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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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Wednesday, 09 April 14
DRY BULK MARKET STRUGGLED THROUGHOUT THE WEEK - INTERMODAL
The Dry Bulk market struggled throughout the week but the poor performance across the board didn't allow for any positive reversal, pushing ...
Tuesday, 08 April 14
PORT OF NEWCASTLE SHIPPED 2.90 MMT OF POWER PLANT AND SEMI-SOFT COKING COAL IN A WEEK
COALspot.com: In the week ended 07:00 hours 7 April 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensla ...
Tuesday, 08 April 14
RBCT SHIPPED 53.79% MORE COAL IN MARCH 2014
COALspot.com: South Africa's Richards Bay Coal Terminal (RBCT) the single largest export coal terminal in the world, shipped 6.90 million to ...
Tuesday, 08 April 14
APRIL 2014 INDONESIAN COAL PRICE REFERENCE DROPS TO LOWEST SINCE JANUARY 2010
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia has revised down again the coal bench mark price by US$ 2.20 / MT to ...
Tuesday, 08 April 14
TALKING ABOUT A ONE-HORSE RACE - GEORGE LAZARIDIS
Ever since the onslaught of the financial crisis, China along with the other BRIICs, have played a pivotal role in supporting global economic gr ...
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- Eastern Coal Council - USA
- Neyveli Lignite Corporation Ltd, - India
- Bhoruka Overseas - Indonesia
- Ministry of Mines - Canada
- Bahari Cakrawala Sebuku - Indonesia
- Indonesian Coal Mining Association
- Ministry of Finance - Indonesia
- Parliament of New Zealand
- Tamil Nadu electricity Board
- Bangladesh Power Developement Board
- GVK Power & Infra Limited - India
- Carbofer General Trading SA - India
- Rio Tinto Coal - Australia
- Cigading International Bulk Terminal - Indonesia
- Commonwealth Bank - Australia
- The State Trading Corporation of India Ltd
- Kepco SPC Power Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Romanian Commodities Exchange
- Malabar Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Transport, Egypt
- Petron Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Salva Resources Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Parry Sugars Refinery, India
- Indogreen Group - Indonesia
- ASAPP Information Group - India
- Orica Mining Services - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Anglo American - United Kingdom
- Goldman Sachs - Singapore
- Savvy Resources Ltd - HongKong
- Australian Coal Association
- Karaikal Port Pvt Ltd - India
- ICICI Bank Limited - India
- Bukit Baiduri Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- CNBM International Corporation - China
- Essar Steel Hazira Ltd - India
- Bhushan Steel Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Manunggal Multi Energi - Indonesia
- Makarim & Taira - Indonesia
- Banpu Public Company Limited - Thailand
- Grasim Industreis Ltd - India
- GAC Shipping (India) Pvt Ltd
- Gujarat Sidhee Cement - India
- Larsen & Toubro Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Electricity Authority - India
- SN Aboitiz Power Inc, Philippines
- Interocean Group of Companies - India
- Pipit Mutiara Jaya. PT, Indonesia
- Intertek Mineral Services - Indonesia
- Latin American Coal - Colombia
- Bukit Makmur.PT - Indonesia
- Central Java Power - Indonesia
- PTC India Limited - India
- Kaltim Prima Coal - Indonesia
- Medco Energi Mining Internasional
- Electricity Generating Authority of Thailand
- Attock Cement Pakistan Limited
- Bhatia International Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Meenaskhi Energy Private Limited - India
- Heidelberg Cement - Germany
- Ambuja Cements Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Energy Link Ltd, New Zealand
- Coastal Gujarat Power Limited - India
- IEA Clean Coal Centre - UK
- Oldendorff Carriers - Singapore
- Deloitte Consulting - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Samtan Co., Ltd - South Korea
- Madhucon Powers Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Leighton Contractors Pty Ltd - Australia
- CIMB Investment Bank - Malaysia
- Indian Energy Exchange, India
- Vizag Seaport Private Limited - India
- Star Paper Mills Limited - India
- Singapore Mercantile Exchange
- Directorate Of Revenue Intelligence - India
- LBH Netherlands Bv - Netherlands
- Pendopo Energi Batubara - Indonesia
- Tata Chemicals Ltd - India
- International Coal Ventures Pvt Ltd - India
- Africa Commodities Group - South Africa
- Jaiprakash Power Ventures ltd
- Standard Chartered Bank - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- Port Waratah Coal Services - Australia
- Coalindo Energy - Indonesia
- Indika Energy - Indonesia
- Aditya Birla Group - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Riau Bara Harum - Indonesia
- Trasteel International SA, Italy
- Vedanta Resources Plc - India
- GMR Energy Limited - India
- Videocon Industries ltd - India
- Power Finance Corporation Ltd., India
- Thai Mozambique Logistica
- Merrill Lynch Commodities Europe
- Asmin Koalindo Tuhup - Indonesia
- Kobexindo Tractors - Indoneisa
- Mercuria Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Electricity Authority, New Zealand
- Orica Australia Pty. Ltd.
