1. Art and Diseño

INSIDE DRY FREIGHT
Monday, February 2, 2015
Index (Total Return)
Baltic Exch Dry
Baltic Capesize
Baltic Panamax
Cash Prices
Close
608
679
508
Change
0
0
0
Pct. Change
0.0%
0.0%
0.0%
Port Congestion (Source: Global Ports)
Port Hedland Ore
Avg. Day
Weekly Change
5
1
Newcastle Dyke Coal
12.5
8
Newcastle Kooragang Coal
9.5
8
1
2
2
0
0
Brazil Tubarao
China Qingdao
McCloskey AP14
60.6
0
0.0%
India Paradip Ore
5.5
McCloskey AP12
58.88
0
0.0%
India Paradip Coal
14.5
0
59.1
0
0.0%
Rich. Bay Coal
1.5
-2
Coal Newcastle
MARKET NEWS
TODAY’S MARKETS
FREIGHT
Baltic sea freight index explores new lows since 1986
FREIGHT: The Baltic Exchange's main sea freight index, which tracks
rates for ships carrying dry bulk commodities, continued its slide, again
hitting the lowest in nearly three decades on Friday as rates for all the
four vessel segments fell. The overall index, which factors in average
daily earnings of capesize, panamax, supramax and handysize dry bulk
transport vessels, was down 24 points, or 3.8 percent, at 608 points,
the lowest since August 1986.
COAL
China coal set to post its biggest profit fall in a decade in
2014
Breakingviews- Modi market mania faces test in $3.7 bln
coal sale
Polish coal miner JSW writes down value of one of its
mines
Consol hires advisers to evaluate thermal coal MLP
IRON ORE
 China steel futures end 3 days of gains, poor factory
data drags
India's JSW steel calls for action against Chinese steel
"dumping"
ArcelorMittal says may curb Poland production if no end
to miner strike
STEEL: China's steel futures dropped on Monday, ending three sessions of gains after surveys showed the country's manufacturing activity
shrank for the first time in over two years. Slowing steel demand during
winter in the world's largest producer also dragged on prices. "As enduser purchasing activity remains thin, steel traders are still holding back
restocking and some are expecting prices to fall further, so it is not certain that prices have already bottomed out," said Du Hui, an analyst
with Qilu Securities in Shanghai.
GLOBAL MARKETS: Asian shares languished, after the latest gauge
of China's factory sector activity raised concerns about the world's second-largest economy. Financial spreadbetters expected European
bourses to follow suit, with Britain's FTSE 100 seen opening flat to 6
points lower, or down as much as 0.1 percent; Germany's DAX seen
opening 27 to 36 points lower, or down as much as 0.3 percent; and
France's CAC 40 expected to open 1 to 4 points lower, or down as
much as 0.1 percent.
INSIDE DRY FREIGHT
February 2, 2015
MARKET NEWS
China's coal production is estimated to have fallen 2.5 percent
in 2014, the first annual drop in more than a decade due to the
fight against pollution and government efforts to tackle a supply
glut as demand from industry and the power sector weakens.
Baltic sea freight index explores new lows since 1986
The Baltic Exchange's main sea freight index, which tracks rates
for ships carrying dry bulk commodities, continued its slide,
again hitting the lowest in nearly three decades on Friday as
rates for all the four vessel segments fell.
The China Coal Industry Association also estimated that profits
of coal mines fell 44 pct in first 11 months of last year, and that
70 percent of them made losses over the period.
The overall index, which factors in average daily earnings of
capesize, panamax, supramax and handysize dry bulk transport
vessels, was down 24 points, or 3.8 percent, at 608 points, the
lowest since August 1986.
Breakingviews- Modi market mania faces test in $3.7 bln
coal sale
The capesize index shed 46 points, or about 6.34 percent, to
679 points.
A lumbering, state-controlled monopoly is about to test the Indian stock market's 'Modi Mania'. The government is selling a
stake in Coal India worth around $3.7 billion to meet its fiscal
deficit target. A pledge to ramp up domestic coal production
makes it easier to lure investors. Still, the placing will set the
tone for a stock market that has rallied by one quarter following
the election of Prime Minister Narendra Modi last year.
Average daily earnings for capesize vessels, which typically
transport 150,000-tonne cargoes such as iron ore and coal, declined $285 to $6,707.
The panamax index was down 42 points or 7.64 percent at 508
points. Average daily earnings for panamaxes, which usually
carry coal or grain cargoes of about 60,000 to 70,000 tonnes,
slid $332 to $4,060. Both are at its lowest levels in seven
months.
The sale of up to 10 percent of Coal India at a maximum 4.5
percent discount to the closing price on Jan. 29 is a big deal to
swallow. Assuming the government sells the entire stake, it will
be the country's largest capital market transaction ever. The
proceeds will be equivalent to more than a third of the entire
amount raised through initial public offerings, follow-on issues,
and convertible bonds in India last year, according to Thomson
One.
