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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, 15 January 14
CFR SOUTH CHINA COAL SWAPS FALL BY 6.57% MONTH ON MONTH
COALspot.com : API 8 CFR South China Coal swaps for average Q1’ 14 delivery lost 6.57 percept month on month and closed at US$ 78.90 per mt as ...
Wednesday, 15 January 14
INDONESIAN MINING LAW AVERTS BOP PRESSURE, RISKS REMAIN, FITCH SAYS
The last-minute intervention at the weekend by Indonesia's politicians to avert a significant disruption of mining activity and exports, should lim ...
Wednesday, 15 January 14
Q3 AND Q4 INDONESIAN COAL SWAPS DECLINE MONTH ON MONTH
COALspot.com – Sub-Bit Indonesia coal swap (FOB) for average Q1’ 14 delivery lost $ 1.23 pmt month on month on Friday 10 January 2014. T ...
Wednesday, 15 January 14
PANAMAX: PACIFIC - REMAINED QUIET; ATLANTIC - CONTINUED THEIR RETREAT
COALspot.com: The holiday hangover seems well underway for the Dry Bulk market that saw more ground being lost this past week. The BDI has closed of ...
Tuesday, 14 January 14
AUSTRALIAN NEWCASTLE PORT'S WEEKLY COAL EXPORTS FALL 18.28 %
COALspot.com: In the week ended January 13, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled 2.67 ...
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- OPG Power Generation Pvt Ltd - India
- Heidelberg Cement - Germany
- Romanian Commodities Exchange
- India Bulls Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Central Electricity Authority - India
- Makarim & Taira - Indonesia
- Indian Oil Corporation Limited
- Directorate General of MIneral and Coal - Indonesia
- Thai Mozambique Logistica
- Australian Coal Association
- Kideco Jaya Agung - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Intertek Mineral Services - Indonesia
- Posco Energy - South Korea
- Kobexindo Tractors - Indoneisa
- International Coal Ventures Pvt Ltd - India
- Goldman Sachs - Singapore
- Gujarat Mineral Development Corp Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Renaissance Capital - South Africa
- Central Java Power - Indonesia
- Petron Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Videocon Industries ltd - India
- Ind-Barath Power Infra Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The University of Queensland
- Georgia Ports Authority, United States
- Carbofer General Trading SA - India
- Dalmia Cement Bharat India
- Sakthi Sugars Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- CIMB Investment Bank - Malaysia
- Metalloyd Limited - United Kingdom
- Energy Development Corp, Philippines
- Meenaskhi Energy Private Limited - India
- Parry Sugars Refinery, India
- Interocean Group of Companies - India
- Cigading International Bulk Terminal - Indonesia
- Wood Mackenzie - Singapore
- Power Finance Corporation Ltd., India
- Simpson Spence & Young - Indonesia
- IHS Mccloskey Coal Group - USA
- Chamber of Mines of South Africa
- Orica Australia Pty. Ltd.
- MS Steel International - UAE
- Xindia Steels Limited - India
- Africa Commodities Group - South Africa
- Vedanta Resources Plc - India
- Attock Cement Pakistan Limited
- Kohat Cement Company Ltd. - Pakistan
- Semirara Mining Corp, Philippines
- Parliament of New Zealand
- SMG Consultants - Indonesia
- Vizag Seaport Private Limited - India
- Essar Steel Hazira Ltd - India
- Pendopo Energi Batubara - Indonesia
- Eastern Energy - Thailand
- Meralco Power Generation, Philippines
- Bangladesh Power Developement Board
- Grasim Industreis Ltd - India
- Edison Trading Spa - Italy
- Oldendorff Carriers - Singapore
- Bukit Baiduri Energy - Indonesia
- IEA Clean Coal Centre - UK
- Jindal Steel & Power Ltd - India
- Singapore Mercantile Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Coastal Gujarat Power Limited - India
- Standard Chartered Bank - UAE
- Ambuja Cements Ltd - India
- Lanco Infratech Ltd - India
- Global Green Power PLC Corporation, Philippines
- Larsen & Toubro Limited - India
- Uttam Galva Steels Limited - India
- Leighton Contractors Pty Ltd - Australia
- Latin American Coal - Colombia
- Pipit Mutiara Jaya. PT, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- San Jose City I Power Corp, Philippines
- Indika Energy - Indonesia
- Baramulti Group, Indonesia
- European Bulk Services B.V. - Netherlands
- Marubeni Corporation - India
- Kartika Selabumi Mining - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Bhatia International Limited - India
- GMR Energy Limited - India
