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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, 13 October 21
FBX INDEX: THE IMPOSSIBILITY OF SHORT-TERM FORECASTING - LARS JENSEN
Will freight rates on Asia-Europe or the Transpacific reach 40.000 USD/FFE in the run-up prior to Chinese New Year 2022? Or will they start droppin ...
Wednesday, 13 October 21
CHINA FLOODS: COAL PRICE HITS FRESH HIGH AS MINES SHUT - BBC
The price of coal used in China’s power plants has surged to a new record high as another of the country’s key mining regions is hit by ...
Tuesday, 12 October 21
BUMA SIGNS CONDITIONAL AGREEMENT FOR AUSTRALIAN ASSET ACQUISITION
PT Tbk. announced that its subsidiary, PT Bukit Makmur Mandiri Utama, through its newly incorporated Australian subsidiary, BUMA International Pty ...
Tuesday, 12 October 21
INDONESIA'S COAL-BASED POWER PLANTS ARE SUBJECT TO CARBON TAX NEXT YEAR, ELECTRICITY COSTS COULD RISE! - CNBC
The Indonesian government is planning plans to implement a carbon tax of IDR 30 per kilogram (kg) of carbon dioxide equivalent (CO2e) or equivalent ...
Monday, 11 October 21
COAL ABANDONMENT IN POWER GENERATION PROMOTED GAS DEMAND GROWTH IN EUROPE - TOP MANAGER: TASS
Accelerated abandonment of coal in power generation and the overall recovery of economic activity facilitated gas demand growth in Europe and led t ...
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- Bhoruka Overseas - Indonesia
- Samtan Co., Ltd - South Korea
- Standard Chartered Bank - UAE
- Sarangani Energy Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Kobexindo Tractors - Indoneisa
- Karaikal Port Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Billiton Holdings Pty Ltd - Australia
- Malabar Cements Ltd - India
- Sical Logistics Limited - India
- Bhushan Steel Limited - India
- Independent Power Producers Association of India
- The Treasury - Australian Government
- Indika Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Kepco SPC Power Corporation, Philippines
- Africa Commodities Group - South Africa
- Maharashtra Electricity Regulatory Commission - India
- Karbindo Abesyapradhi - Indoneisa
- Energy Link Ltd, New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- GN Power Mariveles Coal Plant, Philippines
- Iligan Light & Power Inc, Philippines
- Chamber of Mines of South Africa
- Carbofer General Trading SA - India
- Directorate General of MIneral and Coal - Indonesia
- Manunggal Multi Energi - Indonesia
- Medco Energi Mining Internasional
- India Bulls Power Limited - India
- Meralco Power Generation, Philippines
- Indian Energy Exchange, India
- IEA Clean Coal Centre - UK
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mintek Dendrill Indonesia
- Sojitz Corporation - Japan
- Price Waterhouse Coopers - Russia
- Orica Australia Pty. Ltd.
- Bahari Cakrawala Sebuku - Indonesia
- Oldendorff Carriers - Singapore
- Aditya Birla Group - India
- Dalmia Cement Bharat India
- Pendopo Energi Batubara - Indonesia
- International Coal Ventures Pvt Ltd - India
- Petron Corporation, Philippines
- Eastern Energy - Thailand
- Sakthi Sugars Limited - India
- Banpu Public Company Limited - Thailand
- Australian Commodity Traders Exchange
- Meenaskhi Energy Private Limited - India
- Economic Council, Georgia
- Cement Manufacturers Association - India
- VISA Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Aboitiz Power Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Orica Mining Services - Indonesia
- Indogreen Group - Indonesia
- Port Waratah Coal Services - Australia
- Altura Mining Limited, Indonesia
- Alfred C Toepfer International GmbH - Germany
- Marubeni Corporation - India
- New Zealand Coal & Carbon
- Goldman Sachs - Singapore
- Wilmar Investment Holdings
- Electricity Generating Authority of Thailand
- Lanco Infratech Ltd - India
- Central Java Power - Indonesia
- Grasim Industreis Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Georgia Ports Authority, United States
- Directorate Of Revenue Intelligence - India
- OPG Power Generation Pvt Ltd - India
- Larsen & Toubro Limited - India
- Planning Commission, India
- Tamil Nadu electricity Board
- Kapuas Tunggal Persada - Indonesia
- PowerSource Philippines DevCo
- Bukit Makmur.PT - Indonesia
- Madhucon Powers Ltd - India
- Toyota Tsusho Corporation, Japan
- Pipit Mutiara Jaya. PT, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Eastern Coal Council - USA
- Kohat Cement Company Ltd. - Pakistan
- Baramulti Group, Indonesia
