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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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Saturday, 09 October 21
CHINA POWER CUTS: COAL MINERS ORDERED TO BOOST OUTPUT, SAY REPORTS - BBC
Beijing has reportedly ordered China’s coal mines to boost output as an energy shortage across the country has seen millions of homes and bus ...
Friday, 08 October 21
SEPTEMBER CRUDE OIL TANKER DEMOLISHING HITS 39-MONTHS HIGH AT 1.9M DWT - PETER SAND
Has the lid finally come off for crude oil tanker demolition in 2021? If judged by the 1.9m DWT of capacity that was removed in September, the answ ...
Friday, 08 October 21
COAL SHORTAGE MAY LEAD TO RISE IN STEEL PRICES IN COMING MONTHS: JSPL MD - PTI
Steel prices are expected to increase in the coming months as companies are buying coal at three times the rates a month ago, said a top industry e ...
Wednesday, 06 October 21
INDONESIA COAL PRICE REFERENCE: ANOTHER MONTH, ANOTHER RALLY
COALspot.com: Indonesian Coal Price Reference in a steep climb for most of second and third quarters of 2021 as it reached a pinnacle of $161.63 Oc ...
Wednesday, 06 October 21
EUROPEAN COAL FUTURES CLIMB TO 13-YEAR PEAK - REUTERS
European coal futures rose to a 13-year high and physical thermal coal prices were at record highs as rallying gas prices and strong Asian demand f ...
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- SMG Consultants - Indonesia
- Price Waterhouse Coopers - Russia
- Kumho Petrochemical, South Korea
- Maharashtra Electricity Regulatory Commission - India
- GMR Energy Limited - India
- Kartika Selabumi Mining - Indonesia
- Simpson Spence & Young - Indonesia
- Jindal Steel & Power Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kepco SPC Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Anglo American - United Kingdom
- IHS Mccloskey Coal Group - USA
- Cement Manufacturers Association - India
- Eastern Coal Council - USA
- Independent Power Producers Association of India
- Parliament of New Zealand
- TeaM Sual Corporation - Philippines
- Eastern Energy - Thailand
- Pendopo Energi Batubara - Indonesia
- Coastal Gujarat Power Limited - India
- Malabar Cements Ltd - India
- CNBM International Corporation - China
- CIMB Investment Bank - Malaysia
- Toyota Tsusho Corporation, Japan
- Sarangani Energy Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Australian Commodity Traders Exchange
- Kapuas Tunggal Persada - Indonesia
- India Bulls Power Limited - India
- ICICI Bank Limited - India
- Deloitte Consulting - India
- Chamber of Mines of South Africa
- Orica Australia Pty. Ltd.
- Ministry of Mines - Canada
- Energy Development Corp, Philippines
- Vizag Seaport Private Limited - India
- Semirara Mining and Power Corporation, Philippines
- White Energy Company Limited
- Siam City Cement - Thailand
- Edison Trading Spa - Italy
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Goldman Sachs - Singapore
- Mercator Lines Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Global Business Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Ambuja Cements Ltd - India
- Electricity Authority, New Zealand
- Coal and Oil Company - UAE
- Indian Energy Exchange, India
- Economic Council, Georgia
- Interocean Group of Companies - India
- Jaiprakash Power Ventures ltd
- Africa Commodities Group - South Africa
- Lanco Infratech Ltd - India
- Carbofer General Trading SA - India
- Ind-Barath Power Infra Limited - India
- Samtan Co., Ltd - South Korea
- Renaissance Capital - South Africa
- Star Paper Mills Limited - India
- The Treasury - Australian Government
- Orica Mining Services - Indonesia
- Barasentosa Lestari - Indonesia
- Siam City Cement PLC, Thailand
- Australian Coal Association
- Binh Thuan Hamico - Vietnam
- Iligan Light & Power Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Semirara Mining Corp, Philippines
- Romanian Commodities Exchange
- LBH Netherlands Bv - Netherlands
- Leighton Contractors Pty Ltd - Australia
- Gujarat Sidhee Cement - India
- Indian Oil Corporation Limited
- Vedanta Resources Plc - India
- San Jose City I Power Corp, Philippines
- Kobexindo Tractors - Indoneisa
- Global Green Power PLC Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- The State Trading Corporation of India Ltd
- Alfred C Toepfer International GmbH - Germany
- Sindya Power Generating Company Private Ltd
- GAC Shipping (India) Pvt Ltd
- Billiton Holdings Pty Ltd - Australia
- Therma Luzon, Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Mjunction Services Limited - India
