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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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Monday, 27 September 21
CHINESE COAL FIRMS MEET TO ADDRESS WINTER SUPPLY CHALLENGES - CNBC
Major Chinese coal producers are trying to resolve supply shortages and curb price rises as the country’s winter consumption peak approaches, ...
Saturday, 25 September 21
HIGH STAKES FOR ASIAN DEVELOPMENT BANK’S AMBITIOUS COAL POWER RETIREMENT PLAN - IEEFA
Implementation challenges could block funding for other equally important high impact clean energy funding strategies
In the lead up ...
Thursday, 23 September 21
LONGER COAL CONTRACTS MAY REIN IN PRICES - ECNS
In China’s coal sector that has been marred recently by price surges, regional authorities and related enterprises should ensure the fuel con ...
Thursday, 23 September 21
BALTIC INDEX HITS 12-YEAR PEAK ON FIRMER VESSELS RATES - REUTERS
The Baltic Exchange’s main dry bulk sea freight index rose for a fourth straight session on Wednesday to a 12-year high, buoyed by higher rat ...
Thursday, 23 September 21
RECORD-HIGH GAS PRICES AFFECT MANY EUROPEAN CORPORATE SECTORS - FITCH RATINGS
Record-high natural gas prices are putting pressure on supply chains of many European corporate sectors, including non-integrated energy suppliers, ...
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- Heidelberg Cement - Germany
- Minerals Council of Australia
- Intertek Mineral Services - Indonesia
- Ministry of Transport, Egypt
- Thiess Contractors Indonesia
- Jaiprakash Power Ventures ltd
- Tata Chemicals Ltd - India
- Dalmia Cement Bharat India
- ICICI Bank Limited - India
- Interocean Group of Companies - India
- Kepco SPC Power Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Lanco Infratech Ltd - India
- Indogreen Group - Indonesia
- Global Green Power PLC Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Vedanta Resources Plc - India
- Riau Bara Harum - Indonesia
- Economic Council, Georgia
- Mercator Lines Limited - India
- Romanian Commodities Exchange
- Africa Commodities Group - South Africa
- Maheswari Brothers Coal Limited - India
- Sakthi Sugars Limited - India
- Semirara Mining Corp, Philippines
- Energy Link Ltd, New Zealand
- Directorate General of MIneral and Coal - Indonesia
- Larsen & Toubro Limited - India
- Jindal Steel & Power Ltd - India
- Star Paper Mills Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Essar Steel Hazira Ltd - India
- PTC India Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Parry Sugars Refinery, India
- Grasim Industreis Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Chamber of Mines of South Africa
- The University of Queensland
- International Coal Ventures Pvt Ltd - India
- Thai Mozambique Logistica
- Krishnapatnam Port Company Ltd. - India
- Australian Commodity Traders Exchange
- Rio Tinto Coal - Australia
- Altura Mining Limited, Indonesia
- Global Business Power Corporation, Philippines
- Aditya Birla Group - India
- Indika Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Toyota Tsusho Corporation, Japan
- Coal and Oil Company - UAE
- Sarangani Energy Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Wood Mackenzie - Singapore
- Siam City Cement PLC, Thailand
- PetroVietnam Power Coal Import and Supply Company
- Bangladesh Power Developement Board
- Gujarat Sidhee Cement - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Makarim & Taira - Indonesia
- SMG Consultants - Indonesia
- Bukit Makmur.PT - Indonesia
- VISA Power Limited - India
- Sojitz Corporation - Japan
- Metalloyd Limited - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Videocon Industries ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Goldman Sachs - Singapore
- Meralco Power Generation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Power Finance Corporation Ltd., India
- Australian Coal Association
- Electricity Generating Authority of Thailand
- GMR Energy Limited - India
- Kobexindo Tractors - Indoneisa
- San Jose City I Power Corp, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Siam City Cement - Thailand
- New Zealand Coal & Carbon
- Bukit Baiduri Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Uttam Galva Steels Limited - India
- Port Waratah Coal Services - Australia
- Mintek Dendrill Indonesia
- Miang Besar Coal Terminal - Indonesia
- Bhoruka Overseas - Indonesia
- OPG Power Generation Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Kaltim Prima Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Asmin Koalindo Tuhup - Indonesia
