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Thursday, 12 December 13
GREAT EXPECTATIONS SANCTIONED - EVA TZIMA
 News that sanctions on Iranian oil exports could be lifted sometime in the following months have shaken the markets recently. One of the world’s top oil suppliers historically and once OPEC’ s 2nd largest producer, Iran, has seen its exports squished since 2012, when both the U.S. and the European Union imposed additional sanctions against the country’s oil exports.
The sanctions that were imposed on the basis that Iran’s nuclear programme included enrichment of uranium, which if surpasses certain levels of purity can be used to develop nuclear weapons, affected extensively Iran’s economy. Following U.S.’s Comprehensive Iran Sanctions, Accountability, and Divestment Act (CIS ADA), a law passed in the summer of 2010 by the Congress, the E.U. also placed significant restrictions on foreign trade, financial services, energy sectors and technologies related to Iran. Additionally, the provision of insurance by firms incorporated in any E.U. member country, to Iranian-owned companies, was banned. With oil and gas production accounting for almost half of the local government’s income, the country’s current account surplus for 2012 has dropped more than 50% compared to 2011, while at the same time Iranian assets and funds were blocked due to the international sanctions.
With over 5% of the global sea borne exports coming from Iran up until 2012 and with domestic reserves placing the country at number four on the world’s largest oil reserves list, the knee jerk reaction was that lifting of these sanctions was great news for the tanker sector. Right when freight rates for the crude oil carriers have started catching a significant break, such development would come as the cherry on the top of a strengthening market and a possible recovery within 2014. As the noise has started to settle down though, it has become more evident that the outcome of all this is still very uncertain both for the timeframe during which sanctions will be lifted, as well as for the sort and scale of impact this could have on the fate of crude carriers.
The effects of Iran becoming a no-trade zone have been in tensely felt in the shipping industry, as the total restrictions for oil and gas exports have hurt seaborne trade in the region and elsewhere. On the one hand, European Union member states accounted for around 20% of Iran’s oil exports prior to the 2012 sanctions, while at the same time indirect restrictions were placed even for big importing countries of Iranian oil who didn’t impose sanctions themselves. In fact, as the U.S. targeted the country’s revenue from oil exports, it committed to cut off from the U.S. banking system any international financial institution that engaged into oil related transactions with Iran’ s central bank. That led the top importers of Iranian oil, like China, India, Japan and S. Korea, to reduce the number of Iranian crude in to their countries. This weighed further down on seaborne traded volumes and on top of that, any ship insurance cover from the sanction imposing countries was also rendered impossible; So, remove the sanctions and you get a healthier market back. Financial institutions are allowed to back up Iran related transactions, P&I clubs will start insuring cargoes and ships involved in the trade, Iranian funds t hat have been frozen all these years will be unblocked permitting for a significant liquidity boost in the oil market and crude exports both in the Med and Asia region will reach pre-2012 volumes again or even surpass them especially since Far East appetite for oil has been firing up again recently; Picture perfect for sure but don’t pop up the champagne just yet…
The reality is that the recent deal reached in Geneva will for now only allow “limited, targeted and reversible relief” from the existing sanctions. From Iran’s side, one of the main commitments involves halting enrichment of uranium over 5%. In return, world powers will put an end to specific sanctions involving the trade of petrochemicals, gold and the automotive sector, while they will also allow for $4.2bn of oil related funds to be transferred back to the country. This means that there is currently no commitment for oil related sanctions to be lifted in the near future and this is certainly a massive political hot potato for any world leader who decides to touch it, and one that cannot be easily reversed if a no sanctions path is carved. Businesses involved in sectors previously or currently affected by the sanctions will not jump to do business with Iran either. I would think that they will choose to wait for now and get involved only after a long period of time ha s passed, avoiding any back and forth on the sanction policy, as they wouldn’t want to risk seeing themselves or their funds being tainted in the process.
But irrespective of the developments surrounding the sanctions, as far as the trade of oil is concerned, the fact is that it has been the demand side of the trade driving the volumes rather than the supply. While the supply of crude coming from Iran has hit employment of tankers, in reality, the sector hasn’t suffered that long due to scarcity of cargoes but rather because of continuous subdued demand for the commodity, on the back of slowing down economies and increase in the price of oil itself. Nonetheless, the most worrying aspect in my opinion is the great expectations removal of sanctions can create in the market. The false sense of a possible demand spike that might o r might not happen, can lead to over optimistic expectations by owners and boost ordering in segments like that of VLs, the order book of which has been relatively healthy up until recently, leading to another vicious cycle of tonnage oversupply. Hopefully not.
