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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, 22 November 13
DRY BULK MARKET STILL LACKLUSTRE, DESPITE PROJECTIONS OF A NEW RALLY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
We might still be about six weeks far from the end of the year, but the projected by many analysts upcoming rally of the dry bulk market, hasn't ye ...
Friday, 22 November 13
US COAL PRODUCTION DOWN 1.3% W-W
COALspot.com – United States the world’s second largest coal producer, produced approximately 19.5 million short tons (mmst) of coal in ...
Thursday, 21 November 13
TAIPOWER TO PROCURE 750K MT OF 5500 GAR BITUMINOUS COAL FOR MAY - AUGUST 2014
COALspot.com: Taiwan Power Company intends to procure 750,000 metric tons of bituminous coal with calorific value not lesser than 5,500 kcal/kg on a ...
Thursday, 21 November 13
CAPESIZE : THE DOWNWARD TREND HAS TURNED INTO NOTABLE SPOT AND PERIOD IMPROVEMENT - FEARNLEYS
Handy
The Atlantic market experienced a general rate increase for most trades this week. More cargoes in the market and chrts looking for prompt t ...
Wednesday, 20 November 13
PANAMAX MARKET RESUMED ITS NEGATIVE MOVEMENT FOR A SECOND WEEK IN A ROW - INTERMODAL
COALspot.com: The recovery noted the week prior in the dry Bulk market proved to be short-lived, as the BDI slipped back down to the low 1,500 point ...
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- Bangladesh Power Developement Board
- Neyveli Lignite Corporation Ltd, - India
- Kobexindo Tractors - Indoneisa
- Ceylon Electricity Board - Sri Lanka
- Standard Chartered Bank - UAE
- Gujarat Electricity Regulatory Commission - India
- Lanco Infratech Ltd - India
- Wood Mackenzie - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Vizag Seaport Private Limited - India
- Manunggal Multi Energi - Indonesia
- Thai Mozambique Logistica
- Sree Jayajothi Cements Limited - India
- Malabar Cements Ltd - India
- Power Finance Corporation Ltd., India
- New Zealand Coal & Carbon
- Renaissance Capital - South Africa
- Ministry of Mines - Canada
- Petron Corporation, Philippines
- Rio Tinto Coal - Australia
- Ind-Barath Power Infra Limited - India
- GVK Power & Infra Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Eastern Coal Council - USA
- Central Electricity Authority - India
- Indo Tambangraya Megah - Indonesia
- Binh Thuan Hamico - Vietnam
- Electricity Generating Authority of Thailand
- Jindal Steel & Power Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Toyota Tsusho Corporation, Japan
- Energy Development Corp, Philippines
- Indogreen Group - Indonesia
- Madhucon Powers Ltd - India
- Formosa Plastics Group - Taiwan
- Cement Manufacturers Association - India
- SN Aboitiz Power Inc, Philippines
- SMC Global Power, Philippines
- Price Waterhouse Coopers - Russia
- OPG Power Generation Pvt Ltd - India
- Siam City Cement - Thailand
- Bukit Baiduri Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Gujarat Sidhee Cement - India
- Global Coal Blending Company Limited - Australia
- Ministry of Finance - Indonesia
- The State Trading Corporation of India Ltd
- VISA Power Limited - India
- Coastal Gujarat Power Limited - India
- Metalloyd Limited - United Kingdom
- Global Green Power PLC Corporation, Philippines
- Bhatia International Limited - India
- Riau Bara Harum - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Tata Chemicals Ltd - India
- Sindya Power Generating Company Private Ltd
- McConnell Dowell - Australia
- Bhoruka Overseas - Indonesia
- Central Java Power - Indonesia
- Parliament of New Zealand
- Globalindo Alam Lestari - Indonesia
- PNOC Exploration Corporation - Philippines
- Sinarmas Energy and Mining - Indonesia
- Planning Commission, India
- Bharathi Cement Corporation - India
- Tamil Nadu electricity Board
- Attock Cement Pakistan Limited
- Mercuria Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- International Coal Ventures Pvt Ltd - India
- Ambuja Cements Ltd - India
- Savvy Resources Ltd - HongKong
- Karaikal Port Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Goldman Sachs - Singapore
- Therma Luzon, Inc, Philippines
- Posco Energy - South Korea
- Jorong Barutama Greston.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Grasim Industreis Ltd - India
- Mercator Lines Limited - India
- Kalimantan Lumbung Energi - Indonesia
- PTC India Limited - India
- Coalindo Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- CIMB Investment Bank - Malaysia
- Orica Mining Services - Indonesia
