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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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Monday, 17 February 14
Q1 2015 COAL SWAPS CLOSED $ 2.21 HIGHER THAN Q2 2014 SWAPS
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 delivery lost 3.16 percent month on month and closed at US$ 76.12 per mt as o ...
Sunday, 16 February 14
SUPRAMAX : THE FAR EAST/SE ASIA CHARTER RATES FIRMED UP
COALspot.com: The freight market had a mixed reaction this week with BDI increased by 1.37 pct and closing at 1106 points on Valentine day. The cape ...
Friday, 14 February 14
US COAL PRODUCTION STILL SLIPPING
COALspot.com – United States the world’s second largest coal producer, produced approximately 17.9 million short tons (mmst) of coal in ...
Thursday, 13 February 14
PANAMAX : NOT ENOUGH REQUIREMENTS TO KEEP THE ATLANTIC MARKET FLOATING - FEARNLEYS AS
Handy
After the Chinese holidays the week started on a positive note. Owners are talking higher rates but chrtrs are still somehow reluctant to mov ...
Thursday, 13 February 14
DRY BULK MARKET FACES BETTER PROSPECTS ON THE BACK OF IMPROVING DEMAND AND SUPPLY BALANCE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has started off the New Year on the "left foot", with the strong finish of 2013 proving to be unsustainable, on the ba ...
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- Indogreen Group - Indonesia
- GMR Energy Limited - India
- Bulk Trading Sa - Switzerland
- Jorong Barutama Greston.PT - Indonesia
- Sakthi Sugars Limited - India
- Australian Coal Association
- Tata Chemicals Ltd - India
- Altura Mining Limited, Indonesia
- Bhoruka Overseas - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- SMC Global Power, Philippines
- Deloitte Consulting - India
- Rashtriya Ispat Nigam Limited - India
- Kideco Jaya Agung - Indonesia
- Siam City Cement - Thailand
- IEA Clean Coal Centre - UK
- GAC Shipping (India) Pvt Ltd
- Mintek Dendrill Indonesia
- Semirara Mining and Power Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Binh Thuan Hamico - Vietnam
- Larsen & Toubro Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Pendopo Energi Batubara - Indonesia
- Orica Mining Services - Indonesia
- Independent Power Producers Association of India
- Banpu Public Company Limited - Thailand
- Agrawal Coal Company - India
- Commonwealth Bank - Australia
- Kaltim Prima Coal - Indonesia
- Parliament of New Zealand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sical Logistics Limited - India
- Eastern Energy - Thailand
- Mercuria Energy - Indonesia
- ASAPP Information Group - India
- CIMB Investment Bank - Malaysia
- Georgia Ports Authority, United States
- International Coal Ventures Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Thai Mozambique Logistica
- Bukit Asam (Persero) Tbk - Indonesia
- Gujarat Sidhee Cement - India
- Toyota Tsusho Corporation, Japan
- Goldman Sachs - Singapore
- Sojitz Corporation - Japan
- Indian Energy Exchange, India
- Xindia Steels Limited - India
- Renaissance Capital - South Africa
- Bukit Makmur.PT - Indonesia
- Samtan Co., Ltd - South Korea
- Bhatia International Limited - India
- Metalloyd Limited - United Kingdom
- Asmin Koalindo Tuhup - Indonesia
- Price Waterhouse Coopers - Russia
- Standard Chartered Bank - UAE
- The Treasury - Australian Government
- Madhucon Powers Ltd - India
- Semirara Mining Corp, Philippines
- Coastal Gujarat Power Limited - India
- Kumho Petrochemical, South Korea
- Essar Steel Hazira Ltd - India
- Iligan Light & Power Inc, Philippines
- Port Waratah Coal Services - Australia
- Global Green Power PLC Corporation, Philippines
- Interocean Group of Companies - India
- IHS Mccloskey Coal Group - USA
- Borneo Indobara - Indonesia
- London Commodity Brokers - England
- Intertek Mineral Services - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Orica Australia Pty. Ltd.
