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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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Friday, 17 January 14
DRY BULK MARKET ENDS DECLINE, BOUNCES BACK - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
It's been a rough start to the New Year for the dry bulk market, which was supposed to be on the verge of rallying to new heights this year, on the ...
Friday, 17 January 14
SPOT COAL PRICE TRENDS IN US VARY ACROSS KEY BASINS DURING 2013, SAYS EIA
COALspot.com: Spot steam coal price trends in US varied across key basins in 2013, a latest EIA report says. Compared with 2012, while total coal de ...
Thursday, 16 January 14
PANAMAX : THE GAP BETWEEN SPOT AND PERIOD HAS INCREASED IN BOTH HEMISPHERES - FEARNRESEARCH
Handy
In the Atlantic we have seen rates slowly sliding on lack of enough fresh business. USG/Continent still paying excess 28k and seems on an upw ...
Thursday, 16 January 14
SHIP OWNERS SCRAP 1,119 SHIPS DURING 2013 ON THE BACK OF OVERSUPPLY ISSUES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Scrapping of older vessels is still the best bet that ship owners can make, in order to improve their newer vessels' fortunes, amid an oversupply o ...
Wednesday, 15 January 14
KOREA MIDLAND POWER CO INVITES BIDS FOR 360K MT OF SUB-BITUMINOUS COAL FOR ITS BORYEONG PLANT
COALspot.com : Korea Midland Power Co., Ltd. has invited bids through International open bidding for 360,000 Metric Tons (MT) of sub-bituminous ...
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- IEA Clean Coal Centre - UK
- Jindal Steel & Power Ltd - India
- SMC Global Power, Philippines
- India Bulls Power Limited - India
- The State Trading Corporation of India Ltd
- Bhushan Steel Limited - India
- Parliament of New Zealand
- CIMB Investment Bank - Malaysia
- Miang Besar Coal Terminal - Indonesia
- Toyota Tsusho Corporation, Japan
- AsiaOL BioFuels Corp., Philippines
- Sical Logistics Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Lanco Infratech Ltd - India
- Indogreen Group - Indonesia
- Thai Mozambique Logistica
- Rio Tinto Coal - Australia
- Deloitte Consulting - India
- Electricity Generating Authority of Thailand
- Simpson Spence & Young - Indonesia
- Orica Australia Pty. Ltd.
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mintek Dendrill Indonesia
- Latin American Coal - Colombia
- Uttam Galva Steels Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Minerals Council of Australia
- Xindia Steels Limited - India
- MS Steel International - UAE
- Australian Coal Association
- Meralco Power Generation, Philippines
- Kobexindo Tractors - Indoneisa
- Larsen & Toubro Limited - India
- McConnell Dowell - Australia
- Port Waratah Coal Services - Australia
- Vizag Seaport Private Limited - India
- Trasteel International SA, Italy
- Parry Sugars Refinery, India
- PTC India Limited - India
- Goldman Sachs - Singapore
- Holcim Trading Pte Ltd - Singapore
- Directorate Of Revenue Intelligence - India
- South Luzon Thermal Energy Corporation
- Standard Chartered Bank - UAE
- Orica Mining Services - Indonesia
- Marubeni Corporation - India
- Ceylon Electricity Board - Sri Lanka
- ICICI Bank Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Eastern Energy - Thailand
- Bulk Trading Sa - Switzerland
- Salva Resources Pvt Ltd - India
- Indika Energy - Indonesia
- Sakthi Sugars Limited - India
- Tamil Nadu electricity Board
- Meenaskhi Energy Private Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Grasim Industreis Ltd - India
- Ind-Barath Power Infra Limited - India
- Globalindo Alam Lestari - Indonesia
- Karaikal Port Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Makarim & Taira - Indonesia
- Bayan Resources Tbk. - Indonesia
- Global Green Power PLC Corporation, Philippines
- Samtan Co., Ltd - South Korea
- White Energy Company Limited
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Gujarat Sidhee Cement - India
- SMG Consultants - Indonesia
- PNOC Exploration Corporation - Philippines
- Jaiprakash Power Ventures ltd
- Semirara Mining Corp, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Merrill Lynch Commodities Europe
- Cigading International Bulk Terminal - Indonesia
- Baramulti Group, Indonesia
- Mjunction Services Limited - India
- Bharathi Cement Corporation - India
- Sindya Power Generating Company Private Ltd
- Sinarmas Energy and Mining - Indonesia
- Banpu Public Company Limited - Thailand
- Global Coal Blending Company Limited - Australia
- VISA Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Africa Commodities Group - South Africa
- Attock Cement Pakistan Limited
