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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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Saturday, 22 February 14
POTEN RAISES THE QUESTION OF ACCURACY IN CALCULATING TANKER FREIGHT RATES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
As the tanker market has grown in complexity over the course of the past few years, the question of whether the traditional methods of assessing rat ...
Friday, 21 February 14
INDONESIA PLAN TO CAP COAL OUTPUT AND HIKE ROYALTY; START MUSIC
COALspot.com: Energy and Mineral Resources Ministy of Indonesia is planning to increase the royalty for coal miners particularly for Mining Business ...
Friday, 21 February 14
THE WORLD'S SECOND LARGEST COAL MINER MINED 19.2 MMST OF COAL IN A WEEK, EIA SAYS
COALspot.com – United States the world’s second largest coal producer, mined approximately 19.2 million short tons (mmst) of coal in a w ...
Friday, 21 February 14
DRY BULK MARKET SHOWS SIGNS OF LIFE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has slowly started to emerge from the downfall it's been since the start of the year, as rates have began to pick up over the c ...
Friday, 21 February 14
INDONESIA COAL OUTPUT CAP TO HURT MINERS RELIANT ON VOLUME GROWTH, FITCH SAYS
Fitch Ratings says that the credit profiles of mining sub-contractors and miners highly reliant on increasing volumes to support high debt servicing w ...
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Binh Thuan Hamico - Vietnam
- Price Waterhouse Coopers - Russia
- Bangladesh Power Developement Board
- Sree Jayajothi Cements Limited - India
- IEA Clean Coal Centre - UK
- Indogreen Group - Indonesia
- Antam Resourcindo - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Asmin Koalindo Tuhup - Indonesia
- Kobexindo Tractors - Indoneisa
- The University of Queensland
- Romanian Commodities Exchange
- Posco Energy - South Korea
- Directorate General of MIneral and Coal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Medco Energi Mining Internasional
- SMG Consultants - Indonesia
- Straits Asia Resources Limited - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Manunggal Multi Energi - Indonesia
- Semirara Mining and Power Corporation, Philippines
- GMR Energy Limited - India
- Tata Chemicals Ltd - India
- Aditya Birla Group - India
- SN Aboitiz Power Inc, Philippines
- London Commodity Brokers - England
- Latin American Coal - Colombia
- Siam City Cement - Thailand
- Siam City Cement PLC, Thailand
- Bhushan Steel Limited - India
- Eastern Energy - Thailand
- Chamber of Mines of South Africa
- Sojitz Corporation - Japan
- Heidelberg Cement - Germany
- Electricity Generating Authority of Thailand
- Oldendorff Carriers - Singapore
- Thiess Contractors Indonesia
- Grasim Industreis Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Trasteel International SA, Italy
- Coalindo Energy - Indonesia
- Bhatia International Limited - India
- Riau Bara Harum - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Coal and Oil Company - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- Sical Logistics Limited - India
- Jaiprakash Power Ventures ltd
- GVK Power & Infra Limited - India
- Banpu Public Company Limited - Thailand
- Wilmar Investment Holdings
- Vizag Seaport Private Limited - India
- Anglo American - United Kingdom
- Eastern Coal Council - USA
- Mercuria Energy - Indonesia
- Parliament of New Zealand
- TeaM Sual Corporation - Philippines
- Global Business Power Corporation, Philippines
- Power Finance Corporation Ltd., India
- Orica Mining Services - Indonesia
- ASAPP Information Group - India
- Mjunction Services Limited - India
- Lanco Infratech Ltd - India
- European Bulk Services B.V. - Netherlands
- Sindya Power Generating Company Private Ltd
- Economic Council, Georgia
- Interocean Group of Companies - India
- Ministry of Finance - Indonesia
- Bulk Trading Sa - Switzerland
- Bukit Baiduri Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Gujarat Sidhee Cement - India
- Mintek Dendrill Indonesia
- Barasentosa Lestari - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Indonesian Coal Mining Association
- Madhucon Powers Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Central Electricity Authority - India
- Intertek Mineral Services - Indonesia
- The State Trading Corporation of India Ltd
- Agrawal Coal Company - India
- Jorong Barutama Greston.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- OPG Power Generation Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Independent Power Producers Association of India
