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