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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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Thursday, 27 February 14
SHIPPING LOANS WORTH $5 BILLION HAVE CHANGED HANDS OVER THE PAST YEAR, AS FUNDS INVEST IN SHIPPING - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Funds investing in shipping has been the "talk of the town" over the past couple of years, as institutional investors, private equity and ...
Thursday, 27 February 14
NEWCASTLE COAL EXPORTS SLIP 26.68 PERCENT WEEK ON WEEK
COALspot.com: In the week ended 24 February 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, total 2. ...
Wednesday, 26 February 14
SMALLER SIZE SEGMENTS HOLDING ON TO THEIR LEVELS; CAPES CORRECTING UPWARDS - INTERMODAL
Chartering (Wet: Stable- / Dry: Stable+)
The Dry Bulk market continued to improve this past week, on the back of rates for the smaller size s ...
Tuesday, 25 February 14
GBCE, A COAL UPGRADING TECHNOLOGY DEVELOPER, APPOINTS RICHARD BULMAN AS PROJECT DIRECTOR
Press Release: GB Clean Energy Ltd. (GBCE) announced today the appointment of Richard Bulman as Project Director. In this capacity Mr. Bulman ...
Tuesday, 25 February 14
ULTRAMAXES ARE THE 'WEAPON OF CHOICE' FOR DRY BULK SHIP OWNERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
It's been a busy start in 2014, as the first month of the year was a rather active in terms of second hand vessel purchases and newbuilding orderin ...
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- Madhucon Powers Ltd - India
- Energy Development Corp, Philippines
- South Luzon Thermal Energy Corporation
- Edison Trading Spa - Italy
- Vedanta Resources Plc - India
- Central Electricity Authority - India
- Medco Energi Mining Internasional
- Aditya Birla Group - India
- Leighton Contractors Pty Ltd - Australia
- Attock Cement Pakistan Limited
- European Bulk Services B.V. - Netherlands
- Planning Commission, India
- Kohat Cement Company Ltd. - Pakistan
- Miang Besar Coal Terminal - Indonesia
- Oldendorff Carriers - Singapore
- New Zealand Coal & Carbon
- Bangladesh Power Developement Board
- Global Business Power Corporation, Philippines
- Parry Sugars Refinery, India
- Kumho Petrochemical, South Korea
- CIMB Investment Bank - Malaysia
- Pendopo Energi Batubara - Indonesia
- Videocon Industries ltd - India
- White Energy Company Limited
- MS Steel International - UAE
- Kobexindo Tractors - Indoneisa
- McConnell Dowell - Australia
- Bhushan Steel Limited - India
- Borneo Indobara - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Simpson Spence & Young - Indonesia
- Mintek Dendrill Indonesia
- Meralco Power Generation, Philippines
- Malabar Cements Ltd - India
- Sarangani Energy Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Kartika Selabumi Mining - Indonesia
- Thiess Contractors Indonesia
- Sinarmas Energy and Mining - Indonesia
- Barasentosa Lestari - Indonesia
- Bhatia International Limited - India
- Port Waratah Coal Services - Australia
- Cement Manufacturers Association - India
- Tata Chemicals Ltd - India
- Riau Bara Harum - Indonesia
- Siam City Cement PLC, Thailand
- SMG Consultants - Indonesia
- Toyota Tsusho Corporation, Japan
- Asmin Koalindo Tuhup - Indonesia
- Energy Link Ltd, New Zealand
- Renaissance Capital - South Africa
- Intertek Mineral Services - Indonesia
- Kideco Jaya Agung - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Interocean Group of Companies - India
- Romanian Commodities Exchange
- Star Paper Mills Limited - India
- Sree Jayajothi Cements Limited - India
- Gujarat Sidhee Cement - India
- PowerSource Philippines DevCo
- Krishnapatnam Port Company Ltd. - India
- Sakthi Sugars Limited - India
- GVK Power & Infra Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Meenaskhi Energy Private Limited - India
- Kapuas Tunggal Persada - Indonesia
- Vizag Seaport Private Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Coal and Oil Company - UAE
- IHS Mccloskey Coal Group - USA
- Petrochimia International Co. Ltd.- Taiwan
- Metalloyd Limited - United Kingdom
- Carbofer General Trading SA - India
- Kepco SPC Power Corporation, Philippines
- Commonwealth Bank - Australia
- Electricity Generating Authority of Thailand
- GAC Shipping (India) Pvt Ltd
- Kaltim Prima Coal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Ministry of Transport, Egypt
- Rio Tinto Coal - Australia
- Indo Tambangraya Megah - Indonesia
- TeaM Sual Corporation - Philippines
- Wilmar Investment Holdings
- Siam City Cement - Thailand
- Global Green Power PLC Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Larsen & Toubro Limited - India