- ASAPP Information Group - India
- Pendopo Energi Batubara - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Kepco SPC Power Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Formosa Plastics Group - Taiwan
- PetroVietnam Power Coal Import and Supply Company
- Agrawal Coal Company - India
- Siam City Cement - Thailand
- Indian Energy Exchange, India
- Alfred C Toepfer International GmbH - Germany
- Kalimantan Lumbung Energi - Indonesia
- TeaM Sual Corporation - Philippines
- Mercuria Energy - Indonesia
- Borneo Indobara - Indonesia
- Aditya Birla Group - India
- Dalmia Cement Bharat India
- Romanian Commodities Exchange
- LBH Netherlands Bv - Netherlands
- Oldendorff Carriers - Singapore
- Medco Energi Mining Internasional
- The Treasury - Australian Government
- Kumho Petrochemical, South Korea
- Ministry of Transport, Egypt
- SN Aboitiz Power Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Coalindo Energy - Indonesia
- Edison Trading Spa - Italy
- Eastern Coal Council - USA
- Anglo American - United Kingdom
- Power Finance Corporation Ltd., India
- Malabar Cements Ltd - India
- Timah Investasi Mineral - Indoneisa
- Videocon Industries ltd - India
- Renaissance Capital - South Africa
- Aboitiz Power Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Central Electricity Authority - India
- Gujarat Mineral Development Corp Ltd - India
- Coal and Oil Company - UAE
- Semirara Mining and Power Corporation, Philippines
- Ministry of Mines - Canada
- Independent Power Producers Association of India
- Kohat Cement Company Ltd. - Pakistan
- PowerSource Philippines DevCo
- Bank of Tokyo Mitsubishi UFJ Ltd
- Commonwealth Bank - Australia
- Carbofer General Trading SA - India
- Rashtriya Ispat Nigam Limited - India
- Kapuas Tunggal Persada - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Bhoruka Overseas - Indonesia
- Heidelberg Cement - Germany
- Wood Mackenzie - Singapore
- Intertek Mineral Services - Indonesia
- Australian Commodity Traders Exchange
- IHS Mccloskey Coal Group - USA
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Altura Mining Limited, Indonesia
- Chamber of Mines of South Africa
- Electricity Authority, New Zealand
- Tata Chemicals Ltd - India
- Global Business Power Corporation, Philippines
- Metalloyd Limited - United Kingdom
- OPG Power Generation Pvt Ltd - India
- GMR Energy Limited - India
- Bhatia International Limited - India
- San Jose City I Power Corp, Philippines
- New Zealand Coal & Carbon
- GVK Power & Infra Limited - India
- Billiton Holdings Pty Ltd - Australia
- Posco Energy - South Korea
- CNBM International Corporation - China
- GAC Shipping (India) Pvt Ltd
- Riau Bara Harum - Indonesia
- Therma Luzon, Inc, Philippines
- The University of Queensland
- Vedanta Resources Plc - India
- Manunggal Multi Energi - Indonesia
- Bukit Baiduri Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Straits Asia Resources Limited - Singapore
- Economic Council, Georgia
- Chettinad Cement Corporation Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Sarangani Energy Corporation, Philippines
- Cement Manufacturers Association - India
- Bangladesh Power Developement Board
- Bukit Makmur.PT - Indonesia
- Essar Steel Hazira Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- Petrochimia International Co. Ltd.- Taiwan
- Energy Development Corp, Philippines
- Planning Commission, India
- Siam City Cement PLC, Thailand
- Kideco Jaya Agung - Indonesia
- Barasentosa Lestari - Indonesia
- Singapore Mercantile Exchange
- Star Paper Mills Limited - India
- Maheswari Brothers Coal Limited - India
- Madhucon Powers Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Jorong Barutama Greston.PT - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Indian Oil Corporation Limited
- Price Waterhouse Coopers - Russia
- Wilmar Investment Holdings
- GN Power Mariveles Coal Plant, Philippines
- Ambuja Cements Ltd - India
- Ministry of Finance - Indonesia
- Georgia Ports Authority, United States
- Thiess Contractors Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Interocean Group of Companies - India
- Maharashtra Electricity Regulatory Commission - India
- Energy Link Ltd, New Zealand
- Savvy Resources Ltd - HongKong
- Sree Jayajothi Cements Limited - India
- Petron Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mercator Lines Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kaltim Prima Coal - Indonesia
- Binh Thuan Hamico - Vietnam
- Sojitz Corporation - Japan
- Central Java Power - Indonesia
- London Commodity Brokers - England
- Coastal Gujarat Power Limited - India
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