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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, 04 March 14
AUSTRALIA'S NPC TO SHIP 11.85 MMT OF COAL IN MARCH
COALspot.com: In the week ended 3 March 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, total 3.15 m ...
Tuesday, 04 March 14
HIGHER PRICES AND STEADY FREIGHT RATES LEAD SHIP OWNERS TO TEMPORARILY HALT SECOND HAND VESSEL PURCHASES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
As the dry bulk market has kept on improving, but at a very slow rate, ship owners have elected to take a step back from the flurry of the S&P m ...
Monday, 03 March 14
SUB-BIT INDONESIA COAL SWAP (FOB) FOR AVERAGE Q115 CLOSED AT $60.28, $ 1.70 HIGHER THAN 2Q14
COALspot.com – Indonesia, the world’s largest exporter of the thermal coal's swaps for delivery April - June 2014 slightly corrected do ...
Monday, 03 March 14
API 8 CFR SOUTH CHINA SWAPS: Q4' 2014 DELIVERY CLOSED US$ 1.40 HIGHER COMPARED TO Q2' 2014 DELIVERY
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries lost 1.90 percent month on month and closed at US$ 76.27 per mt as on Fr ...
Monday, 03 March 14
COSTS LIABILITY PASSING DOWN A CHARTERPARTY CHAIN - SKULD
KNOWLEDGE TO ELEVATE
Provided that charterparties are on back to back terms, and the claim is successful, liability for costs incurred shoul ...
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- Ceylon Electricity Board - Sri Lanka
- Samtan Co., Ltd - South Korea
- Parry Sugars Refinery, India
- White Energy Company Limited
- Pipit Mutiara Jaya. PT, Indonesia
- Banpu Public Company Limited - Thailand
- Minerals Council of Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Maharashtra Electricity Regulatory Commission - India
- The State Trading Corporation of India Ltd
- Miang Besar Coal Terminal - Indonesia
- Kobexindo Tractors - Indoneisa
- Planning Commission, India
- IHS Mccloskey Coal Group - USA
- Straits Asia Resources Limited - Singapore
- Electricity Authority, New Zealand
- Directorate Of Revenue Intelligence - India
- Coalindo Energy - Indonesia
- Sakthi Sugars Limited - India
- Alfred C Toepfer International GmbH - Germany
- Economic Council, Georgia
- Indogreen Group - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Tamil Nadu electricity Board
- Renaissance Capital - South Africa
- Sarangani Energy Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- India Bulls Power Limited - India
- Grasim Industreis Ltd - India
- Kideco Jaya Agung - Indonesia
- GVK Power & Infra Limited - India
- Cement Manufacturers Association - India
- Essar Steel Hazira Ltd - India
- Uttam Galva Steels Limited - India
- Iligan Light & Power Inc, Philippines
- Goldman Sachs - Singapore
- Jindal Steel & Power Ltd - India
- The Treasury - Australian Government
- Eastern Energy - Thailand
- Wood Mackenzie - Singapore
- Mercuria Energy - Indonesia
- Parliament of New Zealand
- Therma Luzon, Inc, Philippines
- TeaM Sual Corporation - Philippines
- Makarim & Taira - Indonesia
- Leighton Contractors Pty Ltd - Australia
- ASAPP Information Group - India
- Manunggal Multi Energi - Indonesia
- Kumho Petrochemical, South Korea
- Salva Resources Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Pendopo Energi Batubara - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- International Coal Ventures Pvt Ltd - India
- Thai Mozambique Logistica
- San Jose City I Power Corp, Philippines
- Interocean Group of Companies - India
- Energy Link Ltd, New Zealand
- Central Electricity Authority - India
- Larsen & Toubro Limited - India
- Indo Tambangraya Megah - Indonesia
- Tata Chemicals Ltd - India
- Global Business Power Corporation, Philippines
- Energy Development Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- IEA Clean Coal Centre - UK
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Orica Mining Services - Indonesia
- Bangladesh Power Developement Board
- Singapore Mercantile Exchange
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PTC India Limited - India
- Eastern Coal Council - USA
- Indonesian Coal Mining Association
- Ministry of Transport, Egypt
- Globalindo Alam Lestari - Indonesia
- Ministry of Finance - Indonesia
- Heidelberg Cement - Germany
- Metalloyd Limited - United Kingdom
- Directorate General of MIneral and Coal - Indonesia
- SMC Global Power, Philippines
- Malabar Cements Ltd - India
- Mintek Dendrill Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Wilmar Investment Holdings
- Electricity Generating Authority of Thailand
- Indika Energy - Indonesia
