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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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Thursday, 09 January 14
CAPESIZE: WEST AUSTRALIA FREIGHT IS NOW DOWN IN THE $8S AND STILL DROPPING - FEARNLEYS
Handy
In the Atlantic we see rates sliding slowly for the start of 2014. Several players cvrd over the holidays and the rate decline was som ...
Thursday, 09 January 14
THE SHIPPING MARKET IN 2013 AND LOOKING FORWARD GLOBAL ECONOMY: STEADY AS SHE GOES UPWARDS - BIMCO
Over the past year, developed economies have gained traction while developing and emerging economies have suffered from slower growth. Despite key e ...
Wednesday, 08 January 14
DRY BULK MARKET PROSPECTS LOOKING BRIGHTER DESPITE SLOW START TO THE NEW YEAR - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Despite the fact that the dry bulk market's benchmark, the BDI has been on a fall since the start of 2014, ending yesterday's session down to 1,87 ...
Wednesday, 08 January 14
AUSTRALIAN NEWCASTLE PORT'S WEEKLY COAL EXPORTS FALL
COALspot.com: In the week ended January 6, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled 3.27 m ...
Wednesday, 08 January 14
THE DRY BULK MARKET HAS LOST SOME OF ITS STEAM THESE PAST COUPLE OF DAYS: INTERMODAL
Chartering (Wet: Softer- / Dry: Softer- )
The Dry Bulk market has lost some of its steam these past couple of days although hires, espe ...
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- Bahari Cakrawala Sebuku - Indonesia
- Port Waratah Coal Services - Australia
- Ambuja Cements Ltd - India
- Independent Power Producers Association of India
- Anglo American - United Kingdom
- Simpson Spence & Young - Indonesia
- Coalindo Energy - Indonesia
- Attock Cement Pakistan Limited
- Eastern Energy - Thailand
- Kalimantan Lumbung Energi - Indonesia
- Grasim Industreis Ltd - India
- Malabar Cements Ltd - India
- Coastal Gujarat Power Limited - India
- Indika Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Cement Manufacturers Association - India
- Maharashtra Electricity Regulatory Commission - India
- Kideco Jaya Agung - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Straits Asia Resources Limited - Singapore
- Kartika Selabumi Mining - Indonesia
- TeaM Sual Corporation - Philippines
- Africa Commodities Group - South Africa
- LBH Netherlands Bv - Netherlands
- Sical Logistics Limited - India
- International Coal Ventures Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Tamil Nadu electricity Board
- White Energy Company Limited
- Central Electricity Authority - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bangladesh Power Developement Board
- Bhushan Steel Limited - India
- Uttam Galva Steels Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Baiduri Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Oldendorff Carriers - Singapore
- Vedanta Resources Plc - India
- Madhucon Powers Ltd - India
- Ministry of Mines - Canada
- Latin American Coal - Colombia
- South Luzon Thermal Energy Corporation
- IEA Clean Coal Centre - UK
- Semirara Mining Corp, Philippines
- PTC India Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Meenaskhi Energy Private Limited - India
- Alfred C Toepfer International GmbH - Germany
- Ministry of Finance - Indonesia
- Makarim & Taira - Indonesia
- European Bulk Services B.V. - Netherlands
- Georgia Ports Authority, United States
- Australian Commodity Traders Exchange
- Tata Chemicals Ltd - India
- Edison Trading Spa - Italy
- Renaissance Capital - South Africa
- Directorate Of Revenue Intelligence - India
- Ministry of Transport, Egypt
- Chamber of Mines of South Africa
- Price Waterhouse Coopers - Russia
- Petron Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- Kumho Petrochemical, South Korea
- Goldman Sachs - Singapore
- Energy Development Corp, Philippines
- Star Paper Mills Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Karaikal Port Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- VISA Power Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Eastern Coal Council - USA
- Semirara Mining and Power Corporation, Philippines
- Trasteel International SA, Italy
- Bukit Asam (Persero) Tbk - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Ind-Barath Power Infra Limited - India
- Medco Energi Mining Internasional
- Gujarat Mineral Development Corp Ltd - India
- Sakthi Sugars Limited - India
- Borneo Indobara - Indonesia
- Videocon Industries ltd - India
- Baramulti Group, Indonesia
- Indian Energy Exchange, India
