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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.
Information contained within the website of COALspot.com is intended for informational purposes only and is not intended as professional counsel and should not be used as such.
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Monday, 24 March 14
SGX'S Q2'14 CFR SOUTH CHINA COAL SWAP CLOSES SLIGHTLY HIGHER W-O-W
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries lost 1.81 percent month on month and closed at US$ 74.82 per mt as o ...
Sunday, 23 March 14
THE COAL FREIGHT RATES SEEN SLIGHTLY FIRMING UP THIS WEEK - REDDY
COALspot.com: The freight market firmed up this week. BDI was up 8.26 pct week on week and index was closed at 1599 points. The Cape index was u ...
Saturday, 22 March 14
SHIP OWNERS INVEST $15 BILLION FOR NEWBUILDINGS AND SECONDHAND VESSELS DURING FEBRUARY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Ship owners have kept on their aggressive stance in the investment scene both for newbuildings, as well as for secondhand vessels globally durin ...
Friday, 21 March 14
DRY BULK MARKET STAYS ON RECOVERY MODE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has reached new year heighs, as a result of renewed Capesize demand. The Baltic Dry Index (BDI) ended yesterday's sessio ...
Friday, 21 March 14
US COAL PRODUCTION UP 1.5%; WEST MISSISSIPPI COAL PRODUCTION DOWN 1.85% WEEK ON WEEK
COALspot.com – United States the world's second largest coal producer, produced approximately 19.0 million short tons (mmst) of coal i ...
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- IHS Mccloskey Coal Group - USA
- Agrawal Coal Company - India
- Wilmar Investment Holdings
- Energy Link Ltd, New Zealand
- OPG Power Generation Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kumho Petrochemical, South Korea
- European Bulk Services B.V. - Netherlands
- Africa Commodities Group - South Africa
- Krishnapatnam Port Company Ltd. - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Commonwealth Bank - Australia
- Savvy Resources Ltd - HongKong
- Mintek Dendrill Indonesia
- Aditya Birla Group - India
- Directorate General of MIneral and Coal - Indonesia
- Australian Commodity Traders Exchange
- Ministry of Transport, Egypt
- Global Business Power Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Kapuas Tunggal Persada - Indonesia
- PTC India Limited - India
- Sindya Power Generating Company Private Ltd
- Georgia Ports Authority, United States
- Meenaskhi Energy Private Limited - India
- Bharathi Cement Corporation - India
- Goldman Sachs - Singapore
- White Energy Company Limited
- Samtan Co., Ltd - South Korea
- Madhucon Powers Ltd - India
- Barasentosa Lestari - Indonesia
- Malabar Cements Ltd - India
- Ministry of Mines - Canada
- Gujarat Mineral Development Corp Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- CNBM International Corporation - China
- Independent Power Producers Association of India
- GVK Power & Infra Limited - India
- San Jose City I Power Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- TNB Fuel Sdn Bhd - Malaysia
- Aboitiz Power Corporation - Philippines
- Renaissance Capital - South Africa
- Power Finance Corporation Ltd., India
- Ind-Barath Power Infra Limited - India
- Formosa Plastics Group - Taiwan
- Minerals Council of Australia
- Chamber of Mines of South Africa
- Thai Mozambique Logistica
- Eastern Coal Council - USA
- Sree Jayajothi Cements Limited - India
- Sical Logistics Limited - India
- Siam City Cement - Thailand
- Trasteel International SA, Italy
- GAC Shipping (India) Pvt Ltd
- Global Coal Blending Company Limited - Australia
- Indo Tambangraya Megah - Indonesia
- Central Java Power - Indonesia
- LBH Netherlands Bv - Netherlands
- Sojitz Corporation - Japan
- SN Aboitiz Power Inc, Philippines
- Bhoruka Overseas - Indonesia
- Binh Thuan Hamico - Vietnam
- Siam City Cement PLC, Thailand
- Karbindo Abesyapradhi - Indoneisa
- Manunggal Multi Energi - Indonesia
- Attock Cement Pakistan Limited
- Karaikal Port Pvt Ltd - India
- Mjunction Services Limited - India
- Bhatia International Limited - India
- Kideco Jaya Agung - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Orica Mining Services - Indonesia
- VISA Power Limited - India
- Makarim & Taira - Indonesia
- Altura Mining Limited, Indonesia
- Deloitte Consulting - India
- Wood Mackenzie - Singapore
- Vizag Seaport Private Limited - India
- Petron Corporation, Philippines
- Central Electricity Authority - India
- Jorong Barutama Greston.PT - Indonesia
- Edison Trading Spa - Italy
- Dalmia Cement Bharat India
