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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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- Rio Tinto Coal - Australia
- Iligan Light & Power Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Central Electricity Authority - India
- Meralco Power Generation, Philippines
- Agrawal Coal Company - India
- Karbindo Abesyapradhi - Indoneisa
- Bhushan Steel Limited - India
- Larsen & Toubro Limited - India
- Energy Development Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Petron Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Borneo Indobara - Indonesia
- Central Java Power - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Aditya Birla Group - India
- Ind-Barath Power Infra Limited - India
- Sojitz Corporation - Japan
- Mintek Dendrill Indonesia
- Bangladesh Power Developement Board
- Wilmar Investment Holdings
- Petrochimia International Co. Ltd.- Taiwan
- Pendopo Energi Batubara - Indonesia
- Romanian Commodities Exchange
- Eastern Energy - Thailand
- Directorate Of Revenue Intelligence - India
- PowerSource Philippines DevCo
- Parliament of New Zealand
- Vizag Seaport Private Limited - India
- Attock Cement Pakistan Limited
- OPG Power Generation Pvt Ltd - India
- Renaissance Capital - South Africa
- Miang Besar Coal Terminal - Indonesia
- Samtan Co., Ltd - South Korea
- IHS Mccloskey Coal Group - USA
- GMR Energy Limited - India
- The University of Queensland
- Antam Resourcindo - Indonesia
- Bukit Baiduri Energy - Indonesia
- Ministry of Finance - Indonesia
- Australian Commodity Traders Exchange
- Gujarat Mineral Development Corp Ltd - India
- Electricity Generating Authority of Thailand
- Bhatia International Limited - India
- Minerals Council of Australia
- The Treasury - Australian Government
- Sarangani Energy Corporation, Philippines
- Orica Australia Pty. Ltd.
- Global Coal Blending Company Limited - Australia
- Altura Mining Limited, Indonesia
- AsiaOL BioFuels Corp., Philippines
- Karaikal Port Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Africa Commodities Group - South Africa
- MS Steel International - UAE
- Dalmia Cement Bharat India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kobexindo Tractors - Indoneisa
- Riau Bara Harum - Indonesia
- European Bulk Services B.V. - Netherlands
- Ministry of Transport, Egypt
- Uttam Galva Steels Limited - India
- Videocon Industries ltd - India
- Ministry of Mines - Canada
- Parry Sugars Refinery, India
- Ceylon Electricity Board - Sri Lanka
- Mjunction Services Limited - India
- Gujarat Sidhee Cement - India
- Krishnapatnam Port Company Ltd. - India
- Intertek Mineral Services - Indonesia
- Thai Mozambique Logistica
- Madhucon Powers Ltd - India
- New Zealand Coal & Carbon
- Holcim Trading Pte Ltd - Singapore
- Bharathi Cement Corporation - India
- Vijayanagar Sugar Pvt Ltd - India
- Tamil Nadu electricity Board
- Coastal Gujarat Power Limited - India
- South Luzon Thermal Energy Corporation
- Xindia Steels Limited - India
- Latin American Coal - Colombia
- Pipit Mutiara Jaya. PT, Indonesia
- Goldman Sachs - Singapore
- Commonwealth Bank - Australia
- Kapuas Tunggal Persada - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indogreen Group - Indonesia
- Ambuja Cements Ltd - India
- Therma Luzon, Inc, Philippines
- Edison Trading Spa - Italy
- Electricity Authority, New Zealand
- Bukit Makmur.PT - Indonesia
- Jaiprakash Power Ventures ltd
- Neyveli Lignite Corporation Ltd, - India
- Barasentosa Lestari - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Anglo American - United Kingdom
- Tata Chemicals Ltd - India
- Deloitte Consulting - India
- Kartika Selabumi Mining - Indonesia
- Thiess Contractors Indonesia
- Indo Tambangraya Megah - Indonesia
- Siam City Cement - Thailand
- Medco Energi Mining Internasional
- Oldendorff Carriers - Singapore
