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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, 31 March 14
CFR SOUTH CHINA COAL SWAP FOR Q2 14 DELIVERY LOST 1.17% M-O-M
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries lost 1.17 percent month on month and closed at US$ 75.38 per m ...
Sunday, 30 March 14
FREIGHTS FROM INDONESIA TO INDIA IS EXPECTED TO BE SOFT NEXT WEEK - REDDY
COALspot.com: The freight market dropped drastically and all sectors were affected severely.
The BDI was down by 14.13 pct and closed at 1, ...
Friday, 28 March 14
US PRODUCED APPROXIMATELY 18.9 MMST IN A WEEK - EIA
COALspot.com – United States the world's second largest coal producer, produced approximately 18.9 million short tons (mmst) of coal i ...
Friday, 28 March 14
CHINA'S ENVIRONMENTAL MEASURES WILL NOT CURB GROWTH IN DOMESTIC STEEL PRODUCTION AND SEABORNE IRON ORE - WOOD MACKENZIE SAYS
Steel plants in China have been targeted as a major source of the toxic smog enveloping Beijing and Shanghai. Emergency measures have been impos ...
Thursday, 27 March 14
PANAMAX : SEEMS TO HEAD FURTHER DOWN; CAPESIZE : ANOTHER CHOPPY AND UNPREDICTABLE WEEK - FEARNLEYS AS
Handy
A weaker sentiment for the smaller size as well, with reduced activity in the Atlantic where Owners have to face significantly lower ret ...
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- Mercator Lines Limited - India
- Chamber of Mines of South Africa
- Barasentosa Lestari - Indonesia
- Eastern Energy - Thailand
- Central Electricity Authority - India
- Ambuja Cements Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Kepco SPC Power Corporation, Philippines
- The University of Queensland
- Medco Energi Mining Internasional
- San Jose City I Power Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Sree Jayajothi Cements Limited - India
- Sinarmas Energy and Mining - Indonesia
- Latin American Coal - Colombia
- Meralco Power Generation, Philippines
- Parliament of New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kartika Selabumi Mining - Indonesia
- ICICI Bank Limited - India
- Semirara Mining and Power Corporation, Philippines
- Global Business Power Corporation, Philippines
- Lanco Infratech Ltd - India
- Grasim Industreis Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- India Bulls Power Limited - India
- CNBM International Corporation - China
- Directorate Of Revenue Intelligence - India
- Electricity Generating Authority of Thailand
- PNOC Exploration Corporation - Philippines
- White Energy Company Limited
- Australian Coal Association
- MS Steel International - UAE
- Larsen & Toubro Limited - India
- Sakthi Sugars Limited - India
- Eastern Coal Council - USA
- PetroVietnam Power Coal Import and Supply Company
- Trasteel International SA, Italy
- New Zealand Coal & Carbon
- Vedanta Resources Plc - India
- Sindya Power Generating Company Private Ltd
- Essar Steel Hazira Ltd - India
- Borneo Indobara - Indonesia
- Economic Council, Georgia
- Parry Sugars Refinery, India
- Maharashtra Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Toyota Tsusho Corporation, Japan
- Gujarat Mineral Development Corp Ltd - India
- Meenaskhi Energy Private Limited - India
- Antam Resourcindo - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indo Tambangraya Megah - Indonesia
- Globalindo Alam Lestari - Indonesia
- IEA Clean Coal Centre - UK
- Binh Thuan Hamico - Vietnam
- SN Aboitiz Power Inc, Philippines
- Planning Commission, India
- Chettinad Cement Corporation Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Attock Cement Pakistan Limited
- Metalloyd Limited - United Kingdom
- Heidelberg Cement - Germany
- Global Green Power PLC Corporation, Philippines
- VISA Power Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Formosa Plastics Group - Taiwan
- GVK Power & Infra Limited - India
- Georgia Ports Authority, United States
- CIMB Investment Bank - Malaysia
- PTC India Limited - India
- Siam City Cement PLC, Thailand
- Central Java Power - Indonesia
- Standard Chartered Bank - UAE
- Savvy Resources Ltd - HongKong
- Electricity Authority, New Zealand
- Sojitz Corporation - Japan
- Marubeni Corporation - India
- Orica Australia Pty. Ltd.
