Limited - Singapore
- Ceylon Electricity Board - Sri Lanka
- CNBM International Corporation - China
- Kobexindo Tractors - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- Global Green Power PLC Corporation, Philippines
- Sojitz Corporation - Japan
- Meralco Power Generation, Philippines
- Meenaskhi Energy Private Limited - India
- Kartika Selabumi Mining - Indonesia
- IHS Mccloskey Coal Group - USA
- Petron Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Power Finance Corporation Ltd., India
- Iligan Light & Power Inc, Philippines
- India Bulls Power Limited - India
- Indonesian Coal Mining Association
- Price Waterhouse Coopers - Russia
- Medco Energi Mining Internasional
- Makarim & Taira - Indonesia
- Bukit Baiduri Energy - Indonesia
- Essar Steel Hazira Ltd - India
- Ind-Barath Power Infra Limited - India
- Larsen & Toubro Limited - India
- Standard Chartered Bank - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- London Commodity Brokers - England
- Bangladesh Power Developement Board
- Petrochimia International Co. Ltd.- Taiwan
- Marubeni Corporation - India
- Kideco Jaya Agung - Indonesia
- Bhoruka Overseas - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Star Paper Mills Limited - India
- Sindya Power Generating Company Private Ltd
- Uttam Galva Steels Limited - India
- The State Trading Corporation of India Ltd
- Global Coal Blending Company Limited - Australia
- Deloitte Consulting - India
- Indogreen Group - Indonesia
- Energy Link Ltd, New Zealand
- Alfred C Toepfer International GmbH - Germany
- Planning Commission, India
- Indika Energy - Indonesia
- Cement Manufacturers Association - India
- Commonwealth Bank - Australia
- Barasentosa Lestari - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Kepco SPC Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Thai Mozambique Logistica
- Cigading International Bulk Terminal - Indonesia
- Grasim Industreis Ltd - India
- Energy Development Corp, Philippines
- Bharathi Cement Corporation - India
- MS Steel International - UAE
- Chettinad Cement Corporation Ltd - India
- Australian Commodity Traders Exchange
- Krishnapatnam Port Company Ltd. - India
- GAC Shipping (India) Pvt Ltd
- Semirara Mining Corp, Philippines
- Bhatia International Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Aditya Birla Group - India
- IEA Clean Coal Centre - UK
- Anglo American - United Kingdom
- Singapore Mercantile Exchange
- SMC Global Power, Philippines
- TeaM Sual Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Georgia Ports Authority, United States
- Wood Mackenzie - Singapore
- Latin American Coal - Colombia
- Vijayanagar Sugar Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Karaikal Port Pvt Ltd - India
- Parry Sugars Refinery, India
- OPG Power Generation Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Antam Resourcindo - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Timah Investasi Mineral - Indoneisa
- Coalindo Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Intertek Mineral Services - Indonesia
- Australian Coal Association
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Attock Cement Pakistan Limited
- Economic Council, Georgia
- Mjunction Services Limited - India
- Africa Commodities Group - South Africa
- Lanco Infratech Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Orica Australia Pty. Ltd.
- Kapuas Tunggal Persada - Indonesia
- New Zealand Coal & Carbon
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kumho Petrochemical, South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- White Energy Company Limited
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