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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, 08 November 13
DRY BULK MARKET BOUNCES BACK ON RENEWED DEMAND - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market staged a mild comeback this week, as the industry's benchmark, the Baltic Dry Index (BDI) inched forward step by step and bit b ...
Friday, 08 November 13
US'S OCTOBER COAL PRODUCTION INCREASED BY 1.78% M-M - EIA
COALspot.com – United States the world’s second largest coal producer, produced approximately 19.3 million short tons (mmst) of coal in ...
Thursday, 07 November 13
FORMOSA PLASTICS SEEKS 80K MT OF 5850 GAR COAL
COALspot.com: Taiwan's Formosa Plastics Group is inviting bids for 80,000 mt of bituminous coal for delivery in Nov - Dec'13 for its Chi ...
Thursday, 07 November 13
INDONESIAN COAL EXPORT VOLUME INCREASED; REVENUE DECREASED
COALspot.com: Indonesia, the 15th largest economy, 4th largest coal producer in the world and world's largest multi grade coal exporter shipp ...
Thursday, 07 November 13
THE ENERGY INDUSTRY'S RISING WATER CHALLENGE - WOOD MACKENZIE
Water poses a variety of business risks for the energy industry, and could play an influential role in shaping the future energy supply mix, accordi ...
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- Global Coal Blending Company Limited - Australia
- Directorate General of MIneral and Coal - Indonesia
- Africa Commodities Group - South Africa
- Borneo Indobara - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Asmin Koalindo Tuhup - Indonesia
- Global Business Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Mjunction Services Limited - India
- SMG Consultants - Indonesia
- Bangladesh Power Developement Board
- PTC India Limited - India
- Bukit Baiduri Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Therma Luzon, Inc, Philippines
- Port Waratah Coal Services - Australia
- Iligan Light & Power Inc, Philippines
- Bhoruka Overseas - Indonesia
- Singapore Mercantile Exchange
- Uttam Galva Steels Limited - India
- Electricity Generating Authority of Thailand
- Orica Australia Pty. Ltd.
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- International Coal Ventures Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Trasteel International SA, Italy
- Kartika Selabumi Mining - Indonesia
- SN Aboitiz Power Inc, Philippines
- Essar Steel Hazira Ltd - India
- Medco Energi Mining Internasional
- Vijayanagar Sugar Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Larsen & Toubro Limited - India
- Baramulti Group, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Marubeni Corporation - India
- Simpson Spence & Young - Indonesia
- Energy Link Ltd, New Zealand
- Jorong Barutama Greston.PT - Indonesia
- Lanco Infratech Ltd - India
- The Treasury - Australian Government
- Indian Energy Exchange, India
- Coastal Gujarat Power Limited - India
- Jaiprakash Power Ventures ltd
- Price Waterhouse Coopers - Russia
- Australian Commodity Traders Exchange
- LBH Netherlands Bv - Netherlands
- IEA Clean Coal Centre - UK
- Sree Jayajothi Cements Limited - India
- Standard Chartered Bank - UAE
- Barasentosa Lestari - Indonesia
- Global Green Power PLC Corporation, Philippines
- London Commodity Brokers - England
- Bhatia International Limited - India
- Bayan Resources Tbk. - Indonesia
- Commonwealth Bank - Australia
- Rio Tinto Coal - Australia
- Formosa Plastics Group - Taiwan
- Holcim Trading Pte Ltd - Singapore
- Interocean Group of Companies - India
- Star Paper Mills Limited - India
- Savvy Resources Ltd - HongKong
- Electricity Authority, New Zealand
- Independent Power Producers Association of India
- Ambuja Cements Ltd - India
- Siam City Cement PLC, Thailand
- Timah Investasi Mineral - Indoneisa
- PNOC Exploration Corporation - Philippines
- Australian Coal Association
- Intertek Mineral Services - Indonesia
- Cement Manufacturers Association - India
- Toyota Tsusho Corporation, Japan
- SMC Global Power, Philippines
- Bulk Trading Sa - Switzerland
- European Bulk Services B.V. - Netherlands
- IHS Mccloskey Coal Group - USA
- Directorate Of Revenue Intelligence - India
- Merrill Lynch Commodities Europe
- Georgia Ports Authority, United States
- Parry Sugars Refinery, India
- Wood Mackenzie - Singapore
- Chamber of Mines of South Africa
- Thai Mozambique Logistica
- Petron Corporation, Philippines
- Tata Chemicals Ltd - India