- Karbindo Abesyapradhi - Indoneisa
- Bulk Trading Sa - Switzerland
- Thai Mozambique Logistica
- AsiaOL BioFuels Corp., Philippines
- Riau Bara Harum - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Petrochimia International Co. Ltd.- Taiwan
- Tamil Nadu electricity Board
- Price Waterhouse Coopers - Russia
- Kobexindo Tractors - Indoneisa
- Agrawal Coal Company - India
- Bayan Resources Tbk. - Indonesia
- Coastal Gujarat Power Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Romanian Commodities Exchange
- Renaissance Capital - South Africa
- Posco Energy - South Korea
- Goldman Sachs - Singapore
- Indika Energy - Indonesia
- Bhushan Steel Limited - India
- Power Finance Corporation Ltd., India
- The Treasury - Australian Government
- Miang Besar Coal Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Baramulti Group, Indonesia
- IHS Mccloskey Coal Group - USA
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Kideco Jaya Agung - Indonesia
- Energy Link Ltd, New Zealand
- South Luzon Thermal Energy Corporation
- LBH Netherlands Bv - Netherlands
- Bhatia International Limited - India
- Ind-Barath Power Infra Limited - India
- Krishnapatnam Port Company Ltd. - India
- Simpson Spence & Young - Indonesia
- Ministry of Transport, Egypt
- Wood Mackenzie - Singapore
- Star Paper Mills Limited - India
- Salva Resources Pvt Ltd - India
- Makarim & Taira - Indonesia
- Port Waratah Coal Services - Australia
- Wilmar Investment Holdings
- Pipit Mutiara Jaya. PT, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Australian Commodity Traders Exchange
- Oldendorff Carriers - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Tata Chemicals Ltd - India
- Independent Power Producers Association of India
- Xindia Steels Limited - India
- GAC Shipping (India) Pvt Ltd
- Samtan Co., Ltd - South Korea
- Commonwealth Bank - Australia
- Indian Oil Corporation Limited
- OPG Power Generation Pvt Ltd - India
- Edison Trading Spa - Italy
- Cement Manufacturers Association - India
- Rio Tinto Coal - Australia
- Kalimantan Lumbung Energi - Indonesia
- Anglo American - United Kingdom
- Timah Investasi Mineral - Indoneisa
- Therma Luzon, Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Deloitte Consulting - India
- Kumho Petrochemical, South Korea
- Uttam Galva Steels Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- PowerSource Philippines DevCo
- The State Trading Corporation of India Ltd
- Coal and Oil Company - UAE
- Billiton Holdings Pty Ltd - Australia
- Manunggal Multi Energi - Indonesia
- Bukit Baiduri Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- London Commodity Brokers - England
- Ministry of Mines - Canada
- Siam City Cement - Thailand
- Kapuas Tunggal Persada - Indonesia
- Iligan Light & Power Inc, Philippines
- Mintek Dendrill Indonesia
- Semirara Mining Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Jindal Steel & Power Ltd - India
- McConnell Dowell - Australia
- Indian Energy Exchange, India
- Gujarat Sidhee Cement - India
- SMG Consultants - Indonesia
- Singapore Mercantile Exchange
- Bukit Makmur.PT - Indonesia
- Mercuria Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Alfred C Toepfer International GmbH - Germany
- Carbofer General Trading SA - India
- Cigading International Bulk Terminal - Indonesia
- TeaM Sual Corporation - Philippines
- Petron Corporation, Philippines
- GMR Energy Limited - India
- ASAPP Information Group - India
- Aditya Birla Group - India
- Jaiprakash Power Ventures ltd
- Straits Asia Resources Limited - Singapore
- Indogreen Group - Indonesia
- Intertek Mineral Services - Indonesia
- Interocean Group of Companies - India
- Banpu Public Company Limited - Thailand
- Mjunction Services Limited - India
- Bangladesh Power Developement Board
- Orica Mining Services - Indonesia
- Madhucon Powers Ltd - India
- Dalmia Cement Bharat India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sarangani Energy Corporation, Philippines
- Ministry of Finance - Indonesia
- Malabar Cements Ltd - India
- Pendopo Energi Batubara - Indonesia
- Karaikal Port Pvt Ltd - India
- Bharathi Cement Corporation - India
- Coalindo Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Indonesian Coal Mining Association
- Thiess Contractors Indonesia
- Sical Logistics Limited - India
- Minerals Council of Australia
- Maheswari Brothers Coal Limited - India
- Altura Mining Limited, Indonesia
- European Bulk Services B.V. - Netherlands
- Videocon Industries ltd - India
- Merrill Lynch Commodities Europe
- Ceylon Electricity Board - Sri Lanka
- SMC Global Power, Philippines
- Africa Commodities Group - South Africa
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