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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, 10 February 14
Q1 2015, API 8 CFR SOUTH CHINA COAL SWAP CLOSED AROUND $ 2 HIGHER THAN Q2 14 PRICE
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 delivery lost 2.61 percent month on month and closed at US$ 77.28 per mt as on Frid ...
Monday, 10 February 14
SUPRAMAX STILL AT AROUND US$ 5K + BB 50K DELIVERY KALIMANTAN FOR A TRIP TO INDIA - CAPT. REDDY
COALspot.com: The BDI was down by 1.71 pct and closed at 1091 points week ended 7 February 2014. The BDI seemed to reach the bottom as the cape inde ...
Saturday, 08 February 14
U.S PRODUCED 84.5 MMMST OF COAL IN JANUARY; 2.05% UP MONTH ON MONTH, EIA SAYS
COALspot.com – United States the world’s second largest coal producer, produced approximately 18.8 million short tons (mmst) of coal in ...
Friday, 07 February 14
DRY BULK MARKET ON ' REVERSE' MODE DUE TO CHINESE HOLIDAYS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has kept its uninspiring mood throughout yet another week, with the Baltic Dry Index (BDI) hovering slightly above the 1,000-poi ...
Thursday, 06 February 14
INDONESIA'S BAN ON THE EXPORT OF RAW MINERAL ORES COMES INTO FORCE - INCE & CO
COALspot.com: On 12 January 2014, the ban on the export of unprocessed mineral ores came into effect in Indonesia. This ban enforces the Mining Law ...
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- Medco Energi Mining Internasional
- European Bulk Services B.V. - Netherlands
- Kaltim Prima Coal - Indonesia
- Power Finance Corporation Ltd., India
- Economic Council, Georgia
- Price Waterhouse Coopers - Russia
- Kepco SPC Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Australian Commodity Traders Exchange
- Deloitte Consulting - India
- Kumho Petrochemical, South Korea
- Salva Resources Pvt Ltd - India
- Ministry of Finance - Indonesia
- MS Steel International - UAE
- Semirara Mining and Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Lanco Infratech Ltd - India
- TeaM Sual Corporation - Philippines
- Singapore Mercantile Exchange
- Energy Development Corp, Philippines
- Heidelberg Cement - Germany
- GVK Power & Infra Limited - India
- Sindya Power Generating Company Private Ltd
- Thiess Contractors Indonesia
- McConnell Dowell - Australia
- Xindia Steels Limited - India
- Wood Mackenzie - Singapore
- Karaikal Port Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Straits Asia Resources Limited - Singapore
- Port Waratah Coal Services - Australia
- Bhatia International Limited - India
- Bulk Trading Sa - Switzerland
- Grasim Industreis Ltd - India
- Meralco Power Generation, Philippines
- Mintek Dendrill Indonesia
- Formosa Plastics Group - Taiwan
- Rio Tinto Coal - Australia
- Gujarat Mineral Development Corp Ltd - India
- Siam City Cement PLC, Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Baiduri Energy - Indonesia
- The Treasury - Australian Government
- Indian Oil Corporation Limited
- Karbindo Abesyapradhi - Indoneisa
- Goldman Sachs - Singapore
- Carbofer General Trading SA - India
- Jindal Steel & Power Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Iligan Light & Power Inc, Philippines
- Baramulti Group, Indonesia
- Mjunction Services Limited - India
- Cement Manufacturers Association - India
- Sinarmas Energy and Mining - Indonesia
- Global Green Power PLC Corporation, Philippines
- Parry Sugars Refinery, India
- Gujarat Electricity Regulatory Commission - India
- Directorate General of MIneral and Coal - Indonesia
- The University of Queensland
- Rashtriya Ispat Nigam Limited - India
- Electricity Authority, New Zealand
- South Luzon Thermal Energy Corporation
- India Bulls Power Limited - India
- Indian Energy Exchange, India
- Metalloyd Limited - United Kingdom
- San Jose City I Power Corp, Philippines
- Altura Mining Limited, Indonesia
- Star Paper Mills Limited - India
- Vizag Seaport Private Limited - India
- Sakthi Sugars Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Aboitiz Power Corporation - Philippines
- GMR Energy Limited - India
- Ind-Barath Power Infra Limited - India
- Leighton Contractors Pty Ltd - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Toyota Tsusho Corporation, Japan
- Romanian Commodities Exchange
- Africa Commodities Group - South Africa
- Latin American Coal - Colombia
- Siam City Cement - Thailand
- Petron Corporation, Philippines
- ASAPP Information Group - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Mines - Canada