- Singapore Mercantile Exchange
- Dalmia Cement Bharat India
- Ambuja Cements Ltd - India
- Sarangani Energy Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Altura Mining Limited, Indonesia
- Ceylon Electricity Board - Sri Lanka
- South Luzon Thermal Energy Corporation
- TNB Fuel Sdn Bhd - Malaysia
- Standard Chartered Bank - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- Indika Energy - Indonesia
- Port Waratah Coal Services - Australia
- Deloitte Consulting - India
- Central Java Power - Indonesia
- Iligan Light & Power Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Ind-Barath Power Infra Limited - India
- San Jose City I Power Corp, Philippines
- Gujarat Electricity Regulatory Commission - India
- Cigading International Bulk Terminal - Indonesia
- MS Steel International - UAE
- Uttam Galva Steels Limited - India
- Ministry of Transport, Egypt
- Africa Commodities Group - South Africa
- Essar Steel Hazira Ltd - India
- Energy Development Corp, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Maheswari Brothers Coal Limited - India
- CIMB Investment Bank - Malaysia
- Ministry of Mines - Canada
- SMC Global Power, Philippines
- Karaikal Port Pvt Ltd - India
- PTC India Limited - India
- Planning Commission, India
- Timah Investasi Mineral - Indoneisa
- Minerals Council of Australia
- Indian Energy Exchange, India
- Jindal Steel & Power Ltd - India
- Indian Oil Corporation Limited
- Tamil Nadu electricity Board
- IHS Mccloskey Coal Group - USA
- Miang Besar Coal Terminal - Indonesia
- VISA Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- LBH Netherlands Bv - Netherlands
- India Bulls Power Limited - India
- Orica Australia Pty. Ltd.
- Alfred C Toepfer International GmbH - Germany
- Georgia Ports Authority, United States
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Rio Tinto Coal - Australia
- White Energy Company Limited
- Chettinad Cement Corporation Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Carbofer General Trading SA - India
- Merrill Lynch Commodities Europe
- AsiaOL BioFuels Corp., Philippines
- Vedanta Resources Plc - India
- Krishnapatnam Port Company Ltd. - India
- Makarim & Taira - Indonesia
- Borneo Indobara - Indonesia
- New Zealand Coal & Carbon
- Kumho Petrochemical, South Korea
- Australian Coal Association
- Samtan Co., Ltd - South Korea
- Kaltim Prima Coal - Indonesia
- Bhoruka Overseas - Indonesia
- Simpson Spence & Young - Indonesia
- Bharathi Cement Corporation - India
- Marubeni Corporation - India
- International Coal Ventures Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Maharashtra Electricity Regulatory Commission - India
- Coastal Gujarat Power Limited - India
- Metalloyd Limited - United Kingdom
- PowerSource Philippines DevCo
- Xindia Steels Limited - India
- Formosa Plastics Group - Taiwan
- Renaissance Capital - South Africa
- Sinarmas Energy and Mining - Indonesia
- ICICI Bank Limited - India
- Kepco SPC Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Global Coal Blending Company Limited - Australia
- PNOC Exploration Corporation - Philippines
- Petron Corporation, Philippines
- Semirara Mining Corp, Philippines
- Kideco Jaya Agung - Indonesia
- CNBM International Corporation - China
- Energy Link Ltd, New Zealand
- Edison Trading Spa - Italy
- Malabar Cements Ltd - India
- Commonwealth Bank - Australia
- Savvy Resources Ltd - HongKong
- Toyota Tsusho Corporation, Japan
- Australian Commodity Traders Exchange
- Parry Sugars Refinery, India
- Sakthi Sugars Limited - India
- Mercator Lines Limited - India
- Star Paper Mills Limited - India
- Directorate Of Revenue Intelligence - India
- Meralco Power Generation, Philippines
- Goldman Sachs - Singapore
- Meenaskhi Energy Private Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Cement Manufacturers Association - India
- The Treasury - Australian Government
- Kalimantan Lumbung Energi - Indonesia
- Larsen & Toubro Limited - India
- Wood Mackenzie - Singapore
- Thai Mozambique Logistica
- Baramulti Group, Indonesia
- Salva Resources Pvt Ltd - India
- Electricity Authority, New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Videocon Industries ltd - India
- Kapuas Tunggal Persada - Indonesia
- Bukit Makmur.PT - Indonesia
- Therma Luzon, Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- McConnell Dowell - Australia
- GAC Shipping (India) Pvt Ltd
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