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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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Tuesday, 18 March 14
SECOND QUARTER SUB-BIT FOB INDONESIA COAL SWAP LOST 3.27% IN A MONTH
COALspot.com – Indonesia, the world’s largest exporter of the thermal coal's swaps for delivery April - June 2014 gained this pa ...
Tuesday, 18 March 14
NEWCASTLE COAL EXPORT VOLUME FALLS 26.23% WEEK ON WEEK
COALspot.com: In the week ended 17 March 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, total 2 ...
Monday, 17 March 14
API 8 CFR SOUTH CHINA COAL SWAPS FOR AVERAGE Q2 14 DELIVERIES LOST 2.59% M-O-M
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries lost 2.59 percent month on month and closed at US$ 74.15 per mt as o ...
Sunday, 16 March 14
BDI DOWN ON LOW CAPESIZE ACTIVITY
COALspot.com: The freight market was slightly soft this week with BDI down by 4.28 pct week on week. The BDI closed at 1,477 points and the cape ...
Friday, 14 March 14
DRY BULK MARKET ENTERS RECOVERY MODE, ON INCREASED CAPESIZE DEMAND - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has entered and sustained higher ground as of this week, on the back on increased Capesize demand. Although the situation in ...
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- Borneo Indobara - Indonesia
- Siam City Cement PLC, Thailand
- Salva Resources Pvt Ltd - India
- Ministry of Finance - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- International Coal Ventures Pvt Ltd - India
- Parry Sugars Refinery, India
- Lanco Infratech Ltd - India
- Madhucon Powers Ltd - India
- Indo Tambangraya Megah - Indonesia
- Tata Chemicals Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Economic Council, Georgia
- Australian Coal Association
- White Energy Company Limited
- New Zealand Coal & Carbon
- Dalmia Cement Bharat India
- Vijayanagar Sugar Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Ministry of Transport, Egypt
- Karaikal Port Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Altura Mining Limited, Indonesia
- Sojitz Corporation - Japan
- Cement Manufacturers Association - India
- Renaissance Capital - South Africa
- Iligan Light & Power Inc, Philippines
- PTC India Limited - India
- Orica Australia Pty. Ltd.
- Coal and Oil Company - UAE
- Manunggal Multi Energi - Indonesia
- Antam Resourcindo - Indonesia
- PNOC Exploration Corporation - Philippines
- Planning Commission, India
- Videocon Industries ltd - India
- Holcim Trading Pte Ltd - Singapore
- Vizag Seaport Private Limited - India
- Globalindo Alam Lestari - Indonesia
- Ministry of Mines - Canada
- Thiess Contractors Indonesia
- Bhoruka Overseas - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Bukit Makmur.PT - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- CIMB Investment Bank - Malaysia
- OPG Power Generation Pvt Ltd - India
- CNBM International Corporation - China
- Eastern Energy - Thailand
- Krishnapatnam Port Company Ltd. - India
- Barasentosa Lestari - Indonesia
- Kartika Selabumi Mining - Indonesia
- Price Waterhouse Coopers - Russia
- Star Paper Mills Limited - India
- PowerSource Philippines DevCo
- Kapuas Tunggal Persada - Indonesia
- Wood Mackenzie - Singapore
- Parliament of New Zealand
- Mercuria Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- GVK Power & Infra Limited - India
- IHS Mccloskey Coal Group - USA
- Carbofer General Trading SA - India
- Samtan Co., Ltd - South Korea
- Siam City Cement - Thailand
- Trasteel International SA, Italy
- PetroVietnam Power Coal Import and Supply Company
- Sindya Power Generating Company Private Ltd
- Indian Oil Corporation Limited
- Port Waratah Coal Services - Australia
- Jorong Barutama Greston.PT - Indonesia
- Latin American Coal - Colombia
- Singapore Mercantile Exchange
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indian Energy Exchange, India
- Petron Corporation, Philippines
- Goldman Sachs - Singapore
- Commonwealth Bank - Australia
- Global Green Power PLC Corporation, Philippines
- Savvy Resources Ltd - HongKong
- SMC Global Power, Philippines
- Wilmar Investment Holdings
- Sarangani Energy Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Bulk Trading Sa - Switzerland
- Malabar Cements Ltd - India
- The State Trading Corporation of India Ltd
- Kalimantan Lumbung Energi - Indonesia
- Eastern Coal Council - USA
- Larsen & Toubro Limited - India
- European Bulk Services B.V. - Netherlands