- Formosa Plastics Group - Taiwan
- Antam Resourcindo - Indonesia
- Mjunction Services Limited - India
- Mintek Dendrill Indonesia
- Price Waterhouse Coopers - Russia
- Asmin Koalindo Tuhup - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Semirara Mining and Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- The Treasury - Australian Government
- Kepco SPC Power Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Port Waratah Coal Services - Australia
- The State Trading Corporation of India Ltd
- Borneo Indobara - Indonesia
- Deloitte Consulting - India
- Indogreen Group - Indonesia
- Bharathi Cement Corporation - India
- Sindya Power Generating Company Private Ltd
- PowerSource Philippines DevCo
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Alfred C Toepfer International GmbH - Germany
- Bayan Resources Tbk. - Indonesia
- Cement Manufacturers Association - India
- AsiaOL BioFuels Corp., Philippines
- Karaikal Port Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Wilmar Investment Holdings
- SMC Global Power, Philippines
- Miang Besar Coal Terminal - Indonesia
- McConnell Dowell - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Sical Logistics Limited - India
- Commonwealth Bank - Australia
- Iligan Light & Power Inc, Philippines
- Electricity Generating Authority of Thailand
- PNOC Exploration Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sree Jayajothi Cements Limited - India
- Sojitz Corporation - Japan
- Aboitiz Power Corporation - Philippines
- Globalindo Alam Lestari - Indonesia
- Ministry of Transport, Egypt
- Ministry of Mines - Canada
- Gujarat Sidhee Cement - India
- Malabar Cements Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Energy Link Ltd, New Zealand
- Holcim Trading Pte Ltd - Singapore
- Manunggal Multi Energi - Indonesia
- Savvy Resources Ltd - HongKong
- Toyota Tsusho Corporation, Japan
- Thiess Contractors Indonesia
- Trasteel International SA, Italy
- Eastern Coal Council - USA
- LBH Netherlands Bv - Netherlands
- Samtan Co., Ltd - South Korea
- London Commodity Brokers - England
- Madhucon Powers Ltd - India
- White Energy Company Limited
- GVK Power & Infra Limited - India
- PTC India Limited - India
- Mercuria Energy - Indonesia
- Indonesian Coal Mining Association
- Tata Chemicals Ltd - India
- Therma Luzon, Inc, Philippines
- Kumho Petrochemical, South Korea
- Independent Power Producers Association of India
- Tamil Nadu electricity Board
- Planning Commission, India
- Ministry of Finance - Indonesia
- Star Paper Mills Limited - India
- Siam City Cement PLC, Thailand
- CNBM International Corporation - China
- Anglo American - United Kingdom
- Kalimantan Lumbung Energi - Indonesia
- Straits Asia Resources Limited - Singapore
- Orica Mining Services - Indonesia
- Electricity Authority, New Zealand
- Aditya Birla Group - India
- Maharashtra Electricity Regulatory Commission - India
- Rio Tinto Coal - Australia
- Agrawal Coal Company - India
- Bukit Asam (Persero) Tbk - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Petrochimia International Co. Ltd.- Taiwan
- Coalindo Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Altura Mining Limited, Indonesia
- Riau Bara Harum - Indonesia
- Maheswari Brothers Coal Limited - India
- Medco Energi Mining Internasional
- Mercator Lines Limited - India
- Binh Thuan Hamico - Vietnam
- Minerals Council of Australia
- Neyveli Lignite Corporation Ltd, - India
- TeaM Sual Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Economic Council, Georgia
- Barasentosa Lestari - Indonesia
- South Luzon Thermal Energy Corporation
- New Zealand Coal & Carbon
- Siam City Cement - Thailand
- Indian Energy Exchange, India
- Chettinad Cement Corporation Ltd - India
- Bukit Makmur.PT - Indonesia
- VISA Power Limited - India
- Australian Commodity Traders Exchange
- Merrill Lynch Commodities Europe
- Sinarmas Energy and Mining - Indonesia
- GAC Shipping (India) Pvt Ltd
- Krishnapatnam Port Company Ltd. - India
- Banpu Public Company Limited - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Global Business Power Corporation, Philippines
- ICICI Bank Limited - India
- Timah Investasi Mineral - Indoneisa
- ASAPP Information Group - India
- Jorong Barutama Greston.PT - Indonesia
- Directorate Of Revenue Intelligence - India
- Bhushan Steel Limited - India
- Bulk Trading Sa - Switzerland
- Coal and Oil Company - UAE
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