Compiled by:
Intermodal Research & Valuations | research@intermodal.gr
Analysts:
Mr. George Lazaridis | g.lazaridis@intermodal.gr
Ms. Eva Tzima | e.tzima@intermodal.gr
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 re-producing is allowed, without the prior written authorization of Intermodal Shipbrokers Co.
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Monday, 21 April 14
DRY BULK MARKET UPS AND - MOST RECENTLY - DOWNS OFFERS NO ROOM FOR RELAXING AMONG DRY BULK SHIP OWNERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market's latest demise, with the market retrating once again, since the end of March, has come at a time, when most ship owners ...
Sunday, 20 April 14
FREIGHT RATES END WEEK ON WEAK NOTE - VISTAAR
Wish you all Happy Easter.
The freight market continued to its downwards as BDI was fell 7.187 percent to 930 points week on week.
The ...
Friday, 18 April 14
US WEEKLY COAL PRODUCTION DECLINED BY 1% TO 18.9 MMST
COALspot.com – United States the world's second largest coal producer, produced approximately 18.9 million short tons (mmst) of coal i ...
Thursday, 17 April 14
DRY BULK MARKET ON RETREAT MODE, WHILE NEWBUILDING ORDERING ACTIVITY STALLS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has kept on retreating this week, a pattern which emerged since late March. Yesterday the BDI (Baltic Dry Index) ended yet a ...
Wednesday, 16 April 14
INDONESIA'S FEBRUARY 2014 COAL EXPORT VOLUME FELL 2.41%
COALspot.com: Indonesia, the world 4th largest coal producer and the global largest multi grade coal exporter shipped around $1.77* billio ...
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- South Luzon Thermal Energy Corporation
- Miang Besar Coal Terminal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Offshore Bulk Terminal Pte Ltd, Singapore
- Energy Development Corp, Philippines
- Ministry of Transport, Egypt
- Global Business Power Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Jaiprakash Power Ventures ltd
- LBH Netherlands Bv - Netherlands
- Bhoruka Overseas - Indonesia
- SMC Global Power, Philippines
- Medco Energi Mining Internasional
- International Coal Ventures Pvt Ltd - India
- ASAPP Information Group - India
- Star Paper Mills Limited - India
- Merrill Lynch Commodities Europe
- Latin American Coal - Colombia
- MS Steel International - UAE
- Grasim Industreis Ltd - India
- Semirara Mining Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Indonesian Coal Mining Association
- Mercuria Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Larsen & Toubro Limited - India
- Aboitiz Power Corporation - Philippines
- Bahari Cakrawala Sebuku - Indonesia
- CIMB Investment Bank - Malaysia
- Thiess Contractors Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- CNBM International Corporation - China
- Kohat Cement Company Ltd. - Pakistan
- Pendopo Energi Batubara - Indonesia
- The State Trading Corporation of India Ltd
- Standard Chartered Bank - UAE
- Eastern Energy - Thailand
- Gujarat Electricity Regulatory Commission - India
- GVK Power & Infra Limited - India
- Commonwealth Bank - Australia
- Ambuja Cements Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Therma Luzon, Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Global Coal Blending Company Limited - Australia
- Kepco SPC Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Edison Trading Spa - Italy
- Manunggal Multi Energi - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Eastern Coal Council - USA
- Binh Thuan Hamico - Vietnam
- Heidelberg Cement - Germany
- Gujarat Mineral Development Corp Ltd - India
- Simpson Spence & Young - Indonesia
- Kartika Selabumi Mining - Indonesia
- Banpu Public Company Limited - Thailand
- Iligan Light & Power Inc, Philippines
- Vizag Seaport Private Limited - India
- Bukit Makmur.PT - Indonesia
- Timah Investasi Mineral - Indoneisa
- SMG Consultants - Indonesia
- Orica Mining Services - Indonesia
- Indogreen Group - Indonesia
- Essar Steel Hazira Ltd - India
- Intertek Mineral Services - Indonesia
- Malabar Cements Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Karaikal Port Pvt Ltd - India
- ICICI Bank Limited - India
- Central Java Power - Indonesia
- PTC India Limited - India
- Billiton Holdings Pty Ltd - Australia
- Savvy Resources Ltd - HongKong
- Coalindo Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Altura Mining Limited, Indonesia
- IEA Clean Coal Centre - UK
- The Treasury - Australian Government
- Carbofer General Trading SA - India
- Attock Cement Pakistan Limited
- Parliament of New Zealand
- Electricity Generating Authority of Thailand
- Sree Jayajothi Cements Limited - India
- Energy Link Ltd, New Zealand
- Interocean Group of Companies - India
- Singapore Mercantile Exchange
- Central Electricity Authority - India
- Anglo American - United Kingdom
- San Jose City I Power Corp, Philippines
- Vedanta Resources Plc - India
- Sinarmas Energy and Mining - Indonesia
- Chettinad Cement Corporation Ltd - India
- Goldman Sachs - Singapore
- Ceylon Electricity Board - Sri Lanka
- Sakthi Sugars Limited - India
- Bayan Resources Tbk. - Indonesia
- Africa Commodities Group - South Africa
- Coal and Oil Company - UAE
- Price Waterhouse Coopers - Russia
- Australian Coal Association
- Minerals Council of Australia
- White Energy Company Limited
- Sindya Power Generating Company Private Ltd
- Kaltim Prima Coal - Indonesia
- Uttam Galva Steels Limited - India
- IHS Mccloskey Coal Group - USA
- PowerSource Philippines DevCo
- India Bulls Power Limited - India
- Ministry of Finance - Indonesia
- Posco Energy - South Korea
- Orica Australia Pty. Ltd.
