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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 February 14
NEW BUILDING ORDERS REACHING NEW POST-CRISIS HEIGHTS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Ship owners are looking to take advantage of the last few attractive deals in the new building market, before prices start climbing to new highs and ...
Wednesday, 12 February 14
2013 WAS THE YEAR OF PRIVATE EQUITY FUNDING - TIMOS PAPADIMITRIOU
COALspot.com: People say that money makes the world go round. Well, can it be that it’s the other way around? Is it possible that money needs ...
Tuesday, 11 February 14
INDONESIAN COAL SWAP SHOWS STRONG GROWTH IN 2014 SECOND HALF
COALspot.com – Swaps prices slide for thermal coal loading from Indonesia, the world’s largest exporter of the fuel, according SGX.
T ...
Tuesday, 11 February 14
AUSTRALIA'S NEWCASTLE COAL EXPORTS SLIDE AROUND 15% WEEK ON WEEK
COALspot.com: In the week ended 10 February 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled ...
Tuesday, 11 February 14
SHIP OWNERS INVEST IN 447 NEWBUILDINGS AND SECOND HAND VESSELS DURING JANUARY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Despite a rough start to the year for the dry bulk freight market and lackluster performance from most other shipping sub-segments, ship owners have ...
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- Indika Energy - Indonesia
- Minerals Council of Australia
- Iligan Light & Power Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Wilmar Investment Holdings
- Kepco SPC Power Corporation, Philippines
- Deloitte Consulting - India
- Anglo American - United Kingdom
- Directorate Of Revenue Intelligence - India
- AsiaOL BioFuels Corp., Philippines
- Tata Chemicals Ltd - India
- Banpu Public Company Limited - Thailand
- Krishnapatnam Port Company Ltd. - India
- London Commodity Brokers - England
- Mjunction Services Limited - India
- Metalloyd Limited - United Kingdom
- Kobexindo Tractors - Indoneisa
- Toyota Tsusho Corporation, Japan
- Sakthi Sugars Limited - India
- Kalimantan Lumbung Energi - Indonesia
- TeaM Sual Corporation - Philippines
- Kohat Cement Company Ltd. - Pakistan
- Larsen & Toubro Limited - India
- Coal and Oil Company - UAE
- IHS Mccloskey Coal Group - USA
- Ministry of Mines - Canada
- Straits Asia Resources Limited - Singapore
- San Jose City I Power Corp, Philippines
- Latin American Coal - Colombia
- Gujarat Mineral Development Corp Ltd - India
- Interocean Group of Companies - India
- GAC Shipping (India) Pvt Ltd
- Australian Commodity Traders Exchange
- Global Coal Blending Company Limited - Australia
- Billiton Holdings Pty Ltd - Australia
- Bukit Baiduri Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Commonwealth Bank - Australia
- OPG Power Generation Pvt Ltd - India
- Bangladesh Power Developement Board
- Goldman Sachs - Singapore
- Indogreen Group - Indonesia
- Indo Tambangraya Megah - Indonesia
- Ambuja Cements Ltd - India
- Merrill Lynch Commodities Europe
- PTC India Limited - India
- Bhoruka Overseas - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Indonesian Coal Mining Association
- Star Paper Mills Limited - India
- Timah Investasi Mineral - Indoneisa
- Jaiprakash Power Ventures ltd
- Bhatia International Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bulk Trading Sa - Switzerland
- Indian Oil Corporation Limited
- Kapuas Tunggal Persada - Indonesia
- CNBM International Corporation - China
- Bhushan Steel Limited - India
- Borneo Indobara - Indonesia
- Renaissance Capital - South Africa
- Holcim Trading Pte Ltd - Singapore
- Siam City Cement - Thailand
- Parliament of New Zealand
- PowerSource Philippines DevCo
- Global Green Power PLC Corporation, Philippines
- Medco Energi Mining Internasional
- Grasim Industreis Ltd - India
- Siam City Cement PLC, Thailand
- Energy Development Corp, Philippines
- McConnell Dowell - Australia
- Bukit Makmur.PT - Indonesia
- ICICI Bank Limited - India
- Attock Cement Pakistan Limited
- Mintek Dendrill Indonesia
- Globalindo Alam Lestari - Indonesia
- Maheswari Brothers Coal Limited - India
- Sinarmas Energy and Mining - Indonesia
- India Bulls Power Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- LBH Netherlands Bv - Netherlands
- Parry Sugars Refinery, India
- SMC Global Power, Philippines
- Antam Resourcindo - Indonesia
- White Energy Company Limited
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Africa Commodities Group - South Africa
- Pendopo Energi Batubara - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Ceylon Electricity Board - Sri Lanka
- ASAPP Information Group - India
- Bahari Cakrawala Sebuku - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Economic Council, Georgia
- Australian Coal Association
- Kaltim Prima Coal - Indonesia
- Ministry of Transport, Egypt
- Heidelberg Cement - Germany
- Binh Thuan Hamico - Vietnam
- Orica Australia Pty. Ltd.
