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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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Friday, 21 March 14
MERCURIA ANNOUNCES ACQUISITION OF J.P. MORGAN PHYSICAL COMMODITIES BUSINESS
COALspot.com: Mercuria Energy Group announced that it has reached a definitive agreement with J.P. Morgan Chase & Co. to acquire its physica ...
Thursday, 20 March 14
CAPESIZE: WEST AUSTRALIA TO CHINA RATES HAVE CLIMBED BACK TOWARD USD 11 PMT - FEARNRESEARCH
Handy
From a slight improvement in the Atlantic to a more mixed picture this mid week. North Atlantic rounds showing softening signs whereas S ...
Wednesday, 19 March 14
INSTEAD OF DECIDING WHETHER THE GLASS IS HALF FULL OR HALF EMPTY, I AM CURRENTLY GLAD THERE IS WATER IN THE GLASS - EVA TZIMA
By Eva Tzima
Research Analyst
Intermodal Research & Valuations
Right when you think that you have all your facts straight, right wh ...
Wednesday, 19 March 14
EUROCOKE SUMMIT 2014
Press Release: ThyssenKrupp, Steel Institute VDEh, SSI and more headline Smithers Apex’s Eurocoke Summit
The leading coke, coal and s ...
Wednesday, 19 March 14
DRY BULK MARKET REBOUND LEADS TO MORE NEWBUILDING ORDERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The steady rise of the dry bulk market, as evidenced by the return, yesterday, of the Baltic Dry Index above the 1,500-point mark (1,518), is fu ...
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- Minerals Council of Australia
- Ministry of Finance - Indonesia
- Chamber of Mines of South Africa
- PetroVietnam Power Coal Import and Supply Company
- Kohat Cement Company Ltd. - Pakistan
- Sinarmas Energy and Mining - Indonesia
- Mercator Lines Limited - India
- Tamil Nadu electricity Board
- Kepco SPC Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- OPG Power Generation Pvt Ltd - India
- Bhatia International Limited - India
- Edison Trading Spa - Italy
- Global Green Power PLC Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Sree Jayajothi Cements Limited - India
- Price Waterhouse Coopers - Russia
- Bhushan Steel Limited - India
- India Bulls Power Limited - India
- Energy Development Corp, Philippines
- Marubeni Corporation - India
- Holcim Trading Pte Ltd - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Goldman Sachs - Singapore
- Global Business Power Corporation, Philippines
- Meralco Power Generation, Philippines
- Thiess Contractors Indonesia
- Samtan Co., Ltd - South Korea
- Malabar Cements Ltd - India
- Uttam Galva Steels Limited - India
- AsiaOL BioFuels Corp., Philippines
- Thai Mozambique Logistica
- Maheswari Brothers Coal Limited - India
- Cement Manufacturers Association - India
- Globalindo Alam Lestari - Indonesia
- Sakthi Sugars Limited - India
- Billiton Holdings Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- PowerSource Philippines DevCo
- International Coal Ventures Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indian Energy Exchange, India
- Australian Coal Association
- Attock Cement Pakistan Limited
- Merrill Lynch Commodities Europe
- SN Aboitiz Power Inc, Philippines
- Simpson Spence & Young - Indonesia
- McConnell Dowell - Australia
- Cigading International Bulk Terminal - Indonesia
- Barasentosa Lestari - Indonesia
- Bayan Resources Tbk. - Indonesia
- Georgia Ports Authority, United States
- Ind-Barath Power Infra Limited - India
- ASAPP Information Group - India
- Chettinad Cement Corporation Ltd - India
- Vedanta Resources Plc - India
- Vijayanagar Sugar Pvt Ltd - India
- Standard Chartered Bank - UAE
- Krishnapatnam Port Company Ltd. - India
- PNOC Exploration Corporation - Philippines
- CNBM International Corporation - China
- Straits Asia Resources Limited - Singapore
- Petron Corporation, Philippines
- Oldendorff Carriers - Singapore
- Heidelberg Cement - Germany
- Tata Chemicals Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Transport, Egypt
- Planning Commission, India
- Siam City Cement - Thailand
- Siam City Cement PLC, Thailand
- Sindya Power Generating Company Private Ltd
- White Energy Company Limited
- Intertek Mineral Services - Indonesia
- Economic Council, Georgia
- Ministry of Mines - Canada
- ICICI Bank Limited - India
- The Treasury - Australian Government
- Interocean Group of Companies - India
- Binh Thuan Hamico - Vietnam
- Power Finance Corporation Ltd., India
- IHS Mccloskey Coal Group - USA
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Port Waratah Coal Services - Australia
- Africa Commodities Group - South Africa
- Independent Power Producers Association of India
- Mjunction Services Limited - India
- Aditya Birla Group - India
- CIMB Investment Bank - Malaysia
- VISA Power Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Bangladesh Power Developement Board
- Star Paper Mills Limited - India
- PTC India Limited - India
- Coalindo Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Borneo Indobara - Indonesia
- Kartika Selabumi Mining - Indonesia
- Madhucon Powers Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Carbofer General Trading SA - India
- Salva Resources Pvt Ltd - India
- Altura Mining Limited, Indonesia
- IEA Clean Coal Centre - UK
- London Commodity Brokers - England
- TeaM Sual Corporation - Philippines
- Medco Energi Mining Internasional
- South Luzon Thermal Energy Corporation
- Gujarat Electricity Regulatory Commission - India
- Antam Resourcindo - Indonesia
- Formosa Plastics Group - Taiwan
- GVK Power & Infra Limited - India
- Australian Commodity Traders Exchange
- European Bulk Services B.V. - Netherlands
- Commonwealth Bank - Australia
- Orica Australia Pty. Ltd.