- Samtan Co., Ltd - South Korea
- OPG Power Generation Pvt Ltd - India
- Wood Mackenzie - Singapore
- Meenaskhi Energy Private Limited - India
- Electricity Authority, New Zealand
- GAC Shipping (India) Pvt Ltd
- Parry Sugars Refinery, India
- Tamil Nadu electricity Board
- Dalmia Cement Bharat India
- Power Finance Corporation Ltd., India
- Alfred C Toepfer International GmbH - Germany
- Videocon Industries ltd - India
- Lanco Infratech Ltd - India
- Wilmar Investment Holdings
- Siam City Cement - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Mjunction Services Limited - India
- Kobexindo Tractors - Indoneisa
- VISA Power Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Borneo Indobara - Indonesia
- Chamber of Mines of South Africa
- European Bulk Services B.V. - Netherlands
- Sojitz Corporation - Japan
- GN Power Mariveles Coal Plant, Philippines
- Indian Energy Exchange, India
- Asmin Koalindo Tuhup - Indonesia
- Toyota Tsusho Corporation, Japan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Semirara Mining and Power Corporation, Philippines
- Trasteel International SA, Italy
- Planning Commission, India
- Bukit Baiduri Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Bangladesh Power Developement Board
- Bulk Trading Sa - Switzerland
- Global Green Power PLC Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Madhucon Powers Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Metalloyd Limited - United Kingdom
- Sarangani Energy Corporation, Philippines
- Economic Council, Georgia
- Deloitte Consulting - India
- Georgia Ports Authority, United States
- Rio Tinto Coal - Australia
- Oldendorff Carriers - Singapore
- Agrawal Coal Company - India
- New Zealand Coal & Carbon
- Kapuas Tunggal Persada - Indonesia
- Marubeni Corporation - India
- Jorong Barutama Greston.PT - Indonesia
- Baramulti Group, Indonesia
- Bhatia International Limited - India
- Salva Resources Pvt Ltd - India
- Romanian Commodities Exchange
- Makarim & Taira - Indonesia
- Kumho Petrochemical, South Korea
- Leighton Contractors Pty Ltd - Australia
- Independent Power Producers Association of India
- Cement Manufacturers Association - India
- Indo Tambangraya Megah - Indonesia
- Thai Mozambique Logistica
- PNOC Exploration Corporation - Philippines
- The University of Queensland
- Australian Commodity Traders Exchange
- Aditya Birla Group - India
- Petron Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- Ministry of Mines - Canada
- Riau Bara Harum - Indonesia
- Xindia Steels Limited - India
- London Commodity Brokers - England
- Renaissance Capital - South Africa
- Mercator Lines Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Siam City Cement PLC, Thailand
- Cigading International Bulk Terminal - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Tata Chemicals Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Straits Asia Resources Limited - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Coastal Gujarat Power Limited - India
- Maheswari Brothers Coal Limited - India
- TeaM Sual Corporation - Philippines
- McConnell Dowell - Australia
- Holcim Trading Pte Ltd - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Bhushan Steel Limited - India
- Indian Oil Corporation Limited
- Mintek Dendrill Indonesia
- Antam Resourcindo - Indonesia
- Bharathi Cement Corporation - India
- Gujarat Sidhee Cement - India
- GMR Energy Limited - India
- Indika Energy - Indonesia
- Meralco Power Generation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Ind-Barath Power Infra Limited - India
- Formosa Plastics Group - Taiwan
- Sical Logistics Limited - India
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