- Bahari Cakrawala Sebuku - Indonesia
- Intertek Mineral Services - Indonesia
- Meralco Power Generation, Philippines
- Ministry of Finance - Indonesia
- Riau Bara Harum - Indonesia
- Bulk Trading Sa - Switzerland
- Videocon Industries ltd - India
- Coal and Oil Company - UAE
- New Zealand Coal & Carbon
- Bhushan Steel Limited - India
- Simpson Spence & Young - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coalindo Energy - Indonesia
- Tamil Nadu electricity Board
- Heidelberg Cement - Germany
- Ceylon Electricity Board - Sri Lanka
- Bukit Baiduri Energy - Indonesia
- Borneo Indobara - Indonesia
- McConnell Dowell - Australia
- Lanco Infratech Ltd - India
- Iligan Light & Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Sinarmas Energy and Mining - Indonesia
- MS Steel International - UAE
- Coastal Gujarat Power Limited - India
- Xindia Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- SMG Consultants - Indonesia
- Pendopo Energi Batubara - Indonesia
- Larsen & Toubro Limited - India
- Maheswari Brothers Coal Limited - India
- Kartika Selabumi Mining - Indonesia
- CIMB Investment Bank - Malaysia
- Straits Asia Resources Limited - Singapore
- Australian Coal Association
- AsiaOL BioFuels Corp., Philippines
- Chettinad Cement Corporation Ltd - India
- Energy Development Corp, Philippines
- Interocean Group of Companies - India
- PetroVietnam Power Coal Import and Supply Company
- Merrill Lynch Commodities Europe
- Gujarat Sidhee Cement - India
- Parry Sugars Refinery, India
- Alfred C Toepfer International GmbH - Germany
- Indonesian Coal Mining Association
- Bukit Asam (Persero) Tbk - Indonesia
- Orica Australia Pty. Ltd.
- Singapore Mercantile Exchange
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- SMC Global Power, Philippines
- Jaiprakash Power Ventures ltd
- Rio Tinto Coal - Australia
- South Luzon Thermal Energy Corporation
- Electricity Authority, New Zealand
- Cigading International Bulk Terminal - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Toyota Tsusho Corporation, Japan
- Indogreen Group - Indonesia
- Billiton Holdings Pty Ltd - Australia
- IEA Clean Coal Centre - UK
- Kaltim Prima Coal - Indonesia
- Grasim Industreis Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Tata Chemicals Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Global Green Power PLC Corporation, Philippines
- Economic Council, Georgia
- Electricity Generating Authority of Thailand
- Mercator Lines Limited - India
- Sakthi Sugars Limited - India
- ASAPP Information Group - India
- Bukit Makmur.PT - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Planning Commission, India
- The Treasury - Australian Government
- Antam Resourcindo - Indonesia
- Thiess Contractors Indonesia
- GMR Energy Limited - India
- Therma Luzon, Inc, Philippines
- Cement Manufacturers Association - India
- Mercuria Energy - Indonesia
- Standard Chartered Bank - UAE
- Uttam Galva Steels Limited - India
- Essar Steel Hazira Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- London Commodity Brokers - England
- Semirara Mining Corp, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Eastern Energy - Thailand
- Carbofer General Trading SA - India
- Posco Energy - South Korea
- Parliament of New Zealand
- ICICI Bank Limited - India
- Globalindo Alam Lestari - Indonesia
- Indika Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Oldendorff Carriers - Singapore
- International Coal Ventures Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Romanian Commodities Exchange
- The University of Queensland
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PNOC Exploration Corporation - Philippines
- India Bulls Power Limited - India
- Banpu Public Company Limited - Thailand
- Timah Investasi Mineral - Indoneisa
- Neyveli Lignite Corporation Ltd, - India
- Directorate Of Revenue Intelligence - India
- Port Waratah Coal Services - Australia
- Marubeni Corporation - India
- Bangladesh Power Developement Board
- Salva Resources Pvt Ltd - India
- Indian Energy Exchange, India
- The State Trading Corporation of India Ltd
- Medco Energi Mining Internasional
- Sarangani Energy Corporation, Philippines
- Vedanta Resources Plc - India
- Bayan Resources Tbk. - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Ambuja Cements Ltd - India
- Price Waterhouse Coopers - Russia
- Star Paper Mills Limited - India
- Anglo American - United Kingdom
- Latin American Coal - Colombia
- Metalloyd Limited - United Kingdom
- TeaM Sual Corporation - Philippines
- PowerSource Philippines DevCo
- Baramulti Group, Indonesia
- Indian Oil Corporation Limited
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