- Sarangani Energy Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Antam Resourcindo - Indonesia
- Bharathi Cement Corporation - India
- Coal and Oil Company - UAE
- Attock Cement Pakistan Limited
- Agrawal Coal Company - India
- Sakthi Sugars Limited - India
- San Jose City I Power Corp, Philippines
- Planning Commission, India
- McConnell Dowell - Australia
- Kumho Petrochemical, South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- White Energy Company Limited
- Goldman Sachs - Singapore
- Mercator Lines Limited - India
- Minerals Council of Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- CIMB Investment Bank - Malaysia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Heidelberg Cement - Germany
- Aditya Birla Group - India
- Ceylon Electricity Board - Sri Lanka
- Rashtriya Ispat Nigam Limited - India
- GMR Energy Limited - India
- AsiaOL BioFuels Corp., Philippines
- Parliament of New Zealand
- Malabar Cements Ltd - India
- Central Electricity Authority - India
- OPG Power Generation Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Indika Energy - Indonesia
- South Luzon Thermal Energy Corporation
- ICICI Bank Limited - India
- Altura Mining Limited, Indonesia
- Kalimantan Lumbung Energi - Indonesia
- The State Trading Corporation of India Ltd
- Billiton Holdings Pty Ltd - Australia
- GVK Power & Infra Limited - India
- GAC Shipping (India) Pvt Ltd
- Eastern Coal Council - USA
- Bhushan Steel Limited - India
- Videocon Industries ltd - India
- Thiess Contractors Indonesia
- Salva Resources Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- CNBM International Corporation - China
- Ministry of Mines - Canada
- Romanian Commodities Exchange
- PowerSource Philippines DevCo
- Sical Logistics Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- India Bulls Power Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Mintek Dendrill Indonesia
- Jindal Steel & Power Ltd - India
- Riau Bara Harum - Indonesia
- Tamil Nadu electricity Board
- Bukit Makmur.PT - Indonesia
- Renaissance Capital - South Africa
- Pendopo Energi Batubara - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Siam City Cement - Thailand
- Sojitz Corporation - Japan
- Meralco Power Generation, Philippines
- Madhucon Powers Ltd - India
- Ministry of Finance - Indonesia
- VISA Power Limited - India
- Orica Mining Services - Indonesia
- Anglo American - United Kingdom
- Posco Energy - South Korea
- Eastern Energy - Thailand
- Kepco SPC Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- Ind-Barath Power Infra Limited - India
- Dalmia Cement Bharat India
- Xindia Steels Limited - India
- Vedanta Resources Plc - India
- Indo Tambangraya Megah - Indonesia
- Karaikal Port Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- PetroVietnam Power Coal Import and Supply Company
- Globalindo Alam Lestari - Indonesia
- ASAPP Information Group - India
- Indonesian Coal Mining Association
- Manunggal Multi Energi - Indonesia
- Coalindo Energy - Indonesia
- Vizag Seaport Private Limited - India
- Carbofer General Trading SA - India
- Leighton Contractors Pty Ltd - Australia
- Kideco Jaya Agung - Indonesia
- Wilmar Investment Holdings
- Economic Council, Georgia
- Samtan Co., Ltd - South Korea
- Aboitiz Power Corporation - Philippines
- Ministry of Transport, Egypt
- Straits Asia Resources Limited - Singapore
- New Zealand Coal & Carbon
- Oldendorff Carriers - Singapore
- Edison Trading Spa - Italy
- Makarim & Taira - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Grasim Industreis Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Alfred C Toepfer International GmbH - Germany
- Energy Development Corp, Philippines
- Power Finance Corporation Ltd., India
- Sinarmas Energy and Mining - Indonesia
- Meenaskhi Energy Private Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Kohat Cement Company Ltd. - Pakistan
- Karbindo Abesyapradhi - Indoneisa
- Central Java Power - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Gujarat Sidhee Cement - India
- Semirara Mining Corp, Philippines
- Metalloyd Limited - United Kingdom
- The University of Queensland
- Maheswari Brothers Coal Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Bahari Cakrawala Sebuku - Indonesia
- Latin American Coal - Colombia
- Indogreen Group - Indonesia
- Deloitte Consulting - India
- Indian Oil Corporation Limited
- Mercuria Energy - Indonesia
- MS Steel International - UAE
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