- Videocon Industries ltd - India
- Binh Thuan Hamico - Vietnam
- GVK Power & Infra Limited - India
- Tata Chemicals Ltd - India
- Minerals Council of Australia
- Ind-Barath Power Infra Limited - India
- Jaiprakash Power Ventures ltd
- Bukit Baiduri Energy - Indonesia
- Renaissance Capital - South Africa
- Rashtriya Ispat Nigam Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Parliament of New Zealand
- Antam Resourcindo - Indonesia
- Semirara Mining Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kumho Petrochemical, South Korea
- Bulk Trading Sa - Switzerland
- Barasentosa Lestari - Indonesia
- ICICI Bank Limited - India
- Mercuria Energy - Indonesia
- Latin American Coal - Colombia
- Jindal Steel & Power Ltd - India
- Ministry of Mines - Canada
- Xindia Steels Limited - India
- Thiess Contractors Indonesia
- Mjunction Services Limited - India
- CNBM International Corporation - China
- Essar Steel Hazira Ltd - India
- Formosa Plastics Group - Taiwan
- Singapore Mercantile Exchange
- Kideco Jaya Agung - Indonesia
- Parry Sugars Refinery, India
- The University of Queensland
- Makarim & Taira - Indonesia
- Coastal Gujarat Power Limited - India
- The State Trading Corporation of India Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- South Luzon Thermal Energy Corporation
- Siam City Cement PLC, Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Star Paper Mills Limited - India
- Attock Cement Pakistan Limited
- Deloitte Consulting - India
- European Bulk Services B.V. - Netherlands
- Globalindo Alam Lestari - Indonesia
- Salva Resources Pvt Ltd - India
- Bharathi Cement Corporation - India
- Asmin Koalindo Tuhup - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Ceylon Electricity Board - Sri Lanka
- Merrill Lynch Commodities Europe
- Trasteel International SA, Italy
- Metalloyd Limited - United Kingdom
- Intertek Mineral Services - Indonesia
- Sree Jayajothi Cements Limited - India
- Ambuja Cements Ltd - India
- Thai Mozambique Logistica
- Global Coal Blending Company Limited - Australia
- Global Business Power Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Chettinad Cement Corporation Ltd - India
- GMR Energy Limited - India
- IHS Mccloskey Coal Group - USA
- Bangladesh Power Developement Board
- Coal and Oil Company - UAE
- CIMB Investment Bank - Malaysia
- Uttam Galva Steels Limited - India
- Indonesian Coal Mining Association
- Ministry of Finance - Indonesia
- Central Electricity Authority - India
- SMC Global Power, Philippines
- Indo Tambangraya Megah - Indonesia
- Commonwealth Bank - Australia
- Indian Oil Corporation Limited
- Posco Energy - South Korea
- Global Green Power PLC Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Agrawal Coal Company - India
- LBH Netherlands Bv - Netherlands
- SN Aboitiz Power Inc, Philippines
- MS Steel International - UAE
- Gujarat Mineral Development Corp Ltd - India
- Siam City Cement - Thailand
- Edison Trading Spa - Italy
- Coalindo Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Energy Development Corp, Philippines
- Electricity Authority, New Zealand
- TeaM Sual Corporation - Philippines
- Therma Luzon, Inc, Philippines
- Heidelberg Cement - Germany
- Ministry of Transport, Egypt
- McConnell Dowell - Australia
- AsiaOL BioFuels Corp., Philippines
- Wood Mackenzie - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Australian Coal Association
- Riau Bara Harum - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Interocean Group of Companies - India
- Romanian Commodities Exchange
- Borneo Indobara - Indonesia
- Power Finance Corporation Ltd., India
- ASAPP Information Group - India
- Sindya Power Generating Company Private Ltd
- SMG Consultants - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bayan Resources Tbk. - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Vedanta Resources Plc - India
- Vijayanagar Sugar Pvt Ltd - India
- White Energy Company Limited
- TNB Fuel Sdn Bhd - Malaysia
- Maheswari Brothers Coal Limited - India
- Gujarat Sidhee Cement - India
- Kalimantan Lumbung Energi - Indonesia
- Mercator Lines Limited - India
- Rio Tinto Coal - Australia
- GAC Shipping (India) Pvt Ltd
- Vizag Seaport Private Limited - India
- Bhatia International Limited - India
- PTC India Limited - India
- Semirara Mining and Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Anglo American - United Kingdom
- London Commodity Brokers - England
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