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