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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, 15 October 21
GLOBAL STEEL DEMAND GROWTH DOWNGRADED FOR 2021 DUE TO CHINA - WORLD STEEL ASSOCIATION
The World Steel Association (worldsteel) today released an update of its Short Range Outlook (SRO) for 2021 and 2022. worldsteel forecasts that ste ...
Thursday, 14 October 21
SPIKING COAL PRICES: DON’T BLAME THE ENERGY TRANSITION - IEEFA
Volatility highlights urgency for renewables-based energy solutions
“Energy crisis.” The phrase evokes nearly-forgotten ...
Thursday, 14 October 21
EIA FORECASTS U.S. COAL PRODUCTION TOTALS 588 MMST IN 2021, UP 53 MMST YOY
U.S. coal production in EIA's forecasts totals 588 million short tons (MMst) in 2021, 53 MMst more than in 2020.
According ...
Wednesday, 13 October 21
COAL PRICES ARE ROARING BACK AMID A GLOBAL ENERGY CRUNCH - SYDNEY MORNING HERALD
Soaring coal prices have placed Australia’s mining and energy exports on track to reach a record $349 billion this year evenas the value of t ...
Wednesday, 13 October 21
CHINA ISN'T THE ONLY HUGE ASIAN ECONOMY WITH A COAL SHORTAGE NOW - CNBC
China is not the only Asian giant grappling with an energy crunch — India is also teetering on the edge of a power crisis.
Mos ...
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- Aboitiz Power Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Bhoruka Overseas - Indonesia
- Sindya Power Generating Company Private Ltd
- Billiton Holdings Pty Ltd - Australia
- CIMB Investment Bank - Malaysia
- GAC Shipping (India) Pvt Ltd
- Savvy Resources Ltd - HongKong
- New Zealand Coal & Carbon
- Australian Coal Association
- Makarim & Taira - Indonesia
- Edison Trading Spa - Italy
- Standard Chartered Bank - UAE
- Simpson Spence & Young - Indonesia
- Indian Energy Exchange, India
- Petrochimia International Co. Ltd.- Taiwan
- Semirara Mining Corp, Philippines
- Electricity Generating Authority of Thailand
- Kalimantan Lumbung Energi - Indonesia
- The State Trading Corporation of India Ltd
- McConnell Dowell - Australia
- Madhucon Powers Ltd - India
- Latin American Coal - Colombia
- India Bulls Power Limited - India
- Indogreen Group - Indonesia
- White Energy Company Limited
- Bhatia International Limited - India
- Eastern Coal Council - USA
- Siam City Cement - Thailand
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- CNBM International Corporation - China
- Siam City Cement PLC, Thailand
- Indika Energy - Indonesia
- Chamber of Mines of South Africa
- Aditya Birla Group - India
- Cement Manufacturers Association - India
- Bharathi Cement Corporation - India
- Star Paper Mills Limited - India
- Krishnapatnam Port Company Ltd. - India
- Economic Council, Georgia
- AsiaOL BioFuels Corp., Philippines
- Barasentosa Lestari - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Banpu Public Company Limited - Thailand
- Marubeni Corporation - India
- Medco Energi Mining Internasional
- Dalmia Cement Bharat India
- Semirara Mining and Power Corporation, Philippines
- Mercator Lines Limited - India
- Bulk Trading Sa - Switzerland
- Chettinad Cement Corporation Ltd - India
- Karaikal Port Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Ministry of Finance - Indonesia
- Central Electricity Authority - India
- Samtan Co., Ltd - South Korea
- IHS Mccloskey Coal Group - USA
- TNB Fuel Sdn Bhd - Malaysia
- Sree Jayajothi Cements Limited - India
- Commonwealth Bank - Australia
- Tamil Nadu electricity Board
- Asmin Koalindo Tuhup - Indonesia
- Vizag Seaport Private Limited - India
- Eastern Energy - Thailand
- Interocean Group of Companies - India
- Africa Commodities Group - South Africa
- Anglo American - United Kingdom
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Toyota Tsusho Corporation, Japan
- Kobexindo Tractors - Indoneisa
- Wood Mackenzie - Singapore
- Thai Mozambique Logistica
- Georgia Ports Authority, United States
- Romanian Commodities Exchange
- San Jose City I Power Corp, Philippines
- Bangladesh Power Developement Board
- Kapuas Tunggal Persada - Indonesia
- Xindia Steels Limited - India
- Carbofer General Trading SA - India
- Bayan Resources Tbk. - Indonesia
- Indian Oil Corporation Limited
- Pipit Mutiara Jaya. PT, Indonesia
- VISA Power Limited - India
- LBH Netherlands Bv - Netherlands
- Mjunction Services Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Orica Australia Pty. Ltd.