- Minerals Council of Australia
- Jindal Steel & Power Ltd - India
- Timah Investasi Mineral - Indoneisa
- Karaikal Port Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Georgia Ports Authority, United States
- San Jose City I Power Corp, Philippines
- Ministry of Finance - Indonesia
- Iligan Light & Power Inc, Philippines
- Indika Energy - Indonesia
- Trasteel International SA, Italy
- Vijayanagar Sugar Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Mercuria Energy - Indonesia
- The Treasury - Australian Government
- PetroVietnam Power Coal Import and Supply Company
- Heidelberg Cement - Germany
- Therma Luzon, Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bharathi Cement Corporation - India
- Essar Steel Hazira Ltd - India
- Deloitte Consulting - India
- Petron Corporation, Philippines
- Eastern Energy - Thailand
- VISA Power Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Antam Resourcindo - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Bulk Trading Sa - Switzerland
- Eastern Coal Council - USA
- Bhoruka Overseas - Indonesia
- Electricity Authority, New Zealand
- Africa Commodities Group - South Africa
- Aboitiz Power Corporation - Philippines
- Altura Mining Limited, Indonesia
- Australian Commodity Traders Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Wood Mackenzie - Singapore
- Ceylon Electricity Board - Sri Lanka
- TNB Fuel Sdn Bhd - Malaysia
- Posco Energy - South Korea
- Gujarat Electricity Regulatory Commission - India
- Orica Mining Services - Indonesia
- Coalindo Energy - Indonesia
- Xindia Steels Limited - India
- Goldman Sachs - Singapore
- Sindya Power Generating Company Private Ltd
- London Commodity Brokers - England
- Bukit Makmur.PT - Indonesia
- Manunggal Multi Energi - Indonesia
- Parliament of New Zealand
- Price Waterhouse Coopers - Russia
- IEA Clean Coal Centre - UK
- ICICI Bank Limited - India
- Uttam Galva Steels Limited - India
- Singapore Mercantile Exchange
- Merrill Lynch Commodities Europe
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Orica Australia Pty. Ltd.
- ASAPP Information Group - India
- Maharashtra Electricity Regulatory Commission - India
- Bahari Cakrawala Sebuku - Indonesia
- Sojitz Corporation - Japan
- Indian Energy Exchange, India
- Agrawal Coal Company - India
- Dalmia Cement Bharat India
- Samtan Co., Ltd - South Korea
- Billiton Holdings Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- Anglo American - United Kingdom
- PTC India Limited - India
- Global Coal Blending Company Limited - Australia
- Lanco Infratech Ltd - India
- Latin American Coal - Colombia
- Rashtriya Ispat Nigam Limited - India
- Straits Asia Resources Limited - Singapore
- Formosa Plastics Group - Taiwan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Power Finance Corporation Ltd., India
- Directorate Of Revenue Intelligence - India
- Directorate General of MIneral and Coal - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Baiduri Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Central Java Power - Indonesia
- Indian Oil Corporation Limited
- Chamber of Mines of South Africa
- Gujarat Mineral Development Corp Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Coastal Gujarat Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Semirara Mining and Power Corporation, Philippines
- Independent Power Producers Association of India
- LBH Netherlands Bv - Netherlands
- Offshore Bulk Terminal Pte Ltd, Singapore
- SMC Global Power, Philippines
- India Bulls Power Limited - India
- Mjunction Services Limited - India
- Banpu Public Company Limited - Thailand
- Neyveli Lignite Corporation Ltd, - India
- Sical Logistics Limited - India
- Indonesian Coal Mining Association
- The State Trading Corporation of India Ltd
- Globalindo Alam Lestari - Indonesia
- Standard Chartered Bank - UAE
- The University of Queensland
- CNBM International Corporation - China
- Maheswari Brothers Coal Limited - India
- Economic Council, Georgia
- International Coal Ventures Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Ministry of Mines - Canada
- Jaiprakash Power Ventures ltd
- Mercator Lines Limited - India
- Ambuja Cements Ltd - India
- Baramulti Group, Indonesia
- GMR Energy Limited - India
- Grasim Industreis Ltd - India
- Semirara Mining Corp, Philippines
- Australian Coal Association
- Indogreen Group - Indonesia
- Salva Resources Pvt Ltd - India
- Tamil Nadu electricity Board
- Makarim & Taira - Indonesia
- Thai Mozambique Logistica
- Marubeni Corporation - India
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