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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, 07 April 14
WEEKLY SUB-BIT FOB INDONESIA COAL SWAP CLAIMS EDGE FALL; TREND NEGATIVE
COALspot.com: Indonesian coal swaps for average Q4’ 2014 lost on month, day and on week according to AsiaClear OTC coal swap's reports ...
Monday, 07 April 14
API 8 CFR SOUTH CHINA COAL SWAPS GAINED 2.09% M-O-M
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries gained 2.09 percent month on month and closed at US$ 75.68 per ...
Sunday, 06 April 14
THE FREIGHT MARKET KEEPS SLIDING
COALspot.com: The freight market continued to drop this week. The BDI (Baltic Dry Index) is a widely followed metric that reflects the overall r ...
Friday, 04 April 14
UNITED STATES COAL OUTPUT UP 5.4% IN PAST WEEK
COALspot.com – United States the world's second largest coal producer, produced approximately 19.9 million short tons (mmst) of coal i ...
Thursday, 03 April 14
PANAMAX SECTOR IS WATCHING A SEVERE DROP IN RATES - FEARNLEYS
Handy
A further weaker sentiment for the Supras as well in both hemispheres this week with oversupply of tonnage being the major headline. Tra ...
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- Goldman Sachs - Singapore
- McConnell Dowell - Australia
- Sinarmas Energy and Mining - Indonesia
- Cement Manufacturers Association - India
- Ambuja Cements Ltd - India
- SN Aboitiz Power Inc, Philippines
- Sical Logistics Limited - India
- Kohat Cement Company Ltd. - Pakistan
- GVK Power & Infra Limited - India
- Formosa Plastics Group - Taiwan
- Madhucon Powers Ltd - India
- Anglo American - United Kingdom
- VISA Power Limited - India
- San Jose City I Power Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Banpu Public Company Limited - Thailand
- Eastern Energy - Thailand
- Ind-Barath Power Infra Limited - India
- Bhushan Steel Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Port Waratah Coal Services - Australia
- IHS Mccloskey Coal Group - USA
- Siam City Cement PLC, Thailand
- Global Coal Blending Company Limited - Australia
- India Bulls Power Limited - India
- PowerSource Philippines DevCo
- Miang Besar Coal Terminal - Indonesia
- Planning Commission, India
- Star Paper Mills Limited - India
- Global Green Power PLC Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Meenaskhi Energy Private Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Aditya Birla Group - India
- Bharathi Cement Corporation - India
- Mintek Dendrill Indonesia
- Mercator Lines Limited - India
- Larsen & Toubro Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Energy Development Corp, Philippines
- Tamil Nadu electricity Board
- Xindia Steels Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Kartika Selabumi Mining - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- SMG Consultants - Indonesia
- Kideco Jaya Agung - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Salva Resources Pvt Ltd - India
- Latin American Coal - Colombia
- Pendopo Energi Batubara - Indonesia
- Economic Council, Georgia
- Leighton Contractors Pty Ltd - Australia
- Interocean Group of Companies - India
- Petron Corporation, Philippines
- Renaissance Capital - South Africa
- Barasentosa Lestari - Indonesia
- Iligan Light & Power Inc, Philippines
- Metalloyd Limited - United Kingdom
- Georgia Ports Authority, United States
- Sakthi Sugars Limited - India
- Karaikal Port Pvt Ltd - India
- Australian Commodity Traders Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kaltim Prima Coal - Indonesia
- Sree Jayajothi Cements Limited - India
- Central Java Power - Indonesia
- Coastal Gujarat Power Limited - India
- SMC Global Power, Philippines
- Oldendorff Carriers - Singapore
- IEA Clean Coal Centre - UK
- Coal and Oil Company - UAE
- Carbofer General Trading SA - India
- Global Business Power Corporation, Philippines
- Singapore Mercantile Exchange
- Ceylon Electricity Board - Sri Lanka
- White Energy Company Limited
- Kobexindo Tractors - Indoneisa
- Samtan Co., Ltd - South Korea
- Jaiprakash Power Ventures ltd
- Australian Coal Association
- Vizag Seaport Private Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- The Treasury - Australian Government
- Deloitte Consulting - India
- Sindya Power Generating Company Private Ltd
- Grasim Industreis Ltd - India
- Meralco Power Generation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Price Waterhouse Coopers - Russia
- Sarangani Energy Corporation, Philippines