- Singapore Mercantile Exchange
- Asmin Koalindo Tuhup - Indonesia
- Vizag Seaport Private Limited - India
- Coal and Oil Company - UAE
- Lanco Infratech Ltd - India
- Kumho Petrochemical, South Korea
- Kaltim Prima Coal - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Baramulti Group, Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Gujarat Sidhee Cement - India
- MS Steel International - UAE
- Indogreen Group - Indonesia
- Romanian Commodities Exchange
- Karaikal Port Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Semirara Mining Corp, Philippines
- Posco Energy - South Korea
- Renaissance Capital - South Africa
- LBH Netherlands Bv - Netherlands
- Bukit Makmur.PT - Indonesia
- Mintek Dendrill Indonesia
- Sojitz Corporation - Japan
- GAC Shipping (India) Pvt Ltd
- Jindal Steel & Power Ltd - India
- Manunggal Multi Energi - Indonesia
- Electricity Generating Authority of Thailand
- SMG Consultants - Indonesia
- Trasteel International SA, Italy
- Leighton Contractors Pty Ltd - Australia
- Meenaskhi Energy Private Limited - India
- Bhoruka Overseas - Indonesia
- San Jose City I Power Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Therma Luzon, Inc, Philippines
- Metalloyd Limited - United Kingdom
- The State Trading Corporation of India Ltd
- Ambuja Cements Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Indian Oil Corporation Limited
- Anglo American - United Kingdom
- Energy Link Ltd, New Zealand
- New Zealand Coal & Carbon
- Riau Bara Harum - Indonesia
- SMC Global Power, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Agrawal Coal Company - India
- Jorong Barutama Greston.PT - Indonesia
- Electricity Authority, New Zealand
- Alfred C Toepfer International GmbH - Germany
- Gujarat Mineral Development Corp Ltd - India
- Global Coal Blending Company Limited - Australia
- Sical Logistics Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Videocon Industries ltd - India
- Larsen & Toubro Limited - India
- Central Java Power - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Grasim Industreis Ltd - India
- Central Electricity Authority - India
- Bulk Trading Sa - Switzerland
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Toyota Tsusho Corporation, Japan
- Dalmia Cement Bharat India
- Latin American Coal - Colombia
- Kobexindo Tractors - Indoneisa
- Mercuria Energy - Indonesia
- Deloitte Consulting - India
- Parry Sugars Refinery, India
- Iligan Light & Power Inc, Philippines
- Eastern Coal Council - USA
- Bahari Cakrawala Sebuku - Indonesia
- GMR Energy Limited - India
- Wood Mackenzie - Singapore
- Semirara Mining and Power Corporation, Philippines
- Wilmar Investment Holdings
- Aboitiz Power Corporation - Philippines
- Rio Tinto Coal - Australia
- Parliament of New Zealand
- Makarim & Taira - Indonesia
- Indonesian Coal Mining Association
- Bharathi Cement Corporation - India
- Bukit Baiduri Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Sarangani Energy Corporation, Philippines
- Orica Mining Services - Indonesia
- Eastern Energy - Thailand
- Indika Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- The University of Queensland
- Bank of Tokyo Mitsubishi UFJ Ltd
- TNB Fuel Sdn Bhd - Malaysia
- Kideco Jaya Agung - Indonesia
- Xindia Steels Limited - India
- Banpu Public Company Limited - Thailand
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