- Riau Bara Harum - Indonesia
- Global Coal Blending Company Limited - Australia
- Port Waratah Coal Services - Australia
- International Coal Ventures Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Meralco Power Generation, Philippines
- Indo Tambangraya Megah - Indonesia
- Iligan Light & Power Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Mercuria Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Larsen & Toubro Limited - India
- Malabar Cements Ltd - India
- GVK Power & Infra Limited - India
- Renaissance Capital - South Africa
- Bukit Asam (Persero) Tbk - Indonesia
- Mintek Dendrill Indonesia
- SN Aboitiz Power Inc, Philippines
- Posco Energy - South Korea
- Attock Cement Pakistan Limited
- Sical Logistics Limited - India
- ASAPP Information Group - India
- Central Java Power - Indonesia
- Timah Investasi Mineral - Indoneisa
- Kaltim Prima Coal - Indonesia
- Ministry of Mines - Canada
- PetroVietnam Power Coal Import and Supply Company
- IEA Clean Coal Centre - UK
- Petron Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Essar Steel Hazira Ltd - India
- ICICI Bank Limited - India
- Videocon Industries ltd - India
- Leighton Contractors Pty Ltd - Australia
- Merrill Lynch Commodities Europe
- Heidelberg Cement - Germany
- TeaM Sual Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- Coalindo Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- GMR Energy Limited - India
- London Commodity Brokers - England
- Global Green Power PLC Corporation, Philippines
- Independent Power Producers Association of India
- Bank of Tokyo Mitsubishi UFJ Ltd
- PTC India Limited - India
- Antam Resourcindo - Indonesia
- Manunggal Multi Energi - Indonesia
- Rio Tinto Coal - Australia
- Jindal Steel & Power Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Bahari Cakrawala Sebuku - Indonesia
- Australian Commodity Traders Exchange
- Grasim Industreis Ltd - India
- Orica Mining Services - Indonesia
- SMC Global Power, Philippines
- Borneo Indobara - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Indonesian Coal Mining Association
- Ministry of Transport, Egypt
- Goldman Sachs - Singapore
- Parliament of New Zealand
- Globalindo Alam Lestari - Indonesia
- Sojitz Corporation - Japan
- European Bulk Services B.V. - Netherlands
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Formosa Plastics Group - Taiwan
- Meenaskhi Energy Private Limited - India
- Sarangani Energy Corporation, Philippines
- Parry Sugars Refinery, India
- Bhushan Steel Limited - India
- Minerals Council of Australia
- Kepco SPC Power Corporation, Philippines
- Wilmar Investment Holdings
- Oldendorff Carriers - Singapore
- Pendopo Energi Batubara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Thiess Contractors Indonesia
- Kohat Cement Company Ltd. - Pakistan
- PNOC Exploration Corporation - Philippines
- Coastal Gujarat Power Limited - India
- SMG Consultants - Indonesia
- Price Waterhouse Coopers - Russia
- Global Business Power Corporation, Philippines
- Uttam Galva Steels Limited - India
- Vedanta Resources Plc - India
- Altura Mining Limited, Indonesia
- Jaiprakash Power Ventures ltd
- Ind-Barath Power Infra Limited - India
- South Luzon Thermal Energy Corporation
- Baramulti Group, Indonesia
- Therma Luzon, Inc, Philippines
- Ambuja Cements Ltd - India
- Salva Resources Pvt Ltd - India
- Deloitte Consulting - India
- PowerSource Philippines DevCo
- Straits Asia Resources Limited - Singapore
- Energy Development Corp, Philippines
- MS Steel International - UAE
- Trasteel International SA, Italy
- Singapore Mercantile Exchange
- Electricity Authority, New Zealand
- Gujarat Sidhee Cement - India
- The University of Queensland
- Sakthi Sugars Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Intertek Mineral Services - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Metalloyd Limited - United Kingdom
- Planning Commission, India
- Holcim Trading Pte Ltd - Singapore
- OPG Power Generation Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Agrawal Coal Company - India
- Kartika Selabumi Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Lanco Infratech Ltd - India
- Tata Chemicals Ltd - India
- The Treasury - Australian Government
- GN Power Mariveles Coal Plant, Philippines
- Coal and Oil Company - UAE
- Gujarat Electricity Regulatory Commission - India
- Power Finance Corporation Ltd., India
- Kumho Petrochemical, South Korea
- Ceylon Electricity Board - Sri Lanka
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