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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, 30 January 14
JPU SETTLEMENT PRICE AS A BENCHMARK WILL DECLINE IN IMPORTANCE BUT REMAIN RELEVANT, SAYS WOOD MACKENZIE
JPU price will remain above spot, trending closer to spot till 2015 then increasing to 2035.
Japanese Power Utilities (JPU) are approaching a cru ...
Thursday, 30 January 14
PANAMAX MARKET IS SOFTENING ON LESS ACTIVITY IN BOTH HEMISPHERES - FEARNRESEARCH
Handy
In the Atlantic rates have been slowly sliding but ows can still achieve decent money for TArv´s. USG positions still being fixed in re ...
Thursday, 30 January 14
TANKER PROFITABILITY IS THE 'MILLION-DOLLAR' QUESTION FOR SHIP OWNERS THIS YEAR - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The tanker market conditions are expected to remain challenging throughout the year for tanker owners, but even more pressing will be the issue of a ...
Tuesday, 28 January 14
GLOBAL COKING AND STEAM COAL PRODUCTION HAVE GROWN 2% TO 3% TO ABOUT 7.1 BILLION TONNES AS OF THE END OF 2013 - VDKI
COALspot.com (Press Release): Initial figures on the world hard coal market at the VDKi ((Association of Coal Importers - German) New Year’s R ...
Tuesday, 28 January 14
AUSTRALIAN NEWCASTLE PORT'S WEEKLY COAL EXPORTS JUMP 13.75% WEEK ON WEEK
COALspot.com: In the week ended 27 January 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled ...
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- Iligan Light & Power Inc, Philippines
- Mjunction Services Limited - India
- Asmin Koalindo Tuhup - Indonesia
- GMR Energy Limited - India
- Indian Energy Exchange, India
- Lanco Infratech Ltd - India
- Kobexindo Tractors - Indoneisa
- Africa Commodities Group - South Africa
- Tamil Nadu electricity Board
- Indika Energy - Indonesia
- Formosa Plastics Group - Taiwan
- Miang Besar Coal Terminal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Australian Coal Association
- Heidelberg Cement - Germany
- Directorate Of Revenue Intelligence - India
- Rashtriya Ispat Nigam Limited - India
- Singapore Mercantile Exchange
- Global Coal Blending Company Limited - Australia
- Coastal Gujarat Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Ministry of Finance - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Coalindo Energy - Indonesia
- Mercuria Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
- PNOC Exploration Corporation - Philippines
- Savvy Resources Ltd - HongKong
- Romanian Commodities Exchange
- Orica Mining Services - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Videocon Industries ltd - India
- Eastern Coal Council - USA
- Ministry of Mines - Canada
- Chamber of Mines of South Africa
- Salva Resources Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Kalimantan Lumbung Energi - Indonesia
- Bukit Baiduri Energy - Indonesia
- Grasim Industreis Ltd - India
- Jindal Steel & Power Ltd - India
- Bhushan Steel Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Thiess Contractors Indonesia
- Kohat Cement Company Ltd. - Pakistan
- New Zealand Coal & Carbon
- Latin American Coal - Colombia
- Medco Energi Mining Internasional
- Gujarat Mineral Development Corp Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Cigading International Bulk Terminal - Indonesia
- Indonesian Coal Mining Association
- Sical Logistics Limited - India
- ASAPP Information Group - India
- Toyota Tsusho Corporation, Japan
- Malabar Cements Ltd - India
- Vedanta Resources Plc - India
- Barasentosa Lestari - Indonesia
- SMG Consultants - Indonesia
- SMC Global Power, Philippines
- Edison Trading Spa - Italy
- Electricity Authority, New Zealand
- Energy Development Corp, Philippines
- Orica Australia Pty. Ltd.
