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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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Tuesday, 21 January 14
PORT OF NEWCASTLE SHIPPED SLIGHTLY MORE COAL WEEK ON WEEK
COALspot.com: In the week ended 20 January 14, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled 2. ...
Monday, 20 January 14
SUB-BIT INDONESIA COAL SWAP SEEN LOWER IN 2ND HALF OF 2014
COALspot.com – Sub-Bit Indonesia coal swap (FOB) for average Q1’ 14 delivery lost $ 0.78 pmt month on month on Friday 17 January 2014. T ...
Monday, 20 January 14
THE CFR SOUTH CHINA COAL MARKET APPEARS TO HAVE LOST DIRECTION
COALspot.com : API 8 CFR South China Coal swaps for average Q1’ 14 delivery lost 4.25 percept month on month and closed at US$ 79.48 per mt as ...
Sunday, 19 January 14
FREIGHT MARKETS SEE CONTINUED WEAK PERFORMANCE
COALspot.com: The market has continued to soften particularly in the far East/SE Asia sector.
The BDI was down 6 pct week on week, the index was ...
Friday, 17 January 14
US COAL PRODUCTION DOWN WEEK ON WEEK: EIA
COALspot.com – United States the world’s second largest coal producer, produced approximately 18.3 million short tons (mmst) of co ...
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- Latin American Coal - Colombia
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- Agrawal Coal Company - India
- Parliament of New Zealand
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- AsiaOL BioFuels Corp., Philippines
- Indian Energy Exchange, India
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- South Luzon Thermal Energy Corporation
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- Trasteel International SA, Italy
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- ICICI Bank Limited - India
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- Tata Chemicals Ltd - India
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- TNB Fuel Sdn Bhd - Malaysia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Makarim & Taira - Indonesia
- Parry Sugars Refinery, India
- Simpson Spence & Young - Indonesia
- Siam City Cement PLC, Thailand
- Romanian Commodities Exchange
- Kapuas Tunggal Persada - Indonesia
- Eastern Energy - Thailand
- Energy Development Corp, Philippines
- The Treasury - Australian Government
- Thai Mozambique Logistica
- Bhushan Steel Limited - India
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- Bayan Resources Tbk. - Indonesia
- Binh Thuan Hamico - Vietnam
- GMR Energy Limited - India
- Iligan Light & Power Inc, Philippines
- Minerals Council of Australia
- Bukit Makmur.PT - Indonesia
- Tamil Nadu electricity Board
- Economic Council, Georgia
- Aboitiz Power Corporation - Philippines
- Xindia Steels Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bhatia International Limited - India
- Indogreen Group - Indonesia
- The State Trading Corporation of India Ltd
- Ministry of Transport, Egypt
- CIMB Investment Bank - Malaysia
- Maharashtra Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Kideco Jaya Agung - Indonesia
- Heidelberg Cement - Germany
- PowerSource Philippines DevCo
- Marubeni Corporation - India
- GAC Shipping (India) Pvt Ltd
- Grasim Industreis Ltd - India
- Thiess Contractors Indonesia
- Power Finance Corporation Ltd., India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Therma Luzon, Inc, Philippines
- Deloitte Consulting - India
- Port Waratah Coal Services - Australia
- Interocean Group of Companies - India
- Holcim Trading Pte Ltd - Singapore
- Leighton Contractors Pty Ltd - Australia
- India Bulls Power Limited - India
- Mjunction Services Limited - India
- Bulk Trading Sa - Switzerland
- LBH Netherlands Bv - Netherlands
- Antam Resourcindo - Indonesia
- Banpu Public Company Limited - Thailand
- Sojitz Corporation - Japan
- Miang Besar Coal Terminal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- OPG Power Generation Pvt Ltd - India
- Anglo American - United Kingdom
- Directorate General of MIneral and Coal - Indonesia
- Ind-Barath Power Infra Limited - India
- Wilmar Investment Holdings
- Directorate Of Revenue Intelligence - India
- Jaiprakash Power Ventures ltd
- Salva Resources Pvt Ltd - India
- Ministry of Finance - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Kohat Cement Company Ltd. - Pakistan
- Coalindo Energy - Indonesia
- Coal and Oil Company - UAE
- Indika Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- White Energy Company Limited
- Vedanta Resources Plc - India
- Attock Cement Pakistan Limited
- Singapore Mercantile Exchange
- Mintek Dendrill Indonesia
- Orica Australia Pty. Ltd.
- Bangladesh Power Developement Board
- Oldendorff Carriers - Singapore
- Essar Steel Hazira Ltd - India
- Global Green Power PLC Corporation, Philippines
- Carbofer General Trading SA - India
- Chettinad Cement Corporation Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- PTC India Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Medco Energi Mining Internasional
- Orica Mining Services - Indonesia
- Metalloyd Limited - United Kingdom
- Sinarmas Energy and Mining - Indonesia
- Ministry of Mines - Canada
- Karaikal Port Pvt Ltd - India
- Georgia Ports Authority, United States
- ASAPP Information Group - India
- Malabar Cements Ltd - India
- Sical Logistics Limited - India
- Barasentosa Lestari - Indonesia
- Kepco SPC Power Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- New Zealand Coal & Carbon
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Videocon Industries ltd - India
- Coastal Gujarat Power Limited - India
- Electricity Generating Authority of Thailand
- Asmin Koalindo Tuhup - Indonesia
- Maheswari Brothers Coal Limited - India
- Uttam Galva Steels Limited - India
- Savvy Resources Ltd - HongKong
- Neyveli Lignite Corporation Ltd, - India
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- Karbindo Abesyapradhi - Indoneisa
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- San Jose City I Power Corp, Philippines
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- SN Aboitiz Power Inc, Philippines
- MS Steel International - UAE
- SMG Consultants - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rio Tinto Coal - Australia
- Manunggal Multi Energi - Indonesia
- Straits Asia Resources Limited - Singapore
- Altura Mining Limited, Indonesia
- London Commodity Brokers - England
- Renaissance Capital - South Africa
- Sakthi Sugars Limited - India
- IEA Clean Coal Centre - UK
- Gujarat Mineral Development Corp Ltd - India
- Ambuja Cements Ltd - India
- Standard Chartered Bank - UAE
- Ceylon Electricity Board - Sri Lanka
- European Bulk Services B.V. - Netherlands
- Bhoruka Overseas - Indonesia
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- Australian Coal Association
- Riau Bara Harum - Indonesia
- Pendopo Energi Batubara - Indonesia
- Timah Investasi Mineral - Indoneisa
- Star Paper Mills Limited - India
- Kartika Selabumi Mining - Indonesia
- International Coal Ventures Pvt Ltd - India
- Central Electricity Authority - India
- Commonwealth Bank - Australia
- Baramulti Group, Indonesia
- Meenaskhi Energy Private Limited - India
- Aditya Birla Group - India
- Sarangani Energy Corporation, Philippines
- Indian Oil Corporation Limited
- Planning Commission, India
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- Petron Corporation, Philippines
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- Eastern Coal Council - USA
- Alfred C Toepfer International GmbH - Germany
- The University of Queensland
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