Please find below the Intermodal Weekly market report for week 19 2023
Intermodal Report Week 19 2023
Market Insight
By Fotis Kanatas
Research Analyst
India is one of the world’s largest coal producers and one of the world’s largest importers of coal. The country uses coal mainly for power generation and is the third largest energy consumer, making it a vital commodity for India. According to Reuters, the country’s coal demand for power generation is expected to be 821,000 kt in the focus year 2023-2024, an increase of 8% compared to last year.
Looking at India’s seaborne coal imports, there is an increase of 19% from 2021 to 2022, with imports standing at 208,034.13 kt. This year, the country has already imported volumes equivalent to 37% of last year’s imports, or 76,728.95 kt, a figure that is expected to rise further as we enter the second half of the year, and it is expected that more coal will be needed to meet the country’s electricity demand. A closer look at quarterly coal imports shows that in 2021 and 2022, Q2 was the strongest period with 51,859.07 kt and 64,261.28 kt respectively. This makes sense as India’s peak power season is in the summer months and stockpiling is needed to ensure energy security. On the steel front, the country is also experiencing growth in this industry. In 2023, India’s steel demand is expected to be in the range of 130mmt -135mmt, about 6% higher than last year.
Taking a look at India’s top importers, the top 4 are Indonesia, Australia, South Africa and Russia. As far as Indonesia is concerned, shipments to India have been increasing since 2021 and the trend is likely to continue. They totalled 49,417.93 kt in 2021, 86,675.97 kt in 2022 and currently stand at 31,530.67 kt for 2023, which is 36% of last year’s imports. The same cannot be said for Australia and South Africa, as both countries’ coal exports to India have been declining since 2021. Australia exported 68,003.09 kt in 2021, 55,440.31 kt in 2022 and 13,384.15 kt so far in 2023, 24% of last year’s exports. South Africa exported 24,347.48 kt in 2021, 17,255.53 kt in 2022 and 9,230.68 kt so far in 2023, which is 53% of the 2022 volume, a remarkable figure, and the biggest amongst the top 4 exporters.
The same is true for Russia. India imported 6,987.85 kt in 2021, 18,941.25 kt in 2022, while imports so far stand at 9,523.40 kt, which is 50% of last year’s imports. This could be explained by the traditionally lower price of South African coal compared to Australian coal, while Russian coal became more lucrative after the invasion of Ukraine.
The largest percentages of volume shipped to India this year compared to last are from South Africa and Russia, indicating a strong interest to continue on this path. This means that the demand for tonne miles is increasing, which in turn supports freight rates. The vessel types most used in this trade are Kamsarmax and Capesize. If the trend continues and India continues to import more coal from distant countries, rates for the trade may increase.
Chartering (Wet: Stable+/ Dry: Stable-)
The sentiment was mixed in the dry bulk market across all sizes with a general feeling that the demand revival has yet to begin. The BDI on Friday (12/05/2023) closed at 1,558 points, unchanged compared to previous Friday’s closing (05/05/2023). Crude tankers momentum was split between VLCC weak trend and positive Suezmax and Aframax performance. The BDTI on Friday (12/05/2023) closed at 1252, an increase of 180 points and the BCTI at 633, a decrease of 61 points compared to previous Friday’s (05/04/2023) levels.
Sale & Purchase (Wet: Stable+ / Dry: Softer)
The recent negative momentum on the dry bulk market was evident in the SnP realm as well with only a handful of dry bulk sales materializing. On the tanker front, a healthy volume of deals came to light last week. In the tanker sector, we had the sale of the “AGAPE SOUL” (159,165dwt-blt ‘01, S. Korea) which was sold to undisclosed buyers, for a price in the region of $29.0m. On the dry bulker side sector, we had the sale of the “TASIK MELATI” (180,310dwt-blt ‘04, Japan), which was sold to Chinese owner Jiangsu, for a price in the region of $15.5m.
Newbuilding (Wet: Softer / Dry: Firmer)
The previous week was another firm one for the shipbuilding industry, with 15 vessels being ordered. The overwhelming majority were bulkers (9) and in particular Kamsarmax size. It is also worth noting that there was only one tanker order, for two ships. German owner Oldendorff Carriers ordered 3 firm and 6 optional 82,200 dwt bulk carriers from Jiangsu New Hantong for delivery in 2025. The trio will be EEDI phase 3 compliant and cost the owner $33.0m each. In a similar deal, Fortune Ocean Shipping ordered four firm 82,000 dwt vessels from Dalian Shipbuilding in China at a cost of $32.5m each. In the only tanker order, Greek owner Steelships ordered two 50,000 dwt tankers from K Shipbuilding in Korea. The two will be fitted with scrubbers and will also be available for LNG propulsion. Finally, Danaos ordered two 5,900 TEU boxships from Qingdao Yangfan for delivery in 2025 at a cost of $63.0m each.
Demolition (Wet: Stable- / Dry: Stable-)
The market has remained somewhat subdued over the past week, with few transactions taking place despite a mild recovery in the global steel market. Freight rates across all segments are mixed but stable, resulting in less interest in scrapping. In India, the monsoon season is about to start, which means that local recyclers may be forced to shut down in a poor market. The country is also facing a liquidity crunch, with excess cash parked by banks with the central bank reduced by 90%. In Pakistan, the situation is worsening by the week. The financial problems are leading to political unrest, with the arrest of ex-Prime Minister Imran Khan being the latest development. The IMF is extremely pessimistic about the country’s future. Bangladesh’s bid prices are falling, which is holding the market back. Dollar reserves are falling, which is a problem for buyers who continue to face L/C restrictions or high interest rates. The domestic steel market is in a better position than last week and is expected to improve in the near future. Finally, the country is closely following the discussion on the budget for the next fiscal year, which is scheduled for June. In Turkey, the market is slow as elections took place over the weekend. The industry is in a wait and see mode since the winner’s program for the whole economy and the recycling industry in particular, will be determining.