The supramax index was down 14 points at 585 points, while
the handysize index slipped 8 points to 340 points.
China coal set to post its biggest profit fall in a decade in
2014
In spite of its inefficiencies, Coal India has some attractive qualities. Low-cost mines allow it to easily cover its capital expenditure and pay chunky dividends even though the company is
obliged to sell the bulk of its production below global prices,
which are currently near multi-year lows. That's likely to be the
case even if the sector is opened up to more competition.
China Coal, the country's second-largest coal producer, expects
its net profit to fall by as much as 85 percent, which would be its
biggest earnings drop in 10 years as the sector is hit by persistent oversupply exacerbated by a slowing Chinese economy.
China Coal Energy Co Ltd's 2014 net profit is expected to drop
75-85 percent as a continued downturn of the sector pushes
prices lower, it said in a statement to the Hong Kong stock exchange on Friday.
Modi's promise to provide round-the-clock energy to the entire
population is also already having a positive effect. Coal India's
production grew 7.3 percent in the nine months to the December, compared with a 1.6 percent annual average growth rate
for the past five years, according to Ambit.
In 2013, the coal producer posted a net profit of 3.58 billion yuan
($572.85 million).
The fall marks the steepest since 2005, according to Thomson
Reuters data. The company first went public in Hong Kong in
2006 and has issued profit growth figures dated back to 2005.
A successful sale that attracts a broad range of domestic and
international private-sector investors will give a confidence
boost to the many deals in-waiting. The government is expected
to offer shares in Oil and Natural Gas Corporation and power
producer NHPC worth a further $3 billion before the end of
March. Elsewhere, State Bank of India is seeking to raise
around $2.4 billion and Tata Motors wants to raise $1.2 billion.
An uptick in initial public offerings is also expected. Coal India
will test the market's willingness to absorb the unusually large
pipeline.
China Coal's profit warning follows a slew of smaller rivals expecting sharp earnings falls in 2014, they said this week.
Zhengzhou Coal Mining Machinery Group Co Ltd, Henan Dayou
Energy Co Ltd, Shaanxi Coal Industry Co Ltd and Shanxi Xishan Coal and Electricity Power all expect profit for 2014 to fall
by at least 70 percent.
Shanxi Coal International Energy Group Co Ltd, Taiyuan Coal
Gasification Co Ltd and Henan Shenhuo Coal & Power Co
Ltd expect to swing into the red, blaming weak prices due to the
supply glut.
Polish coal miner JSW writes down value of one of its
mines
"The trend of coal oversupply and falling prices has not changed
due to easing economic growth," Henan Dayou said in a Chinese-language filing to the Shanghai stock exchange.
Polish coal miner JSW said on Friday it has decided to write
down the value of one of its coal mines by 224 million zlotys
($60.40 million) due to the fall in coal prices.
Spot coal prices from Qinhuangdao port have dropped further to
518 yuan a tonne, after falling by about 15 percent in 2014.
The miner said the write-down on its Krupinski coal mine, which
2
INSIDE DRY FREIGHT
February 2, 2015
MARKET NEWS (Continued)
may still be subject to change, will affect the group's 2014 financial result due March 19.
The most-traded May rebar contract on the Shanghai Futures
Exchange closed down 0.3 percent at 2,492 yuan ($398). The
futures price has already fallen 3.7 percent so far this year.
Trade unions at JSW, which is controlled by the Polish treasury,
went on strike on Wednesday against the company's plans to
cut costs.
A government survey showed China's factory sector unexpectedly shrank for the first time in nearly 2-1/2 years in January,
and firms saw more gloom ahead.
"We don't see any good signs for demand recovery this month,
so steel prices are likely to stay at currently low levels," said Xu
Huimin, an analyst with Huatai Great Wall Futures in Shanghai.
Consol hires advisers to evaluate thermal coal MLP
Consol Energy Inc said it hired advisers to evaluate a master
limited partnership structure for its thermal coal business, as it
shifts focus to boosting natural gas production.
A slowing economy and stagnant demand growth for commodities have already piled stress on Chinese steel mills, with some
reporting losses for last year.
The company said it expected to invest $1 billion in its oil and
natural gas business in 2015, compared with the $220 million in
its coal business.
Shandong Iron & Steel Co Ltd said it expected a net loss in
2014 of about 1.35 billion yuan ($215.68 million) versus a net
profit of 158.3 million yuan the year before.
Consol said production in its natural gas business would likely
grow by 30 percent this year.
Weaker steel prices have forced Chinese steel mills to scale
back production, curbing appetite for iron ore with spot prices
slumping to their lowest since May 2009.