- IEA Clean Coal Centre - UK
- Carbofer General Trading SA - India
- Coalindo Energy - Indonesia
- White Energy Company Limited
- Neyveli Lignite Corporation Ltd, - India
- Madhucon Powers Ltd - India
- SMC Global Power, Philippines
- Posco Energy - South Korea
- Maharashtra Electricity Regulatory Commission - India
- Indian Oil Corporation Limited
- Electricity Authority, New Zealand
- South Luzon Thermal Energy Corporation
- Timah Investasi Mineral - Indoneisa
- Xindia Steels Limited - India
- Indonesian Coal Mining Association
- Eastern Energy - Thailand
- GVK Power & Infra Limited - India
- Vizag Seaport Private Limited - India
- Ambuja Cements Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Rashtriya Ispat Nigam Limited - India
- The State Trading Corporation of India Ltd
- Marubeni Corporation - India
- Bayan Resources Tbk. - Indonesia
- Bhushan Steel Limited - India
- Chettinad Cement Corporation Ltd - India
- LBH Netherlands Bv - Netherlands
- Independent Power Producers Association of India
- Kumho Petrochemical, South Korea
- Manunggal Multi Energi - Indonesia
- Sinarmas Energy and Mining - Indonesia
- IHS Mccloskey Coal Group - USA
- India Bulls Power Limited - India
- Central Java Power - Indonesia
- Bharathi Cement Corporation - India
- Mercuria Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- SN Aboitiz Power Inc, Philippines
- Standard Chartered Bank - UAE
- MS Steel International - UAE
- CNBM International Corporation - China
- Singapore Mercantile Exchange
- Therma Luzon, Inc, Philippines
- Merrill Lynch Commodities Europe
- GAC Shipping (India) Pvt Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- European Bulk Services B.V. - Netherlands
- Bank of Tokyo Mitsubishi UFJ Ltd
- Medco Energi Mining Internasional
- Ind-Barath Power Infra Limited - India
- Directorate Of Revenue Intelligence - India
- Ministry of Mines - Canada
- Ceylon Electricity Board - Sri Lanka
- Meenaskhi Energy Private Limited - India
- Sindya Power Generating Company Private Ltd
- Kideco Jaya Agung - Indonesia
- Simpson Spence & Young - Indonesia
- Karaikal Port Pvt Ltd - India
- Edison Trading Spa - Italy
- Petron Corporation, Philippines
- Ministry of Finance - Indonesia
- Tamil Nadu electricity Board
- Wilmar Investment Holdings
- Orica Australia Pty. Ltd.
- Kartika Selabumi Mining - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- PowerSource Philippines DevCo
- Globalindo Alam Lestari - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The Treasury - Australian Government
- Sical Logistics Limited - India
- Trasteel International SA, Italy
- McConnell Dowell - Australia
- Karbindo Abesyapradhi - Indoneisa
- Savvy Resources Ltd - HongKong
- Renaissance Capital - South Africa
- Oldendorff Carriers - Singapore
- Georgia Ports Authority, United States
- Parliament of New Zealand
- Deloitte Consulting - India
- Planning Commission, India
- Indo Tambangraya Megah - Indonesia
- Formosa Plastics Group - Taiwan
- Borneo Indobara - Indonesia
- Indian Energy Exchange, India
- Sree Jayajothi Cements Limited - India
- Bhatia International Limited - India
- Central Electricity Authority - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Commonwealth Bank - Australia
- AsiaOL BioFuels Corp., Philippines
- Price Waterhouse Coopers - Russia
- Gujarat Electricity Regulatory Commission - India
- Baramulti Group, Indonesia
- Latin American Coal - Colombia
- TeaM Sual Corporation - Philippines
- Barasentosa Lestari - Indonesia
- Mjunction Services Limited - India
- Attock Cement Pakistan Limited
- ASAPP Information Group - India
- Bulk Trading Sa - Switzerland
- Cement Manufacturers Association - India
- Antam Resourcindo - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Anglo American - United Kingdom
- Aboitiz Power Corporation - Philippines
- Samtan Co., Ltd - South Korea
- Eastern Coal Council - USA
- Energy Development Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- London Commodity Brokers - England
- Gujarat Mineral Development Corp Ltd - India
- Straits Asia Resources Limited - Singapore
- Banpu Public Company Limited - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Alfred C Toepfer International GmbH - Germany
- Iligan Light & Power Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Agrawal Coal Company - India
- Malabar Cements Ltd - India
- Orica Mining Services - Indonesia
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