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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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Wednesday, 12 March 14
DRY BULK VESSELS STILL THE CREAM OF THE CROP FOR SHIP OWNERS
Dry bulk carriers have remained the most popular vessel type among ship owners as proven by the sheer number of second hand vessel sales and new ...
Tuesday, 11 March 14
HOLD HARMLESS CLAUSES ARE NOT ALWAYS MUTUAL! - ITIC
KNOWLEDGE TO ELEVATE
ITIC provides an insurance related contract review service to all of its members. As the leading professional indemnity i ...
Tuesday, 11 March 14
NEWCASTLE SHIPPED 6.98% LESS COAL WEEK ON WEEK
COALspot.com: In the week ended 10 March 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, total 2 ...
Tuesday, 11 March 14
INDONESIAN SUB-BITUMINOUS COAL SWAPS CONTINUES TO FALL
COALspot.com – Indonesia, the world’s largest exporter of the thermal coal's swaps for delivery April - June 2014 slip again thi ...
Monday, 10 March 14
API 8 CFR SOUTH CHINA COAL SWAPS LOST 4.28 PERCENT MONTH ON MONTH FOR Q2 DELIVERY
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries lost 4.28 percent month on month and closed at US$ 73.97 per mt as on Fr ...
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- White Energy Company Limited
- Kapuas Tunggal Persada - Indonesia
- Trasteel International SA, Italy
- Chamber of Mines of South Africa
- The Treasury - Australian Government
- GVK Power & Infra Limited - India
- Minerals Council of Australia
- Globalindo Alam Lestari - Indonesia
- Meralco Power Generation, Philippines
- Bukit Baiduri Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- Ambuja Cements Ltd - India
- Kumho Petrochemical, South Korea
- Planning Commission, India
- McConnell Dowell - Australia
- Bhatia International Limited - India
- Salva Resources Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Kartika Selabumi Mining - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Wilmar Investment Holdings
- Price Waterhouse Coopers - Russia
- Toyota Tsusho Corporation, Japan
- Bangladesh Power Developement Board
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Goldman Sachs - Singapore
- London Commodity Brokers - England
- Malabar Cements Ltd - India
- Antam Resourcindo - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Barasentosa Lestari - Indonesia
- Directorate Of Revenue Intelligence - India
- Bayan Resources Tbk. - Indonesia
- Australian Coal Association
- Agrawal Coal Company - India
- Asmin Koalindo Tuhup - Indonesia
- Aboitiz Power Corporation - Philippines
- Electricity Generating Authority of Thailand
- Samtan Co., Ltd - South Korea
- Oldendorff Carriers - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Australian Commodity Traders Exchange
- Star Paper Mills Limited - India
- Port Waratah Coal Services - Australia
- Banpu Public Company Limited - Thailand
- European Bulk Services B.V. - Netherlands
- Central Java Power - Indonesia
- Intertek Mineral Services - Indonesia
- Jaiprakash Power Ventures ltd
- Bharathi Cement Corporation - India
- Standard Chartered Bank - UAE
- Deloitte Consulting - India
- Essar Steel Hazira Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Africa Commodities Group - South Africa
- International Coal Ventures Pvt Ltd - India
- Singapore Mercantile Exchange
- Ind-Barath Power Infra Limited - India
- Sree Jayajothi Cements Limited - India
- San Jose City I Power Corp, Philippines
- Ministry of Finance - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Georgia Ports Authority, United States
- SMC Global Power, Philippines
- Interocean Group of Companies - India
- Baramulti Group, Indonesia
- Kepco SPC Power Corporation, Philippines
- Merrill Lynch Commodities Europe
- Straits Asia Resources Limited - Singapore
- Power Finance Corporation Ltd., India
- Cement Manufacturers Association - India
- Electricity Authority, New Zealand
- Manunggal Multi Energi - Indonesia
- Attock Cement Pakistan Limited
- VISA Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Therma Luzon, Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Grasim Industreis Ltd - India
- Aditya Birla Group - India
- Bukit Makmur.PT - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Mjunction Services Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Medco Energi Mining Internasional
- Metalloyd Limited - United Kingdom
- Indonesian Coal Mining Association
- Independent Power Producers Association of India
- Holcim Trading Pte Ltd - Singapore
- Binh Thuan Hamico - Vietnam
- Billiton Holdings Pty Ltd - Australia
- Anglo American - United Kingdom
- Global Coal Blending Company Limited - Australia
- GAC Shipping (India) Pvt Ltd
- Commonwealth Bank - Australia
- LBH Netherlands Bv - Netherlands
- Orica Australia Pty. Ltd.