- OPG Power Generation Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Minerals Council of Australia
- MS Steel International - UAE
- SMG Consultants - Indonesia
- TeaM Sual Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Petrochimia International Co. Ltd.- Taiwan
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Mineral Development Corp Ltd - India
- European Bulk Services B.V. - Netherlands
- Semirara Mining and Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Kartika Selabumi Mining - Indonesia
- Eastern Energy - Thailand
- Krishnapatnam Port Company Ltd. - India
- Sinarmas Energy and Mining - Indonesia
- Sojitz Corporation - Japan
- Cement Manufacturers Association - India
- Metalloyd Limited - United Kingdom
- Globalindo Alam Lestari - Indonesia
- Sical Logistics Limited - India
- Uttam Galva Steels Limited - India
- Wilmar Investment Holdings
- Semirara Mining Corp, Philippines
- Aboitiz Power Corporation - Philippines
- Xindia Steels Limited - India
- Straits Asia Resources Limited - Singapore
- Global Green Power PLC Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Mercator Lines Limited - India
- London Commodity Brokers - England
- Therma Luzon, Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Ind-Barath Power Infra Limited - India
- Simpson Spence & Young - Indonesia
- Economic Council, Georgia
- Georgia Ports Authority, United States
- Kohat Cement Company Ltd. - Pakistan
- The Treasury - Australian Government
- Posco Energy - South Korea
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Agrawal Coal Company - India
- New Zealand Coal & Carbon
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- India Bulls Power Limited - India
- Gujarat Electricity Regulatory Commission - India
- McConnell Dowell - Australia
- Mintek Dendrill Indonesia
- Dalmia Cement Bharat India
- Renaissance Capital - South Africa
- Alfred C Toepfer International GmbH - Germany
- Baramulti Group, Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Siam City Cement - Thailand
- Bharathi Cement Corporation - India
- Formosa Plastics Group - Taiwan
- Karbindo Abesyapradhi - Indoneisa
- Siam City Cement PLC, Thailand
- Altura Mining Limited, Indonesia
- Sakthi Sugars Limited - India
- Sindya Power Generating Company Private Ltd
- Chamber of Mines of South Africa
- SMC Global Power, Philippines
- Antam Resourcindo - Indonesia
- Thiess Contractors Indonesia
- Sarangani Energy Corporation, Philippines
- Indian Oil Corporation Limited
- Meralco Power Generation, Philippines
- PowerSource Philippines DevCo
- White Energy Company Limited
- Lanco Infratech Ltd - India
- South Luzon Thermal Energy Corporation
- Indo Tambangraya Megah - Indonesia
- Barasentosa Lestari - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Edison Trading Spa - Italy
- Global Coal Blending Company Limited - Australia
- Coal and Oil Company - UAE
- Independent Power Producers Association of India
- Borneo Indobara - Indonesia
- Marubeni Corporation - India
- Bayan Resources Tbk. - Indonesia
- Energy Development Corp, Philippines
- Maheswari Brothers Coal Limited - India
- Wood Mackenzie - Singapore
- VISA Power Limited - India
- Toyota Tsusho Corporation, Japan
- Mjunction Services Limited - India
- Binh Thuan Hamico - Vietnam
- Planning Commission, India
- Australian Commodity Traders Exchange
- Global Business Power Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Iligan Light & Power Inc, Philippines
- Kumho Petrochemical, South Korea
- Kapuas Tunggal Persada - Indonesia
- The University of Queensland
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