- Merrill Lynch Commodities Europe
- Planning Commission, India
- Meralco Power Generation, Philippines
- Agrawal Coal Company - India
- Tata Chemicals Ltd - India
- Intertek Mineral Services - Indonesia
- McConnell Dowell - Australia
- GN Power Mariveles Coal Plant, Philippines
- Latin American Coal - Colombia
- Larsen & Toubro Limited - India
- Antam Resourcindo - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Chettinad Cement Corporation Ltd - India
- Singapore Mercantile Exchange
- Wilmar Investment Holdings
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The University of Queensland
- PetroVietnam Power Coal Import and Supply Company
- Parry Sugars Refinery, India
- Cigading International Bulk Terminal - Indonesia
- Thai Mozambique Logistica
- Bhoruka Overseas - Indonesia
- Rio Tinto Coal - Australia
- Central Electricity Authority - India
- Bhushan Steel Limited - India
- Krishnapatnam Port Company Ltd. - India
- Port Waratah Coal Services - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Baramulti Group, Indonesia
- PNOC Exploration Corporation - Philippines
- PTC India Limited - India
- Thiess Contractors Indonesia
- Metalloyd Limited - United Kingdom
- Kalimantan Lumbung Energi - Indonesia
- SN Aboitiz Power Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Straits Asia Resources Limited - Singapore
- Ministry of Finance - Indonesia
- Georgia Ports Authority, United States
- Kaltim Prima Coal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Indogreen Group - Indonesia
- Electricity Generating Authority of Thailand
- Aboitiz Power Corporation - Philippines
- Timah Investasi Mineral - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- Banpu Public Company Limited - Thailand
- Bharathi Cement Corporation - India
- Borneo Indobara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Makarim & Taira - Indonesia
- Salva Resources Pvt Ltd - India
- Wood Mackenzie - Singapore
- Directorate Of Revenue Intelligence - India
- Karbindo Abesyapradhi - Indoneisa
- Standard Chartered Bank - UAE
- Aditya Birla Group - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Energy Link Ltd, New Zealand
- Neyveli Lignite Corporation Ltd, - India
- Bhatia International Limited - India
- Savvy Resources Ltd - HongKong
- Riau Bara Harum - Indonesia
- Minerals Council of Australia
- Medco Energi Mining Internasional
- VISA Power Limited - India
- London Commodity Brokers - England
- Holcim Trading Pte Ltd - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- GVK Power & Infra Limited - India
- Altura Mining Limited, Indonesia
- Dalmia Cement Bharat India
- Meenaskhi Energy Private Limited - India
- Sical Logistics Limited - India
- Bayan Resources Tbk. - Indonesia
- Tamil Nadu electricity Board
- Sakthi Sugars Limited - India
- Videocon Industries ltd - India
- Global Coal Blending Company Limited - Australia
- Power Finance Corporation Ltd., India
- Coalindo Energy - Indonesia
- Ministry of Transport, Egypt
- PowerSource Philippines DevCo
- New Zealand Coal & Carbon
- AsiaOL BioFuels Corp., Philippines
- Directorate General of MIneral and Coal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Formosa Plastics Group - Taiwan
- Kideco Jaya Agung - Indonesia
- Bukit Baiduri Energy - Indonesia
- Attock Cement Pakistan Limited
- Bukit Makmur.PT - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Xindia Steels Limited - India
- IEA Clean Coal Centre - UK
- Grasim Industreis Ltd - India
- Marubeni Corporation - India
- Vijayanagar Sugar Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- ASAPP Information Group - India
- Oldendorff Carriers - Singapore
- SMC Global Power, Philippines
- Indonesian Coal Mining Association
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Posco Energy - South Korea
- Ceylon Electricity Board - Sri Lanka
- Miang Besar Coal Terminal - Indonesia
- Mintek Dendrill Indonesia
- South Luzon Thermal Energy Corporation
- Commonwealth Bank - Australia
- Sojitz Corporation - Japan
- Essar Steel Hazira Ltd - India
- Bulk Trading Sa - Switzerland
- Indika Energy - Indonesia
- Bangladesh Power Developement Board
- Maheswari Brothers Coal Limited - India
- Petron Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Heidelberg Cement - Germany
- Sinarmas Energy and Mining - Indonesia
- Uttam Galva Steels Limited - India
- MS Steel International - UAE
- Sree Jayajothi Cements Limited - India
- Trasteel International SA, Italy
- Central Java Power - Indonesia
- Mercuria Energy - Indonesia
- Karaikal Port Pvt Ltd - India
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