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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, 13 December 13
HARD COAL : VOLUMES POSSIBLY AT RECORD-BREAKING HIGH; PRICES POSSIBLY AT A RECORD-BREAKING LOW - VDKI
Press Release : World Hard Coal Market 2013: volumes possibly at record-breaking high, prices possibly at a record-breaking low. German and UK impor ...
Friday, 13 December 13
DRY BULK SHIPPING TO WITNESS HEALTHY DEMAND MOVING FORWARD - ICS
The Institute of Chartered Shipbrokers Greek Branch organised its 9th Annual Forum at Eugenides Foundation, on Wednesday, 11th of December, with a r ...
Friday, 13 December 13
US PRODUCED APPROXIMATELY 18.4 MILLION SHORT TONS OF COAL W/E 7 DECEMBER 2013
COALspot.com – United States the world’s second largest coal producer, produced approximately 18.4 million short tons (mmst) of coal in ...
Thursday, 12 December 13
DRY BULK MARKET RATES FOR CAPESIZES TO REMAIN VOLATILE SAYS BIMCO
The dry bulk market has reached multi year highs this week, as the BDI is standing at the 2,300-point mark. In its analysis of the market, BIMCO pre ...
Wednesday, 11 December 13
THE INDONESIAN GOVERNMENT IS CONSIDERING SETTING A REGULATION ON THE MINIMUM PURITY TO REGULATE UNPROCESSED ORE BAN
COALspot.com: Energy and Mineral Resources Minister Jero Wacik recently proposed to house those mining (mineral) companies that had shown a commitme ...
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- Australian Coal Association
- Carbofer General Trading SA - India
- India Bulls Power Limited - India
- Eastern Coal Council - USA
- Edison Trading Spa - Italy
- Indogreen Group - Indonesia
- Bulk Trading Sa - Switzerland
- Semirara Mining and Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Antam Resourcindo - Indonesia
- Savvy Resources Ltd - HongKong
- PetroVietnam Power Coal Import and Supply Company
- Bukit Baiduri Energy - Indonesia
- Agrawal Coal Company - India
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Mines - Canada
- Sical Logistics Limited - India
- Videocon Industries ltd - India
- Maheswari Brothers Coal Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Bhushan Steel Limited - India
- Mjunction Services Limited - India
- Sinarmas Energy and Mining - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Intertek Mineral Services - Indonesia
- Georgia Ports Authority, United States
- Maharashtra Electricity Regulatory Commission - India
- OPG Power Generation Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Sindya Power Generating Company Private Ltd
- Gujarat Sidhee Cement - India
- SMC Global Power, Philippines
- Indika Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- Coalindo Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Posco Energy - South Korea
- CIMB Investment Bank - Malaysia
- Central Java Power - Indonesia
- Kumho Petrochemical, South Korea
- Malabar Cements Ltd - India
- Kaltim Prima Coal - Indonesia
- Uttam Galva Steels Limited - India
- Australian Commodity Traders Exchange
- Iligan Light & Power Inc, Philippines
- Planning Commission, India
- Madhucon Powers Ltd - India
- Xindia Steels Limited - India
- White Energy Company Limited
- Orica Australia Pty. Ltd.
- Bhatia International Limited - India
- European Bulk Services B.V. - Netherlands
- Tamil Nadu electricity Board
- Sree Jayajothi Cements Limited - India
- Romanian Commodities Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- Essar Steel Hazira Ltd - India
- Energy Development Corp, Philippines
- Jaiprakash Power Ventures ltd
- South Luzon Thermal Energy Corporation
- Ministry of Finance - Indonesia
- Wilmar Investment Holdings
- ASAPP Information Group - India
- International Coal Ventures Pvt Ltd - India
- Independent Power Producers Association of India
- Makarim & Taira - Indonesia
- Petron Corporation, Philippines
- Lanco Infratech Ltd - India
- Energy Link Ltd, New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Goldman Sachs - Singapore
- Port Waratah Coal Services - Australia
- Pendopo Energi Batubara - Indonesia
- The University of Queensland
- Banpu Public Company Limited - Thailand
- Holcim Trading Pte Ltd - Singapore
- Borneo Indobara - Indonesia
- Semirara Mining Corp, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Grasim Industreis Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- SN Aboitiz Power Inc, Philippines
- GVK Power & Infra Limited - India
- TeaM Sual Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Asia Pacific Energy Resources Ventures Inc, Philippines
- IEA Clean Coal Centre - UK
- Bahari Cakrawala Sebuku - Indonesia