- Kideco Jaya Agung - Indonesia
- Makarim & Taira - Indonesia
- Electricity Generating Authority of Thailand
- Agrawal Coal Company - India
- Central Java Power - Indonesia
- SN Aboitiz Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Directorate General of MIneral and Coal - Indonesia
- Directorate Of Revenue Intelligence - India
- Bhushan Steel Limited - India
- Georgia Ports Authority, United States
- Energy Link Ltd, New Zealand
- Standard Chartered Bank - UAE
- Indonesian Coal Mining Association
- GAC Shipping (India) Pvt Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- AsiaOL BioFuels Corp., Philippines
- McConnell Dowell - Australia
- Attock Cement Pakistan Limited
- Heidelberg Cement - Germany
- Coastal Gujarat Power Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Bangladesh Power Developement Board
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sical Logistics Limited - India
- Coalindo Energy - Indonesia
- Grasim Industreis Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Independent Power Producers Association of India
- Jaiprakash Power Ventures ltd
- Ceylon Electricity Board - Sri Lanka
- Chamber of Mines of South Africa
- GMR Energy Limited - India
- Bharathi Cement Corporation - India
- Straits Asia Resources Limited - Singapore
- Sakthi Sugars Limited - India
- Maheswari Brothers Coal Limited - India
- TeaM Sual Corporation - Philippines
- Electricity Authority, New Zealand
- Interocean Group of Companies - India
- Energy Development Corp, Philippines
- Indogreen Group - Indonesia
- Orica Mining Services - Indonesia
- Mintek Dendrill Indonesia
- Aboitiz Power Corporation - Philippines
- Kepco SPC Power Corporation, Philippines
- Baramulti Group, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- India Bulls Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Meralco Power Generation, Philippines
- Vedanta Resources Plc - India
- Miang Besar Coal Terminal - Indonesia
- Meenaskhi Energy Private Limited - India
- South Luzon Thermal Energy Corporation
- Gujarat Mineral Development Corp Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Global Business Power Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Kumho Petrochemical, South Korea
- Minerals Council of Australia
- Alfred C Toepfer International GmbH - Germany
- VISA Power Limited - India
- Therma Luzon, Inc, Philippines
- Tamil Nadu electricity Board
- Romanian Commodities Exchange
- Australian Commodity Traders Exchange
- Uttam Galva Steels Limited - India
- Gujarat Sidhee Cement - India
- Gujarat Electricity Regulatory Commission - India
- Central Electricity Authority - India
- Binh Thuan Hamico - Vietnam
- Edison Trading Spa - Italy
- TNB Fuel Sdn Bhd - Malaysia
- Africa Commodities Group - South Africa
- Petrochimia International Co. Ltd.- Taiwan
- MS Steel International - UAE
- Jindal Steel & Power Ltd - India
- Mercator Lines Limited - India
- Bhatia International Limited - India
- The Treasury - Australian Government
- Aditya Birla Group - India
- Bayan Resources Tbk. - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Essar Steel Hazira Ltd - India
- Semirara Mining Corp, Philippines
- Anglo American - United Kingdom
- The University of Queensland
- ASAPP Information Group - India
- Riau Bara Harum - Indonesia
- Intertek Mineral Services - Indonesia
- Posco Energy - South Korea
- Global Coal Blending Company Limited - Australia
- Power Finance Corporation Ltd., India
- Thai Mozambique Logistica
- San Jose City I Power Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- IEA Clean Coal Centre - UK
- Marubeni Corporation - India
- Merrill Lynch Commodities Europe
- Ind-Barath Power Infra Limited - India
- Metalloyd Limited - United Kingdom
- Medco Energi Mining Internasional
- Deloitte Consulting - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bukit Baiduri Energy - Indonesia
- London Commodity Brokers - England
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Simpson Spence & Young - Indonesia
- ICICI Bank Limited - India
- Pendopo Energi Batubara - Indonesia
- Mjunction Services Limited - India
- Rio Tinto Coal - Australia
- Ambuja Cements Ltd - India
- Oldendorff Carriers - Singapore
- LBH Netherlands Bv - Netherlands
- SMG Consultants - Indonesia
- Kobexindo Tractors - Indoneisa
- Indika Energy - Indonesia
- Sree Jayajothi Cements Limited - India
- Xindia Steels Limited - India
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