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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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Sunday, 03 November 13
H2' 2014 INDONESIAN COAL PRICE ( SWAPS) SHOWS POSITIVE TREND
COALspot.com – Sub-Bit Indonesia coal swap (FOB ) for average Q1’2014 delivery gained 0.24 percept week on week on Friday 1 ...
Sunday, 03 November 13
THE CAPE SIZE INDEX FELL 13.61 PCT W-W
COALspot.com: The freight market continued to soften on the cape and panamax sectors , however the supramax and handy size remained fairly firm.
...
Saturday, 02 November 13
DRY BULK SHIPPERS AREN'T CELEBRATING, BUT THEIR SILENCE IS GOLDEN - MARKET REALIST
In October, performance for major dry bulk shipping companies was mixed. Companies like DryShips Inc. (DRYS) had pulled back more than Diana Shippin ...
Friday, 01 November 13
US'S COAL PRODUCTION UP 0.9 PERCENT W-W
COALspot.com – United States the world’s second largest coal producer, produced approximately 19.3 million short tons (mmst) of coal in ...
Friday, 01 November 13
DRY BULK MARKET IN FIRST POSITIVE SIGN IN DAYS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Owners of dry bulk carriers are well aware of the rollercoaster ride that has been the market for their vessels over the past few years. This trend ...
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- Binh Thuan Hamico - Vietnam
- Global Green Power PLC Corporation, Philippines
- Chamber of Mines of South Africa
- Videocon Industries ltd - India
- Bhoruka Overseas - Indonesia
- The University of Queensland
- Riau Bara Harum - Indonesia
- Ministry of Finance - Indonesia
- Thiess Contractors Indonesia
- Straits Asia Resources Limited - Singapore
- Iligan Light & Power Inc, Philippines
- Parry Sugars Refinery, India
- Metalloyd Limited - United Kingdom
- Mercator Lines Limited - India
- Ceylon Electricity Board - Sri Lanka
- Indonesian Coal Mining Association
- Gujarat Mineral Development Corp Ltd - India
- Jaiprakash Power Ventures ltd
- Cigading International Bulk Terminal - Indonesia
- Siam City Cement PLC, Thailand
- Indo Tambangraya Megah - Indonesia
- McConnell Dowell - Australia
- Africa Commodities Group - South Africa
- Savvy Resources Ltd - HongKong
- Simpson Spence & Young - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Port Waratah Coal Services - Australia
- Global Coal Blending Company Limited - Australia
- Directorate General of MIneral and Coal - Indonesia
- Pendopo Energi Batubara - Indonesia
- Manunggal Multi Energi - Indonesia
- Kepco SPC Power Corporation, Philippines
- Agrawal Coal Company - India
- GVK Power & Infra Limited - India
- White Energy Company Limited
- Marubeni Corporation - India
- Bayan Resources Tbk. - Indonesia
- Mintek Dendrill Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Billiton Holdings Pty Ltd - Australia
- IHS Mccloskey Coal Group - USA
- Tamil Nadu electricity Board
- Mercuria Energy - Indonesia
- Semirara Mining Corp, Philippines
- Coal and Oil Company - UAE
- Kideco Jaya Agung - Indonesia
- Maheswari Brothers Coal Limited - India
- Attock Cement Pakistan Limited
- Siam City Cement - Thailand
- Borneo Indobara - Indonesia
- CNBM International Corporation - China
- VISA Power Limited - India
- Vedanta Resources Plc - India
- Orica Mining Services - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- PNOC Exploration Corporation - Philippines
- Planning Commission, India
- India Bulls Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Vizag Seaport Private Limited - India
- Rio Tinto Coal - Australia
- Sakthi Sugars Limited - India
- Economic Council, Georgia
- AsiaOL BioFuels Corp., Philippines
- Commonwealth Bank - Australia
- SN Aboitiz Power Inc, Philippines
- Petron Corporation, Philippines
- Medco Energi Mining Internasional
- Samtan Co., Ltd - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Malabar Cements Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Directorate Of Revenue Intelligence - India
- Parliament of New Zealand
- Alfred C Toepfer International GmbH - Germany
- Singapore Mercantile Exchange
- Wood Mackenzie - Singapore
- The State Trading Corporation of India Ltd
- Indika Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- ASAPP Information Group - India
- Coastal Gujarat Power Limited - India
- Holcim Trading Pte Ltd - Singapore
- Ministry of Transport, Egypt
- Formosa Plastics Group - Taiwan
- Sarangani Energy Corporation, Philippines
- Uttam Galva Steels Limited - India
- Gujarat Sidhee Cement - India