- Riau Bara Harum - Indonesia
- Simpson Spence & Young - Indonesia
- Dalmia Cement Bharat India
- Rashtriya Ispat Nigam Limited - India
- SN Aboitiz Power Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Timah Investasi Mineral - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- TeaM Sual Corporation - Philippines
- Parry Sugars Refinery, India
- Larsen & Toubro Limited - India
- CNBM International Corporation - China
- Madhucon Powers Ltd - India
- Videocon Industries ltd - India
- Kideco Jaya Agung - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Sarangani Energy Corporation, Philippines
- Marubeni Corporation - India
- Thai Mozambique Logistica
- Maharashtra Electricity Regulatory Commission - India
- Sinarmas Energy and Mining - Indonesia
- Romanian Commodities Exchange
- Orica Mining Services - Indonesia
- OPG Power Generation Pvt Ltd - India
- Thiess Contractors Indonesia
- Jindal Steel & Power Ltd - India
- Global Green Power PLC Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Mercuria Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Semirara Mining Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Heidelberg Cement - Germany
- Kaltim Prima Coal - Indonesia
- Bhushan Steel Limited - India
- New Zealand Coal & Carbon
- Latin American Coal - Colombia
- IEA Clean Coal Centre - UK
- Bank of Tokyo Mitsubishi UFJ Ltd
- Tata Chemicals Ltd - India
- Energy Link Ltd, New Zealand
- GMR Energy Limited - India
- Leighton Contractors Pty Ltd - Australia
- Global Business Power Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Makarim & Taira - Indonesia
- Kobexindo Tractors - Indoneisa
- Sindya Power Generating Company Private Ltd
- Indian Energy Exchange, India
- Meenaskhi Energy Private Limited - India
- Indo Tambangraya Megah - Indonesia
- Ministry of Mines - Canada
- MS Steel International - UAE
- Iligan Light & Power Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Lanco Infratech Ltd - India
- Coalindo Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Ceylon Electricity Board - Sri Lanka
- Carbofer General Trading SA - India
- ASAPP Information Group - India
- PowerSource Philippines DevCo
- Bhoruka Overseas - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- Economic Council, Georgia
- Posco Energy - South Korea
- Indogreen Group - Indonesia
- Edison Trading Spa - Italy
- Energy Development Corp, Philippines
- Borneo Indobara - Indonesia
- Renaissance Capital - South Africa
- IHS Mccloskey Coal Group - USA
- Mintek Dendrill Indonesia
- Indika Energy - Indonesia
- The State Trading Corporation of India Ltd
- Parliament of New Zealand
- Savvy Resources Ltd - HongKong
- Sical Logistics Limited - India
- Vedanta Resources Plc - India
- Formosa Plastics Group - Taiwan
- Tamil Nadu electricity Board
- Altura Mining Limited, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indian Oil Corporation Limited
- AsiaOL BioFuels Corp., Philippines
- Xindia Steels Limited - India
- Ministry of Transport, Egypt
- Offshore Bulk Terminal Pte Ltd, Singapore
- The University of Queensland
- SMG Consultants - Indonesia
- Uttam Galva Steels Limited - India
- Wood Mackenzie - Singapore
- India Bulls Power Limited - India
- Coastal Gujarat Power Limited - India
- Siam City Cement - Thailand
- Rio Tinto Coal - Australia
- Petron Corporation, Philippines
- Eastern Energy - Thailand
- Chettinad Cement Corporation Ltd - India
- Sakthi Sugars Limited - India
- Eastern Coal Council - USA
- Central Electricity Authority - India
- CIMB Investment Bank - Malaysia
- Bahari Cakrawala Sebuku - Indonesia
- Mercator Lines Limited - India
- Coal and Oil Company - UAE
- Vizag Seaport Private Limited - India
- PNOC Exploration Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Pendopo Energi Batubara - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Siam City Cement PLC, Thailand
- Sojitz Corporation - Japan
- PTC India Limited - India
- ICICI Bank Limited - India
- Bulk Trading Sa - Switzerland
- PetroVietnam Power Coal Import and Supply Company
- South Luzon Thermal Energy Corporation
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