- Coal and Oil Company - UAE
- ASAPP Information Group - India
- Maharashtra Electricity Regulatory Commission - India
- London Commodity Brokers - England
- The University of Queensland
- Romanian Commodities Exchange
- Jaiprakash Power Ventures ltd
- Sical Logistics Limited - India
- Sojitz Corporation - Japan
- Barasentosa Lestari - Indonesia
- Meenaskhi Energy Private Limited - India
- Africa Commodities Group - South Africa
- Salva Resources Pvt Ltd - India
- CNBM International Corporation - China
- IHS Mccloskey Coal Group - USA
- Australian Commodity Traders Exchange
- Bukit Makmur.PT - Indonesia
- Kideco Jaya Agung - Indonesia
- Directorate Of Revenue Intelligence - India
- Uttam Galva Steels Limited - India
- Interocean Group of Companies - India
- Semirara Mining Corp, Philippines
- Meralco Power Generation, Philippines
- ICICI Bank Limited - India
- Baramulti Group, Indonesia
- Dalmia Cement Bharat India
- Agrawal Coal Company - India
- Chettinad Cement Corporation Ltd - India
- Intertek Mineral Services - Indonesia
- Latin American Coal - Colombia
- Singapore Mercantile Exchange
- Star Paper Mills Limited - India
- Makarim & Taira - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- European Bulk Services B.V. - Netherlands
- Marubeni Corporation - India
- Sakthi Sugars Limited - India
- Trasteel International SA, Italy
- Independent Power Producers Association of India
- Karbindo Abesyapradhi - Indoneisa
- Iligan Light & Power Inc, Philippines
- Energy Link Ltd, New Zealand
- Oldendorff Carriers - Singapore
- Mintek Dendrill Indonesia
- Eastern Energy - Thailand
- Cigading International Bulk Terminal - Indonesia
- Aboitiz Power Corporation - Philippines
- Deloitte Consulting - India
- Maheswari Brothers Coal Limited - India
- San Jose City I Power Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Thiess Contractors Indonesia
- GAC Shipping (India) Pvt Ltd
- Asmin Koalindo Tuhup - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- MS Steel International - UAE
- Bhushan Steel Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Kepco SPC Power Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- LBH Netherlands Bv - Netherlands
- Wilmar Investment Holdings
- Samtan Co., Ltd - South Korea
- Leighton Contractors Pty Ltd - Australia
- Timah Investasi Mineral - Indoneisa
- Antam Resourcindo - Indonesia
- Essar Steel Hazira Ltd - India
- Australian Coal Association
- PowerSource Philippines DevCo
- IEA Clean Coal Centre - UK
- Georgia Ports Authority, United States
- Vijayanagar Sugar Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Carbofer General Trading SA - India
- Indika Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Global Business Power Corporation, Philippines
- Mjunction Services Limited - India
- TeaM Sual Corporation - Philippines
- Kumho Petrochemical, South Korea
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Heidelberg Cement - Germany
- SMG Consultants - Indonesia
- Kaltim Prima Coal - Indonesia
- Indian Energy Exchange, India
- Port Waratah Coal Services - Australia
- Xindia Steels Limited - India
- India Bulls Power Limited - India
- Borneo Indobara - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Simpson Spence & Young - Indonesia
- South Luzon Thermal Energy Corporation
- Minerals Council of Australia
- Indonesian Coal Mining Association
- Bulk Trading Sa - Switzerland
- Gujarat Mineral Development Corp Ltd - India
- The Treasury - Australian Government
- White Energy Company Limited
- Rashtriya Ispat Nigam Limited - India
- Anglo American - United Kingdom
- Electricity Authority, New Zealand
- Ministry of Transport, Egypt
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Commonwealth Bank - Australia
- Banpu Public Company Limited - Thailand
- Sarangani Energy Corporation, Philippines
- Altura Mining Limited, Indonesia
- Chamber of Mines of South Africa
- Edison Trading Spa - Italy
- Vedanta Resources Plc - India
- Miang Besar Coal Terminal - Indonesia
- Medco Energi Mining Internasional
- GMR Energy Limited - India
- Larsen & Toubro Limited - India
- Straits Asia Resources Limited - Singapore
- Krishnapatnam Port Company Ltd. - India
- Kartika Selabumi Mining - Indonesia
- Indian Oil Corporation Limited
- Siam City Cement PLC, Thailand
- Parry Sugars Refinery, India
- PetroVietnam Power Coal Import and Supply Company
- Orica Australia Pty. Ltd.
- Aditya Birla Group - India
- Economic Council, Georgia
- Videocon Industries ltd - India
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