The company also said an initial public offering of its metallurgical, or steel-making, coal business is likely in the fourth quarter.
Benchmark 62 percent grade iron ore for immediate delivery to
China fell 1 percent to $61.70 a tonne on Friday, posting its
biggest monthly fall since May 2013, according to data compiled
by the Steel Index.
Coal miners have been weighed down by a switch by U.S. utilities to cheaper natural gas from power-generating coal, and
weaker demand from top consumer China for steel-making coal.
Consol's coal business accounts for more than half of its total
revenue.
Iron ore futures for May delivery on the Dalian Commodity Exchange closed down 0.4 percent at 472 yuan.
Master Limited Partnership (MLPs) have become increasingly
popular as they pay no taxes at the federal level and distribute
most of their cash flows as dividends to investors.
India's JSW steel calls for action against Chinese steel
"dumping"
Revenue rose 13 percent to $935.7 million in the fourth quarter
ended Dec. 31, boosted by sales of oil, natural gas, and natural
gas liquids.
India's JSW Steel Ltd on Friday urged the government to address "dumping" of cheap steel by Chinese rivals and take
steps to improve iron ore availability after lower steel prices led
to a 30 percent drop in the company's third-quarter profit.
Net income from continuing operations halved to $73.7 million,
or 32 cents per share.
Exploration and production costs rose nearly 24 percent to
$294.3 million.
Steel imports into India leapt by more than 60 percent in the
April to December period, with 1 million tonnes imported in December alone, group Chief Financial Officer Seshagiri Rao told
reporters in Mumbai.
Consol reported an adjusted profit of 25 cents, 5 cents above
the average analyst estimate, according to Thomson Reuters I/
B/E/S.
"We have been representing to the government that they should
take steps, as is being done by various countries, in stopping
the dumping and to stop injury to the domestic industry," Rao
said.
Analysts had expected revenue of $956.1 million.
Up to Thursday's close, Consol's shares had fallen 22 percent in
the last 12 months, compared to a nearly 40 percent drop in the
broader Dow Jones U.S. Coal index
The company has been struggling with restricted supply of steel
making raw materials, especially iron ore, due to mining bans in
India and high domestic prices, forcing it to resort to imports to
keep up production rates.
China steel futures end 3 days of gains, poor factory data
drags
"The major concern going forward is the iron ore availability and
iron ore pricing which is against the interest of domestic steel
production," Rao said, pointing to a 14 percent rise in iron ore
prices in India over the past year. International prices have
halved in that time.
China's steel futures dropped on Monday, ending three sessions
of gains after surveys showed the country's manufacturing activity shrank for the first time in over two years.
Slowing steel demand during winter in the world's largest producer also dragged on prices.
JSW Steel, which needs about 25 million tonnes of the steel
making raw material per year, said it imported over 40 percent
of its requirement in the December quarter.
"As end-user purchasing activity remains thin, steel traders are
still holding back restocking and some are expecting prices to
fall further, so it is not certain that prices have already bottomed
out," said Du Hui, an analyst with Qilu Securities in Shanghai.
It posted a consolidated net profit of 3.29 billion rupees ($53.07
million) for the quarter ended Dec. 31, its fiscal third.
3
INSIDE DRY FREIGHT
February 2, 2015
MARKET NEWS (Continued)
"We are changing the product mix so that we are not competing
in the commodity space with the Chinese. We are making that
extra effort to see that more and more value added products get
exported." Jayant Acharya, Director - Commercial and Marketing at JSW Steel, said.
long term we can cope, but as we have a few days' worth of
resources, in the coming days we may have to curb production."
"We're trying to look for alternative supply sources. A ship with
overseas coal is on its way," she added.
The spokeswoman declined to comment on whether ArcelorMittal, the world's largest steel maker, plans to seek compensation
from JSW or if alternative supplies are more costly.
ArcelorMittal says may curb Poland production if no end to
miner strike
Trade unions at JSW, which is controlled by the Polish treasury,
went on strike on Wednesday against the company's plans to
cut costs.
Steel producer ArcelorMittal's Polish unit said on Friday it might
have to curb production if JSW, its main coking coal supplier,
does not in the next few days resume deliveries that have been
halted by a miners' strike.
ArcelorMittal's Polish coking plant in Zdzieszowice is the largest
of its kind in Europe. The company's steel plants account for 70
percent of Poland's steel production capacity.
ArcelorMittal Polska spokeswoman Sylwia Winiarek said the
steel maker did not receive supplies from JSW, the European
Union's largest coking coal miner, for the third day running on
Friday.
"The situation is tough, as JSW's provides up to 60 percent of
the coal we use," Winiarek told Reuters. "In the medium and
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(Inside Dry Freight is compiled by Atiqul Habib in Bangalore)
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