- Essar Steel Hazira Ltd - India
- Baramulti Group, Indonesia
- Gujarat Electricity Regulatory Commission - India
- Savvy Resources Ltd - HongKong
- Sakthi Sugars Limited - India
- San Jose City I Power Corp, Philippines
- Australian Coal Association
- GVK Power & Infra Limited - India
- Makarim & Taira - Indonesia
- PTC India Limited - India
- Simpson Spence & Young - Indonesia
- Siam City Cement PLC, Thailand
- Cigading International Bulk Terminal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Chamber of Mines of South Africa
- White Energy Company Limited
- Cement Manufacturers Association - India
- Toyota Tsusho Corporation, Japan
- Maheswari Brothers Coal Limited - India
- PetroVietnam Power Coal Import and Supply Company
- PNOC Exploration Corporation - Philippines
- TeaM Sual Corporation - Philippines
- Posco Energy - South Korea
- Directorate General of MIneral and Coal - Indonesia
- Standard Chartered Bank - UAE
- Sical Logistics Limited - India
- Billiton Holdings Pty Ltd - Australia
- VISA Power Limited - India
- Planning Commission, India
- Global Green Power PLC Corporation, Philippines
- Marubeni Corporation - India
- Kumho Petrochemical, South Korea
- Vedanta Resources Plc - India
- Bulk Trading Sa - Switzerland
- Coalindo Energy - Indonesia
- Mercator Lines Limited - India
- Heidelberg Cement - Germany
- ASAPP Information Group - India
- Carbofer General Trading SA - India
- Eastern Coal Council - USA
- Aboitiz Power Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Star Paper Mills Limited - India
- Lanco Infratech Ltd - India
- Wood Mackenzie - Singapore
- Orica Mining Services - Indonesia
- Kideco Jaya Agung - Indonesia
- CNBM International Corporation - China
- Binh Thuan Hamico - Vietnam
- Banpu Public Company Limited - Thailand
- Independent Power Producers Association of India
- Energy Link Ltd, New Zealand
- Trasteel International SA, Italy
- Singapore Mercantile Exchange
- Mercuria Energy - Indonesia
- Indonesian Coal Mining Association
- Coal and Oil Company - UAE
- Power Finance Corporation Ltd., India
- Manunggal Multi Energi - Indonesia
- Economic Council, Georgia
- ICICI Bank Limited - India
- Indian Oil Corporation Limited
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Globalindo Alam Lestari - Indonesia
- Interocean Group of Companies - India
- GN Power Mariveles Coal Plant, Philippines
- The State Trading Corporation of India Ltd
- Asmin Koalindo Tuhup - Indonesia
- Jindal Steel & Power Ltd - India
- Price Waterhouse Coopers - Russia
- Indika Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Straits Asia Resources Limited - Singapore
- Grasim Industreis Ltd - India
- Salva Resources Pvt Ltd - India
- London Commodity Brokers - England
- Georgia Ports Authority, United States
- Merrill Lynch Commodities Europe
- IEA Clean Coal Centre - UK
- Bayan Resources Tbk. - Indonesia
- SN Aboitiz Power Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Kepco SPC Power Corporation, Philippines
- Metalloyd Limited - United Kingdom
- International Coal Ventures Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Meenaskhi Energy Private Limited - India
- Formosa Plastics Group - Taiwan
- GAC Shipping (India) Pvt Ltd
- Bhoruka Overseas - Indonesia
- India Bulls Power Limited - India
- Sindya Power Generating Company Private Ltd
- SMG Consultants - Indonesia
- SMC Global Power, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Offshore Bulk Terminal Pte Ltd, Singapore
- McConnell Dowell - Australia
- Chettinad Cement Corporation Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Indian Energy Exchange, India
- Sree Jayajothi Cements Limited - India
- Semirara Mining Corp, Philippines
- Leighton Contractors Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- Malabar Cements Ltd - India
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