- London Commodity Brokers - England
- Jindal Steel & Power Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Interocean Group of Companies - India
- Mjunction Services Limited - India
- Deloitte Consulting - India
- Ambuja Cements Ltd - India
- Electricity Authority, New Zealand
- Trasteel International SA, Italy
- Indian Oil Corporation Limited
- Bharathi Cement Corporation - India
- Sojitz Corporation - Japan
- Bhatia International Limited - India
- Toyota Tsusho Corporation, Japan
- LBH Netherlands Bv - Netherlands
- Kohat Cement Company Ltd. - Pakistan
- Rashtriya Ispat Nigam Limited - India
- Kartika Selabumi Mining - Indonesia
- Romanian Commodities Exchange
- Sindya Power Generating Company Private Ltd
- TNB Fuel Sdn Bhd - Malaysia
- San Jose City I Power Corp, Philippines
- Ministry of Mines - Canada
- SMG Consultants - Indonesia
- Bukit Makmur.PT - Indonesia
- Eastern Energy - Thailand
- Thai Mozambique Logistica
- Independent Power Producers Association of India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Carbofer General Trading SA - India
- Ind-Barath Power Infra Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Wilmar Investment Holdings
- Lanco Infratech Ltd - India
- ICICI Bank Limited - India
- Latin American Coal - Colombia
- Leighton Contractors Pty Ltd - Australia
- Barasentosa Lestari - Indonesia
- New Zealand Coal & Carbon
- The Treasury - Australian Government
- Renaissance Capital - South Africa
- Aboitiz Power Corporation - Philippines
- Central Java Power - Indonesia
- Bhushan Steel Limited - India
- Makarim & Taira - Indonesia
- Karaikal Port Pvt Ltd - India
- Grasim Industreis Ltd - India
- Central Electricity Authority - India
- Price Waterhouse Coopers - Russia
- Xindia Steels Limited - India
- Edison Trading Spa - Italy
- Power Finance Corporation Ltd., India
- CIMB Investment Bank - Malaysia
- Larsen & Toubro Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bulk Trading Sa - Switzerland
- Therma Luzon, Inc, Philippines
- Altura Mining Limited, Indonesia
- SMC Global Power, Philippines
- TeaM Sual Corporation - Philippines
- Energy Development Corp, Philippines
- GMR Energy Limited - India
- Orica Australia Pty. Ltd.
- Kumho Petrochemical, South Korea
- Goldman Sachs - Singapore
- Cement Manufacturers Association - India
- Madhucon Powers Ltd - India
- Essar Steel Hazira Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Star Paper Mills Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Bahari Cakrawala Sebuku - Indonesia
- Posco Energy - South Korea
- Indian Energy Exchange, India
- Eastern Coal Council - USA
- Jorong Barutama Greston.PT - Indonesia
- Salva Resources Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Intertek Mineral Services - Indonesia
- International Coal Ventures Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Coalindo Energy - Indonesia
- Australian Coal Association
- Aditya Birla Group - India
- Minerals Council of Australia
- Asmin Koalindo Tuhup - Indonesia
- Global Business Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- South Luzon Thermal Energy Corporation
- PowerSource Philippines DevCo
- Meenaskhi Energy Private Limited - India
- Semirara Mining and Power Corporation, Philippines
- MS Steel International - UAE
- IEA Clean Coal Centre - UK
- Dalmia Cement Bharat India
- Kobexindo Tractors - Indoneisa
- Antam Resourcindo - Indonesia
- Globalindo Alam Lestari - Indonesia
- Tata Chemicals Ltd - India
- Standard Chartered Bank - UAE
- Miang Besar Coal Terminal - Indonesia
- Baramulti Group, Indonesia
- OPG Power Generation Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Georgia Ports Authority, United States
- Meralco Power Generation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Australian Commodity Traders Exchange
- Merrill Lynch Commodities Europe
- Chettinad Cement Corporation Ltd - India
- Oldendorff Carriers - Singapore
- Heidelberg Cement - Germany
- Indogreen Group - Indonesia
- Bukit Baiduri Energy - Indonesia
- PTC India Limited - India
- Timah Investasi Mineral - Indoneisa
- Kaltim Prima Coal - Indonesia
- Anglo American - United Kingdom
- Banpu Public Company Limited - Thailand
- European Bulk Services B.V. - Netherlands
- GAC Shipping (India) Pvt Ltd
- Sical Logistics Limited - India
- Electricity Generating Authority of Thailand
- Energy Link Ltd, New Zealand
- Bangladesh Power Developement Board
- Maharashtra Electricity Regulatory Commission - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
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