- Central Java Power - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- AsiaOL BioFuels Corp., Philippines
- Independent Power Producers Association of India
- LBH Netherlands Bv - Netherlands
- Latin American Coal - Colombia
- Rashtriya Ispat Nigam Limited - India
- Bhushan Steel Limited - India
- Ministry of Mines - Canada
- Semirara Mining and Power Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Madhucon Powers Ltd - India
- Anglo American - United Kingdom
- SN Aboitiz Power Inc, Philippines
- Rio Tinto Coal - Australia
- Sinarmas Energy and Mining - Indonesia
- Borneo Indobara - Indonesia
- Kartika Selabumi Mining - Indonesia
- Oldendorff Carriers - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ambuja Cements Ltd - India
- Carbofer General Trading SA - India
- Marubeni Corporation - India
- Krishnapatnam Port Company Ltd. - India
- Billiton Holdings Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- MS Steel International - UAE
- Global Green Power PLC Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Holcim Trading Pte Ltd - Singapore
- Merrill Lynch Commodities Europe
- Maheswari Brothers Coal Limited - India
- South Luzon Thermal Energy Corporation
- Meralco Power Generation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Baramulti Group, Indonesia
- Mjunction Services Limited - India
- Attock Cement Pakistan Limited
- Intertek Mineral Services - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bharathi Cement Corporation - India
- European Bulk Services B.V. - Netherlands
- Bukit Baiduri Energy - Indonesia
- Sojitz Corporation - Japan
- Semirara Mining Corp, Philippines
- Bhoruka Overseas - Indonesia
- Medco Energi Mining Internasional
- Asmin Koalindo Tuhup - Indonesia
- OPG Power Generation Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- Australian Coal Association
- Thiess Contractors Indonesia
- GMR Energy Limited - India
- Ind-Barath Power Infra Limited - India
- Binh Thuan Hamico - Vietnam
- Vijayanagar Sugar Pvt Ltd - India
- Lanco Infratech Ltd - India
- Petron Corporation, Philippines
- Vizag Seaport Private Limited - India
- Aditya Birla Group - India
- Commonwealth Bank - Australia
- Siam City Cement PLC, Thailand
- Kapuas Tunggal Persada - Indonesia
- Romanian Commodities Exchange
- McConnell Dowell - Australia
- Orica Australia Pty. Ltd.
- Posco Energy - South Korea
- Siam City Cement - Thailand
- CNBM International Corporation - China
- Cigading International Bulk Terminal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Jaiprakash Power Ventures ltd
- London Commodity Brokers - England
- Indian Oil Corporation Limited
- Trasteel International SA, Italy
- Indian Energy Exchange, India
- Toyota Tsusho Corporation, Japan
- TNB Fuel Sdn Bhd - Malaysia
- PowerSource Philippines DevCo
- The University of Queensland
- Gujarat Sidhee Cement - India
- Coal and Oil Company - UAE
- Sree Jayajothi Cements Limited - India
- ICICI Bank Limited - India
- Bayan Resources Tbk. - Indonesia
- Simpson Spence & Young - Indonesia
- Power Finance Corporation Ltd., India
- Mercator Lines Limited - India
- Chamber of Mines of South Africa
- Price Waterhouse Coopers - Russia
- Savvy Resources Ltd - HongKong
- Altura Mining Limited, Indonesia
- Antam Resourcindo - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Bhatia International Limited - India
- Edison Trading Spa - Italy
- Bukit Asam (Persero) Tbk - Indonesia
- Kaltim Prima Coal - Indonesia
- Deloitte Consulting - India
- Xindia Steels Limited - India
- Australian Commodity Traders Exchange
- Kalimantan Lumbung Energi - Indonesia
- Vedanta Resources Plc - India
- VISA Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- CIMB Investment Bank - Malaysia
- Agrawal Coal Company - India
- Dalmia Cement Bharat India
- Videocon Industries ltd - India
- Karaikal Port Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Coastal Gujarat Power Limited - India
- Port Waratah Coal Services - Australia
- Georgia Ports Authority, United States
- Standard Chartered Bank - UAE
- PNOC Exploration Corporation - Philippines
- Kepco SPC Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Aboitiz Power Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- New Zealand Coal & Carbon
- Bukit Makmur.PT - Indonesia
- Riau Bara Harum - Indonesia
- Barasentosa Lestari - Indonesia
- Formosa Plastics Group - Taiwan
- Star Paper Mills Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sical Logistics Limited - India
- SMG Consultants - Indonesia
- Africa Commodities Group - South Africa
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