- Jaiprakash Power Ventures ltd
- ICICI Bank Limited - India
- Eastern Coal Council - USA
- Antam Resourcindo - Indonesia
- Madhucon Powers Ltd - India
- International Coal Ventures Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Planning Commission, India
- Aditya Birla Group - India
- Bangladesh Power Developement Board
- Gujarat Sidhee Cement - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- TNB Fuel Sdn Bhd - Malaysia
- Australian Coal Association
- Bharathi Cement Corporation - India
- Videocon Industries ltd - India
- Interocean Group of Companies - India
- Coalindo Energy - Indonesia
- Makarim & Taira - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Pendopo Energi Batubara - Indonesia
- Edison Trading Spa - Italy
- SN Aboitiz Power Inc, Philippines
- Tata Chemicals Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Oldendorff Carriers - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Intertek Mineral Services - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kideco Jaya Agung - Indonesia
- Indo Tambangraya Megah - Indonesia
- Meenaskhi Energy Private Limited - India
- CIMB Investment Bank - Malaysia
- PetroVietnam Power Coal Import and Supply Company
- Timah Investasi Mineral - Indoneisa
- Wilmar Investment Holdings
- Sical Logistics Limited - India
- Maheswari Brothers Coal Limited - India
- GAC Shipping (India) Pvt Ltd
- Indogreen Group - Indonesia
- PNOC Exploration Corporation - Philippines
- New Zealand Coal & Carbon
- Trasteel International SA, Italy
- Sojitz Corporation - Japan
- Central Java Power - Indonesia
- Bukit Makmur.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Dalmia Cement Bharat India
- Barasentosa Lestari - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Neyveli Lignite Corporation Ltd, - India
- Bukit Asam (Persero) Tbk - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Anglo American - United Kingdom
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Agrawal Coal Company - India
- Electricity Generating Authority of Thailand
- Bhushan Steel Limited - India
- PTC India Limited - India
- Ministry of Transport, Egypt
- Semirara Mining Corp, Philippines
- Minerals Council of Australia
- IEA Clean Coal Centre - UK
- Central Electricity Authority - India
- The State Trading Corporation of India Ltd
- Simpson Spence & Young - Indonesia
- Kartika Selabumi Mining - Indonesia
- PowerSource Philippines DevCo
- Independent Power Producers Association of India
- Globalindo Alam Lestari - Indonesia
- Coal and Oil Company - UAE
- SMG Consultants - Indonesia
- Malabar Cements Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Indonesian Coal Mining Association
- Global Coal Blending Company Limited - Australia
- Banpu Public Company Limited - Thailand
- Coastal Gujarat Power Limited - India
- Borneo Indobara - Indonesia
- Chamber of Mines of South Africa
- Parliament of New Zealand
- Billiton Holdings Pty Ltd - Australia
- Mercator Lines Limited - India
- Krishnapatnam Port Company Ltd. - India
- Ceylon Electricity Board - Sri Lanka
- Essar Steel Hazira Ltd - India
- White Energy Company Limited
- Orica Australia Pty. Ltd.
- Samtan Co., Ltd - South Korea
- Kobexindo Tractors - Indoneisa
- Vedanta Resources Plc - India
- Georgia Ports Authority, United States
- Manunggal Multi Energi - Indonesia
- Marubeni Corporation - India
- Standard Chartered Bank - UAE
- Kapuas Tunggal Persada - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Chettinad Cement Corporation Ltd - India
- SMC Global Power, Philippines
- Orica Mining Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- Mercuria Energy - Indonesia
- Posco Energy - South Korea
- Larsen & Toubro Limited - India
- OPG Power Generation Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Indika Energy - Indonesia
- CNBM International Corporation - China
- Renaissance Capital - South Africa
- London Commodity Brokers - England
- Directorate Of Revenue Intelligence - India
- Thai Mozambique Logistica
- Tamil Nadu electricity Board
- AsiaOL BioFuels Corp., Philippines
- Eastern Energy - Thailand
- VISA Power Limited - India
- Attock Cement Pakistan Limited
- Therma Luzon, Inc, Philippines
- Merrill Lynch Commodities Europe
- Commonwealth Bank - Australia
- Kohat Cement Company Ltd. - Pakistan
- Riau Bara Harum - Indonesia
- Binh Thuan Hamico - Vietnam
- Sree Jayajothi Cements Limited - India
- Energy Link Ltd, New Zealand
- LBH Netherlands Bv - Netherlands
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