- Antam Resourcindo - Indonesia
- Salva Resources Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Indogreen Group - Indonesia
- ASAPP Information Group - India
- Indian Oil Corporation Limited
- Indonesian Coal Mining Association
- Carbofer General Trading SA - India
- OPG Power Generation Pvt Ltd - India
- Commonwealth Bank - Australia
- MS Steel International - UAE
- Global Business Power Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Altura Mining Limited, Indonesia
- The Treasury - Australian Government
- Posco Energy - South Korea
- Parliament of New Zealand
- Vizag Seaport Private Limited - India
- Standard Chartered Bank - UAE
- Marubeni Corporation - India
- Pendopo Energi Batubara - Indonesia
- Lanco Infratech Ltd - India
- Iligan Light & Power Inc, Philippines
- Essar Steel Hazira Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Makmur.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Interocean Group of Companies - India
- CNBM International Corporation - China
- Binh Thuan Hamico - Vietnam
- Mjunction Services Limited - India
- Chettinad Cement Corporation Ltd - India
- Thiess Contractors Indonesia
- Aditya Birla Group - India
- New Zealand Coal & Carbon
- Siam City Cement PLC, Thailand
- Central Java Power - Indonesia
- Mercator Lines Limited - India
- SN Aboitiz Power Inc, Philippines
- Gujarat Sidhee Cement - India
- Samtan Co., Ltd - South Korea
- Bhatia International Limited - India
- Karbindo Abesyapradhi - Indoneisa
- PNOC Exploration Corporation - Philippines
- Dalmia Cement Bharat India
- Formosa Plastics Group - Taiwan
- IHS Mccloskey Coal Group - USA
- Orica Australia Pty. Ltd.
- Minerals Council of Australia
- Kapuas Tunggal Persada - Indonesia
- Toyota Tsusho Corporation, Japan
- SMC Global Power, Philippines
- Kobexindo Tractors - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Rio Tinto Coal - Australia
- Meralco Power Generation, Philippines
- Riau Bara Harum - Indonesia
- Wilmar Investment Holdings
- The University of Queensland
- Orica Mining Services - Indonesia
- GVK Power & Infra Limited - India
- Merrill Lynch Commodities Europe
- Xindia Steels Limited - India
- GAC Shipping (India) Pvt Ltd
- Aboitiz Power Corporation - Philippines
- Krishnapatnam Port Company Ltd. - India
- Pipit Mutiara Jaya. PT, Indonesia
- Coal and Oil Company - UAE
- Australian Coal Association
- Deloitte Consulting - India
- London Commodity Brokers - England
- Therma Luzon, Inc, Philippines
- Jindal Steel & Power Ltd - India
- Timah Investasi Mineral - Indoneisa
- GMR Energy Limited - India
- Wood Mackenzie - Singapore
- Bulk Trading Sa - Switzerland
- San Jose City I Power Corp, Philippines
- India Bulls Power Limited - India
- Holcim Trading Pte Ltd - Singapore
- Global Coal Blending Company Limited - Australia
- Miang Besar Coal Terminal - Indonesia
- Singapore Mercantile Exchange
- Manunggal Multi Energi - Indonesia
- Leighton Contractors Pty Ltd - Australia
- SMG Consultants - Indonesia
- McConnell Dowell - Australia
- Siam City Cement - Thailand
- Jaiprakash Power Ventures ltd
- Romanian Commodities Exchange
- Jorong Barutama Greston.PT - Indonesia
- Agrawal Coal Company - India
- Metalloyd Limited - United Kingdom
- Intertek Mineral Services - Indonesia
- Thai Mozambique Logistica
- Rashtriya Ispat Nigam Limited - India
- Power Finance Corporation Ltd., India
- Mercuria Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Barasentosa Lestari - Indonesia
- Larsen & Toubro Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Global Green Power PLC Corporation, Philippines
- Energy Link Ltd, New Zealand
- PowerSource Philippines DevCo
- Globalindo Alam Lestari - Indonesia
- Parry Sugars Refinery, India
- Sarangani Energy Corporation, Philippines
- Electricity Generating Authority of Thailand
- Mintek Dendrill Indonesia
- Heidelberg Cement - Germany
- Kaltim Prima Coal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Electricity Authority, New Zealand
- The State Trading Corporation of India Ltd
- CIMB Investment Bank - Malaysia
- AsiaOL BioFuels Corp., Philippines
- Sojitz Corporation - Japan
- Bhoruka Overseas - Indonesia
- Bharathi Cement Corporation - India
- Maheswari Brothers Coal Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Economic Council, Georgia
- Planning Commission, India
- ICICI Bank Limited - India
- Ceylon Electricity Board - Sri Lanka
- Gujarat Electricity Regulatory Commission - India
- Sree Jayajothi Cements Limited - India
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