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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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Monday, 13 January 14
INDONESIAN ORE BAN TO HAVE LIMITED IMPACT ON CHINESE ALUMINIUM PRODUCERS, FITCH RATINGS SAYS
COALspot.com: Fitch Ratings says today that Indonesia's ban on exports of unprocessed mineral ore will have limited impact on Chinese aluminium pro ...
Sunday, 12 January 14
THE FREIGHT MARKET CONTINUE TO REMAIN WEAK NEXT WEEK - SOLYM CARRIERS
Wish You A very Happy New Year
COALspot.com: The market has dropped quite a lot as expected due to holidays and probably also the effect of ban o ...
Friday, 10 January 14
DECISION ON ORE EXPORT BAN WILL BE MADE TOMORROW: INDUSTRY MINISTER, JG SAYS
Industry Minister M.S. Hidayat dismissed reports on Thursday that the government had made a decision on the matter. “We will only make a decis ...
Friday, 10 January 14
US COAL PRODUCTION UP 5.8% ON WEEK IN WEEK ENDED SATURDAY 4 JANUARY
COALspot.com – United States the world’s second largest coal producer, produced approximately 18.8 million short tons (mmst) of coal in ...
Thursday, 09 January 14
THE INDONESIAN GOVERNMENT EASES ORE EXPORT BAN
COALspot.com: The Indonesian government has finally agreed to ease the ore-export ban just a few days before the Sunday deadline amid protests from ...
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- Bhushan Steel Limited - India
- Videocon Industries ltd - India
- Australian Coal Association
- GVK Power & Infra Limited - India
- Coal and Oil Company - UAE
- South Luzon Thermal Energy Corporation
- Mercator Lines Limited - India
- IHS Mccloskey Coal Group - USA
- Ambuja Cements Ltd - India
- Singapore Mercantile Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- IEA Clean Coal Centre - UK
- Ministry of Mines - Canada
- Madhucon Powers Ltd - India
- Interocean Group of Companies - India
- SN Aboitiz Power Inc, Philippines
- Aditya Birla Group - India
- Minerals Council of Australia
- Globalindo Alam Lestari - Indonesia
- Independent Power Producers Association of India
- Barasentosa Lestari - Indonesia
- Semirara Mining Corp, Philippines
- Latin American Coal - Colombia
- TNB Fuel Sdn Bhd - Malaysia
- Essar Steel Hazira Ltd - India
- Altura Mining Limited, Indonesia
- Grasim Industreis Ltd - India
- Iligan Light & Power Inc, Philippines
- Mjunction Services Limited - India
- Agrawal Coal Company - India
- Sakthi Sugars Limited - India
- CNBM International Corporation - China
- Cement Manufacturers Association - India
- The University of Queensland
- Petron Corporation, Philippines
- Commonwealth Bank - Australia
- Kobexindo Tractors - Indoneisa
- Jaiprakash Power Ventures ltd
- Borneo Indobara - Indonesia
- Electricity Generating Authority of Thailand
- Chettinad Cement Corporation Ltd - India
- Indika Energy - Indonesia
- Parry Sugars Refinery, India
- Deloitte Consulting - India
- Anglo American - United Kingdom
- Jindal Steel & Power Ltd - India
- Heidelberg Cement - Germany
- Uttam Galva Steels Limited - India
- Kumho Petrochemical, South Korea
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Siam City Cement - Thailand
- Coastal Gujarat Power Limited - India
- Coalindo Energy - Indonesia
- Energy Link Ltd, New Zealand
- Alfred C Toepfer International GmbH - Germany
- Miang Besar Coal Terminal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bukit Makmur.PT - Indonesia
- Ministry of Finance - Indonesia
- Energy Development Corp, Philippines
- Wilmar Investment Holdings
- Kartika Selabumi Mining - Indonesia
- Thai Mozambique Logistica
- PTC India Limited - India
- Cigading International Bulk Terminal - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Formosa Plastics Group - Taiwan
- Kideco Jaya Agung - Indonesia
- Mintek Dendrill Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Krishnapatnam Port Company Ltd. - India
- PowerSource Philippines DevCo
- Tata Chemicals Ltd - India
- PNOC Exploration Corporation - Philippines
- Thiess Contractors Indonesia
- Indo Tambangraya Megah - Indonesia
- Vizag Seaport Private Limited - India
- Riau Bara Harum - Indonesia
- Indogreen Group - Indonesia
- Pendopo Energi Batubara - Indonesia
- Electricity Authority, New Zealand
- Gujarat Mineral Development Corp Ltd - India
- Sarangani Energy Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Sree Jayajothi Cements Limited - India
- Meralco Power Generation, Philippines
- Semirara Mining and Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Tamil Nadu electricity Board
- The Treasury - Australian Government
- Maharashtra Electricity Regulatory Commission - India
- Goldman Sachs - Singapore
- Straits Asia Resources Limited - Singapore
- Orica Australia Pty. Ltd.