- Grasim Industreis Ltd - India
- PTC India Limited - India
- Petron Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- SN Aboitiz Power Inc, Philippines
- Bharathi Cement Corporation - India
- Anglo American - United Kingdom
- Directorate Of Revenue Intelligence - India
- San Jose City I Power Corp, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- PNOC Exploration Corporation - Philippines
- Leighton Contractors Pty Ltd - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Jindal Steel & Power Ltd - India
- Tamil Nadu electricity Board
- McConnell Dowell - Australia
- India Bulls Power Limited - India
- Bayan Resources Tbk. - Indonesia
- Cement Manufacturers Association - India
- Bangladesh Power Developement Board
- Manunggal Multi Energi - Indonesia
- Energy Link Ltd, New Zealand
- PetroVietnam Power Coal Import and Supply Company
- ICICI Bank Limited - India
- Global Coal Blending Company Limited - Australia
- Maharashtra Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- Makarim & Taira - Indonesia
- Minerals Council of Australia
- Parry Sugars Refinery, India
- Meenaskhi Energy Private Limited - India
- Heidelberg Cement - Germany
- Vedanta Resources Plc - India
- White Energy Company Limited
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhushan Steel Limited - India
- Energy Development Corp, Philippines
- Kartika Selabumi Mining - Indonesia
- Meralco Power Generation, Philippines
- Power Finance Corporation Ltd., India
- Merrill Lynch Commodities Europe
- Star Paper Mills Limited - India
- LBH Netherlands Bv - Netherlands
- Coalindo Energy - Indonesia
- Ambuja Cements Ltd - India
- Savvy Resources Ltd - HongKong
- Ceylon Electricity Board - Sri Lanka
- Ministry of Transport, Egypt
- South Luzon Thermal Energy Corporation
- Vijayanagar Sugar Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- PowerSource Philippines DevCo
- Sree Jayajothi Cements Limited - India
- Malabar Cements Ltd - India
- Economic Council, Georgia
- Ministry of Mines - Canada
- OPG Power Generation Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Globalindo Alam Lestari - Indonesia
- Singapore Mercantile Exchange
- Indika Energy - Indonesia
- SMG Consultants - Indonesia
- Simpson Spence & Young - Indonesia
- Baramulti Group, Indonesia
- AsiaOL BioFuels Corp., Philippines
- Global Business Power Corporation, Philippines
- Indian Oil Corporation Limited
- Krishnapatnam Port Company Ltd. - India
- Siam City Cement PLC, Thailand
- GVK Power & Infra Limited - India
- Lanco Infratech Ltd - India
- Coal and Oil Company - UAE
- Trasteel International SA, Italy
- Mjunction Services Limited - India
- Holcim Trading Pte Ltd - Singapore
- Central Electricity Authority - India
- Kalimantan Lumbung Energi - Indonesia
- Marubeni Corporation - India
- Africa Commodities Group - South Africa
- Kapuas Tunggal Persada - Indonesia
- Thiess Contractors Indonesia
- Therma Luzon, Inc, Philippines
- Latin American Coal - Colombia
- Chamber of Mines of South Africa
- The University of Queensland
- Sinarmas Energy and Mining - Indonesia
- CNBM International Corporation - China
- Bukit Baiduri Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Billiton Holdings Pty Ltd - Australia
- GN Power Mariveles Coal Plant, Philippines
- Antam Resourcindo - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Central Java Power - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Aditya Birla Group - India
- Wood Mackenzie - Singapore
- Mercator Lines Limited - India
- Wilmar Investment Holdings
- Jaiprakash Power Ventures ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Petrochimia International Co. Ltd.- Taiwan
- Salva Resources Pvt Ltd - India
- Posco Energy - South Korea
- Planning Commission, India
- Vizag Seaport Private Limited - India
- Chettinad Cement Corporation Ltd - India
- Kepco SPC Power Corporation, Philippines
- Uttam Galva Steels Limited - India
- Oldendorff Carriers - Singapore
- The State Trading Corporation of India Ltd
- Ministry of Finance - Indonesia
- Kobexindo Tractors - Indoneisa
- Ind-Barath Power Infra Limited - India
- Videocon Industries ltd - India
- Romanian Commodities Exchange
- Electricity Authority, New Zealand
- VISA Power Limited - India
- Electricity Generating Authority of Thailand
- Timah Investasi Mineral - Indoneisa
- Medco Energi Mining Internasional
- Sarangani Energy Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Edison Trading Spa - Italy
- Carbofer General Trading SA - India
- Dalmia Cement Bharat India
- Maheswari Brothers Coal Limited - India
- Formosa Plastics Group - Taiwan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- New Zealand Coal & Carbon
- Riau Bara Harum - Indonesia
- Attock Cement Pakistan Limited
- Straits Asia Resources Limited - Singapore
- Sindya Power Generating Company Private Ltd
- Australian Commodity Traders Exchange
- Eastern Coal Council - USA
- Rio Tinto Coal - Australia
- MS Steel International - UAE
- Karaikal Port Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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