- Electricity Generating Authority of Thailand
- Malabar Cements Ltd - India
- New Zealand Coal & Carbon
- Mercator Lines Limited - India
- Formosa Plastics Group - Taiwan
- Madhucon Powers Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Singapore Mercantile Exchange
- Power Finance Corporation Ltd., India
- Gujarat Sidhee Cement - India
- Meralco Power Generation, Philippines
- European Bulk Services B.V. - Netherlands
- Ministry of Finance - Indonesia
- Port Waratah Coal Services - Australia
- Independent Power Producers Association of India
- Therma Luzon, Inc, Philippines
- Orica Mining Services - Indonesia
- VISA Power Limited - India
- Aboitiz Power Corporation - Philippines
- CIMB Investment Bank - Malaysia
- Altura Mining Limited, Indonesia
- Jindal Steel & Power Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Uttam Galva Steels Limited - India
- Miang Besar Coal Terminal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Sarangani Energy Corporation, Philippines
- Indian Energy Exchange, India
- Standard Chartered Bank - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The Treasury - Australian Government
- Romanian Commodities Exchange
- Petrochimia International Co. Ltd.- Taiwan
- Videocon Industries ltd - India
- Eastern Energy - Thailand
- Lanco Infratech Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Sojitz Corporation - Japan
- Wood Mackenzie - Singapore
- Alfred C Toepfer International GmbH - Germany
- Energy Link Ltd, New Zealand
- Bayan Resources Tbk. - Indonesia
- Agrawal Coal Company - India
- South Luzon Thermal Energy Corporation
- PNOC Exploration Corporation - Philippines
- Riau Bara Harum - Indonesia
- Samtan Co., Ltd - South Korea
- Thiess Contractors Indonesia
- Rio Tinto Coal - Australia
- Trasteel International SA, Italy
- IEA Clean Coal Centre - UK
- MS Steel International - UAE
- Essar Steel Hazira Ltd - India
- Oldendorff Carriers - Singapore
- Semirara Mining Corp, Philippines
- Kumho Petrochemical, South Korea
- Marubeni Corporation - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kartika Selabumi Mining - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Mercuria Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Barasentosa Lestari - Indonesia
- Central Electricity Authority - India
- Coalindo Energy - Indonesia
- Cement Manufacturers Association - India
- Xindia Steels Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Savvy Resources Ltd - HongKong
- The State Trading Corporation of India Ltd
- Price Waterhouse Coopers - Russia
- Planning Commission, India
- Tamil Nadu electricity Board
- Manunggal Multi Energi - Indonesia
- Karaikal Port Pvt Ltd - India
- Edison Trading Spa - Italy
- Sree Jayajothi Cements Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Neyveli Lignite Corporation Ltd, - India
- Aditya Birla Group - India
- Coastal Gujarat Power Limited - India
- Eastern Coal Council - USA
- Electricity Authority, New Zealand
- Carbofer General Trading SA - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Georgia Ports Authority, United States
- Bank of Tokyo Mitsubishi UFJ Ltd
- SMG Consultants - Indonesia
- Vedanta Resources Plc - India
- Gujarat Electricity Regulatory Commission - India
- The University of Queensland
- Baramulti Group, Indonesia
- Ind-Barath Power Infra Limited - India
- Makarim & Taira - Indonesia
- Sindya Power Generating Company Private Ltd
- TNB Fuel Sdn Bhd - Malaysia
- Petron Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Dalmia Cement Bharat India
- Simpson Spence & Young - Indonesia
- Posco Energy - South Korea
- Sical Logistics Limited - India
- Thai Mozambique Logistica
- Central Java Power - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Bharathi Cement Corporation - India
- Chamber of Mines of South Africa
- Vizag Seaport Private Limited - India
- Kideco Jaya Agung - Indonesia
- GMR Energy Limited - India
- GVK Power & Infra Limited - India
- Salva Resources Pvt Ltd - India
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