- New Zealand Coal & Carbon
- Renaissance Capital - South Africa
- Binh Thuan Hamico - Vietnam
- Bhatia International Limited - India
- Karaikal Port Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indian Energy Exchange, India
- Bhoruka Overseas - Indonesia
- Antam Resourcindo - Indonesia
- Bangladesh Power Developement Board
- AsiaOL BioFuels Corp., Philippines
- Parliament of New Zealand
- Salva Resources Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Oldendorff Carriers - Singapore
- Holcim Trading Pte Ltd - Singapore
- Indonesian Coal Mining Association
- Star Paper Mills Limited - India
- Eastern Coal Council - USA
- Kapuas Tunggal Persada - Indonesia
- Sical Logistics Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Rio Tinto Coal - Australia
- Gujarat Sidhee Cement - India
- Ind-Barath Power Infra Limited - India
- Rashtriya Ispat Nigam Limited - India
- Gujarat Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- Orica Mining Services - Indonesia
- Banpu Public Company Limited - Thailand
- India Bulls Power Limited - India
- Global Business Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Mercuria Energy - Indonesia
- Baramulti Group, Indonesia
- Bharathi Cement Corporation - India
- GMR Energy Limited - India
- Central Java Power - Indonesia
- Xindia Steels Limited - India
- Ministry of Transport, Egypt
- Manunggal Multi Energi - Indonesia
- TeaM Sual Corporation - Philippines
- Australian Commodity Traders Exchange
- London Commodity Brokers - England
- Ceylon Electricity Board - Sri Lanka
- Kalimantan Lumbung Energi - Indonesia
- Directorate Of Revenue Intelligence - India
- Sojitz Corporation - Japan
- Indian Oil Corporation Limited
- Dalmia Cement Bharat India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Savvy Resources Ltd - HongKong
- Kaltim Prima Coal - Indonesia
- Standard Chartered Bank - UAE
- International Coal Ventures Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- White Energy Company Limited
- McConnell Dowell - Australia
- Price Waterhouse Coopers - Russia
- SMC Global Power, Philippines
- Bukit Baiduri Energy - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Vedanta Resources Plc - India
- Posco Energy - South Korea
- Karbindo Abesyapradhi - Indoneisa
- Asmin Koalindo Tuhup - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Wood Mackenzie - Singapore
- Carbofer General Trading SA - India
- Aboitiz Power Corporation - Philippines
- Port Waratah Coal Services - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Chamber of Mines of South Africa
- Toyota Tsusho Corporation, Japan
- Meenaskhi Energy Private Limited - India
- Attock Cement Pakistan Limited
- Bank of Tokyo Mitsubishi UFJ Ltd
- Merrill Lynch Commodities Europe
- Economic Council, Georgia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- ASAPP Information Group - India
- Vijayanagar Sugar Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Romanian Commodities Exchange
- Kepco SPC Power Corporation, Philippines
- Georgia Ports Authority, United States
- Bayan Resources Tbk. - Indonesia
- Edison Trading Spa - Italy
- Medco Energi Mining Internasional
- The State Trading Corporation of India Ltd
- Planning Commission, India
- SMG Consultants - Indonesia
- Siam City Cement PLC, Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Eastern Energy - Thailand
- Lanco Infratech Ltd - India
- Global Green Power PLC Corporation, Philippines
- Africa Commodities Group - South Africa
- CIMB Investment Bank - Malaysia
- Simpson Spence & Young - Indonesia
- VISA Power Limited - India
- Global Coal Blending Company Limited - Australia
- ICICI Bank Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Samtan Co., Ltd - South Korea
- GAC Shipping (India) Pvt Ltd
- Power Finance Corporation Ltd., India
- Trasteel International SA, Italy
- Central Electricity Authority - India
- Marubeni Corporation - India
- Makarim & Taira - Indonesia
- MS Steel International - UAE
- Leighton Contractors Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- OPG Power Generation Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Malabar Cements Ltd - India
- European Bulk Services B.V. - Netherlands
- Larsen & Toubro Limited - India
- Intertek Mineral Services - Indonesia
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