- Medco Energi Mining Internasional
- Trasteel International SA, Italy
- Power Finance Corporation Ltd., India
- SMG Consultants - Indonesia
- Indo Tambangraya Megah - Indonesia
- Aboitiz Power Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Chettinad Cement Corporation Ltd - India
- PTC India Limited - India
- Miang Besar Coal Terminal - Indonesia
- Therma Luzon, Inc, Philippines
- Meralco Power Generation, Philippines
- Ambuja Cements Ltd - India
- Mercuria Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indian Oil Corporation Limited
- Ministry of Transport, Egypt
- Formosa Plastics Group - Taiwan
- Oldendorff Carriers - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- CNBM International Corporation - China
- Price Waterhouse Coopers - Russia
- Economic Council, Georgia
- AsiaOL BioFuels Corp., Philippines
- Rashtriya Ispat Nigam Limited - India
- Central Electricity Authority - India
- GN Power Mariveles Coal Plant, Philippines
- Electricity Generating Authority of Thailand
- Petrochimia International Co. Ltd.- Taiwan
- GAC Shipping (India) Pvt Ltd
- Global Green Power PLC Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Vedanta Resources Plc - India
- Jindal Steel & Power Ltd - India
- Bharathi Cement Corporation - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- New Zealand Coal & Carbon
- McConnell Dowell - Australia
- GMR Energy Limited - India
- Wood Mackenzie - Singapore
- Thai Mozambique Logistica
- ICICI Bank Limited - India
- LBH Netherlands Bv - Netherlands
- Bhoruka Overseas - Indonesia
- Timah Investasi Mineral - Indoneisa
- PowerSource Philippines DevCo
- Pipit Mutiara Jaya. PT, Indonesia
- Heidelberg Cement - Germany
- The Treasury - Australian Government
- Jorong Barutama Greston.PT - Indonesia
- Ind-Barath Power Infra Limited - India
- Vizag Seaport Private Limited - India
- Bayan Resources Tbk. - Indonesia
- Kartika Selabumi Mining - Indonesia
- Marubeni Corporation - India
- Meenaskhi Energy Private Limited - India
- Manunggal Multi Energi - Indonesia
- Karaikal Port Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Parliament of New Zealand
- Indonesian Coal Mining Association
- Interocean Group of Companies - India
- Cement Manufacturers Association - India
- Orica Mining Services - Indonesia
- PNOC Exploration Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Parry Sugars Refinery, India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Deloitte Consulting - India
- Karbindo Abesyapradhi - Indoneisa
- Mercator Lines Limited - India
- Rio Tinto Coal - Australia
- Directorate Of Revenue Intelligence - India
- Simpson Spence & Young - Indonesia
- Baramulti Group, Indonesia
- Toyota Tsusho Corporation, Japan
- Indian Energy Exchange, India
- Coal and Oil Company - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- Singapore Mercantile Exchange
- MS Steel International - UAE
- TNB Fuel Sdn Bhd - Malaysia
- VISA Power Limited - India
- Globalindo Alam Lestari - Indonesia
- Bukit Makmur.PT - Indonesia
- London Commodity Brokers - England
- Latin American Coal - Colombia
- Siam City Cement PLC, Thailand
- Global Coal Blending Company Limited - Australia
- Sojitz Corporation - Japan
- The State Trading Corporation of India Ltd
- Eastern Energy - Thailand
- Dalmia Cement Bharat India
- Metalloyd Limited - United Kingdom
- Gujarat Mineral Development Corp Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Attock Cement Pakistan Limited
- Salva Resources Pvt Ltd - India
- Sakthi Sugars Limited - India
- Siam City Cement - Thailand
- Standard Chartered Bank - UAE
- Chamber of Mines of South Africa
- Cigading International Bulk Terminal - Indonesia
- Larsen & Toubro Limited - India
- Aditya Birla Group - India
- Samtan Co., Ltd - South Korea
- Anglo American - United Kingdom
- Tata Chemicals Ltd - India
- Star Paper Mills Limited - India
- Billiton Holdings Pty Ltd - Australia
- Riau Bara Harum - Indonesia
- Merrill Lynch Commodities Europe
- Africa Commodities Group - South Africa
- Kohat Cement Company Ltd. - Pakistan
- Electricity Authority, New Zealand
- Kobexindo Tractors - Indoneisa
- Renaissance Capital - South Africa
- Straits Asia Resources Limited - Singapore
- Minerals Council of Australia
- Global Business Power Corporation, Philippines
- Bangladesh Power Developement Board
- Mintek Dendrill Indonesia
- Krishnapatnam Port Company Ltd. - India
- Kideco Jaya Agung - Indonesia
- IHS Mccloskey Coal Group - USA
- Commonwealth Bank - Australia
- Thiess Contractors Indonesia
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