- Ministry of Transport, Egypt
- Parry Sugars Refinery, India
- Bukit Asam (Persero) Tbk - Indonesia
- Semirara Mining Corp, Philippines
- Mjunction Services Limited - India
- Medco Energi Mining Internasional
- Therma Luzon, Inc, Philippines
- Mercuria Energy - Indonesia
- CNBM International Corporation - China
- Chettinad Cement Corporation Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- New Zealand Coal & Carbon
- Gujarat Sidhee Cement - India
- Posco Energy - South Korea
- Baramulti Group, Indonesia
- Electricity Generating Authority of Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Wood Mackenzie - Singapore
- Gujarat Electricity Regulatory Commission - India
- Electricity Authority, New Zealand
- Thai Mozambique Logistica
- TNB Fuel Sdn Bhd - Malaysia
- Independent Power Producers Association of India
- Central Electricity Authority - India
- Romanian Commodities Exchange
- Bukit Makmur.PT - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bulk Trading Sa - Switzerland
- Globalindo Alam Lestari - Indonesia
- Malabar Cements Ltd - India
- Maheswari Brothers Coal Limited - India
- Minerals Council of Australia
- MS Steel International - UAE
- South Luzon Thermal Energy Corporation
- Aboitiz Power Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- Alfred C Toepfer International GmbH - Germany
- Tata Chemicals Ltd - India
- PTC India Limited - India
- Parliament of New Zealand
- Essar Steel Hazira Ltd - India
- Uttam Galva Steels Limited - India
- Thiess Contractors Indonesia
- Cigading International Bulk Terminal - Indonesia
- Indian Energy Exchange, India
- Straits Asia Resources Limited - Singapore
- GMR Energy Limited - India
- Wilmar Investment Holdings
- Africa Commodities Group - South Africa
- Intertek Mineral Services - Indonesia
- Bhatia International Limited - India
- Lanco Infratech Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Orica Mining Services - Indonesia
- The University of Queensland
- Indian Oil Corporation Limited
- Simpson Spence & Young - Indonesia
- International Coal Ventures Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Coalindo Energy - Indonesia
- Orica Australia Pty. Ltd.
- PNOC Exploration Corporation - Philippines
- Krishnapatnam Port Company Ltd. - India
- AsiaOL BioFuels Corp., Philippines
- Directorate Of Revenue Intelligence - India
- OPG Power Generation Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Indogreen Group - Indonesia
- Riau Bara Harum - Indonesia
- LBH Netherlands Bv - Netherlands
- Power Finance Corporation Ltd., India
- Bukit Baiduri Energy - Indonesia
- Dalmia Cement Bharat India
- Kalimantan Lumbung Energi - Indonesia
- Borneo Indobara - Indonesia
- Kepco SPC Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Trasteel International SA, Italy
- Heidelberg Cement - Germany
- Indika Energy - Indonesia
- TeaM Sual Corporation - Philippines
- Agrawal Coal Company - India
- Bhoruka Overseas - Indonesia
- Edison Trading Spa - Italy
- Semirara Mining and Power Corporation, Philippines
- Bangladesh Power Developement Board
- Ministry of Mines - Canada
- Antam Resourcindo - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Neyveli Lignite Corporation Ltd, - India
- Jindal Steel & Power Ltd - India
- Energy Link Ltd, New Zealand
- Maharashtra Electricity Regulatory Commission - India
- Eastern Coal Council - USA
- Siam City Cement - Thailand
- ICICI Bank Limited - India
- Rio Tinto Coal - Australia
- Commonwealth Bank - Australia
- Kumho Petrochemical, South Korea
- ASAPP Information Group - India
- Manunggal Multi Energi - Indonesia
- Ministry of Finance - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- London Commodity Brokers - England
- Sojitz Corporation - Japan
- Altura Mining Limited, Indonesia
- Toyota Tsusho Corporation, Japan
- Indonesian Coal Mining Association
- GN Power Mariveles Coal Plant, Philippines
- Binh Thuan Hamico - Vietnam
- Indo Tambangraya Megah - Indonesia
- Bayan Resources Tbk. - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- GAC Shipping (India) Pvt Ltd
- Attock Cement Pakistan Limited
- Vedanta Resources Plc - India
- Standard Chartered Bank - UAE
- Marubeni Corporation - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Chamber of Mines of South Africa
- Videocon Industries ltd - India
- Holcim Trading Pte Ltd - Singapore
- The State Trading Corporation of India Ltd
- Kapuas Tunggal Persada - Indonesia
- Makarim & Taira - Indonesia
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