- Bahari Cakrawala Sebuku - Indonesia
- Australian Commodity Traders Exchange
- Meralco Power Generation, Philippines
- Larsen & Toubro Limited - India
- Bharathi Cement Corporation - India
- Independent Power Producers Association of India
- Borneo Indobara - Indonesia
- Antam Resourcindo - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Marubeni Corporation - India
- Eastern Energy - Thailand
- Vizag Seaport Private Limited - India
- European Bulk Services B.V. - Netherlands
- Manunggal Multi Energi - Indonesia
- Petron Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Xindia Steels Limited - India
- Ind-Barath Power Infra Limited - India
- International Coal Ventures Pvt Ltd - India
- Thai Mozambique Logistica
- Makarim & Taira - Indonesia
- Power Finance Corporation Ltd., India
- Kapuas Tunggal Persada - Indonesia
- Samtan Co., Ltd - South Korea
- Indogreen Group - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Chettinad Cement Corporation Ltd - India
- Madhucon Powers Ltd - India
- Uttam Galva Steels Limited - India
- Attock Cement Pakistan Limited
- India Bulls Power Limited - India
- Bhoruka Overseas - Indonesia
- Kumho Petrochemical, South Korea
- Sree Jayajothi Cements Limited - India
- The University of Queensland
- Krishnapatnam Port Company Ltd. - India
- Oldendorff Carriers - Singapore
- Altura Mining Limited, Indonesia
- Bulk Trading Sa - Switzerland
- Jorong Barutama Greston.PT - Indonesia
- White Energy Company Limited
- ICICI Bank Limited - India
- Economic Council, Georgia
- Agrawal Coal Company - India
- Semirara Mining and Power Corporation, Philippines
- Cement Manufacturers Association - India
- Holcim Trading Pte Ltd - Singapore
- OPG Power Generation Pvt Ltd - India
- Trasteel International SA, Italy
- Karbindo Abesyapradhi - Indoneisa
- Essar Steel Hazira Ltd - India
- Bayan Resources Tbk. - Indonesia
- Bangladesh Power Developement Board
- Standard Chartered Bank - UAE
- Siam City Cement PLC, Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Sidhee Cement - India
- Sarangani Energy Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Leighton Contractors Pty Ltd - Australia
- Simpson Spence & Young - Indonesia
- Goldman Sachs - Singapore
- Mintek Dendrill Indonesia
- MS Steel International - UAE
- CNBM International Corporation - China
- Wood Mackenzie - Singapore
- Central Java Power - Indonesia
- Banpu Public Company Limited - Thailand
- Tata Chemicals Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Energy Link Ltd, New Zealand
- Merrill Lynch Commodities Europe
- Kideco Jaya Agung - Indonesia
- Metalloyd Limited - United Kingdom
- Sinarmas Energy and Mining - Indonesia
- Straits Asia Resources Limited - Singapore
- Jaiprakash Power Ventures ltd
- Indian Oil Corporation Limited
- GVK Power & Infra Limited - India
- Bhatia International Limited - India
- South Luzon Thermal Energy Corporation
- PowerSource Philippines DevCo
- Sojitz Corporation - Japan
- Petrochimia International Co. Ltd.- Taiwan
- Minerals Council of Australia
- Parry Sugars Refinery, India
- Deloitte Consulting - India
- Global Green Power PLC Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- LBH Netherlands Bv - Netherlands
- Ambuja Cements Ltd - India
- SN Aboitiz Power Inc, Philippines
- The State Trading Corporation of India Ltd
- Therma Luzon, Inc, Philippines
- Alfred C Toepfer International GmbH - Germany
- Ministry of Transport, Egypt
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Binh Thuan Hamico - Vietnam
- Rio Tinto Coal - Australia
- Electricity Generating Authority of Thailand
- Commonwealth Bank - Australia
- Georgia Ports Authority, United States
- Dalmia Cement Bharat India
- Aditya Birla Group - India
- Intertek Mineral Services - Indonesia
- Port Waratah Coal Services - Australia
- Renaissance Capital - South Africa
- Interocean Group of Companies - India
- TeaM Sual Corporation - Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Riau Bara Harum - Indonesia
- Aboitiz Power Corporation - Philippines
- Anglo American - United Kingdom
- McConnell Dowell - Australia
- Sakthi Sugars Limited - India
- Carbofer General Trading SA - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Central Electricity Authority - India
- Globalindo Alam Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Semirara Mining Corp, Philippines
- Star Paper Mills Limited - India
- Coal and Oil Company - UAE
- TNB Fuel Sdn Bhd - Malaysia
- Planning Commission, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Wilmar Investment Holdings
- IEA Clean Coal Centre - UK
- Price Waterhouse Coopers - Russia
- The Treasury - Australian Government
- Bukit Makmur.PT - Indonesia
- Indo Tambangraya Megah - Indonesia
- Timah Investasi Mineral - Indoneisa
- Siam City Cement - Thailand
- Meenaskhi Energy Private Limited - India
- Parliament of New Zealand
- San Jose City I Power Corp, Philippines
- Kartika Selabumi Mining - Indonesia
- London Commodity Brokers - England
- Sindya Power Generating Company Private Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PTC India Limited - India
- Mercator Lines Limited - India
- Karaikal Port Pvt Ltd - India
- Posco Energy - South Korea
- Kepco SPC Power Corporation, Philippines
- VISA Power Limited - India
- Baramulti Group, Indonesia
- CIMB Investment Bank - Malaysia
- Pendopo Energi Batubara - Indonesia
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