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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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Wednesday, 01 January 14
COAL & OIL TO SET UP ANOTHER 1,600 MW POWER PLANT IN INDIA - VENKATARAMANI
COALspot.com: Dubai-based Coal & Oil (C&O) Group is planning to make additional investment of around US$ 1.61 billion to set up 1,600 mega w ...
Wednesday, 01 January 14
DRY BULK CARRIER OWNERS ANTICIPATING AN EVEN STRONGER 2014 YEAR - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
To begin with, The Hellenic Shipping News Worldwide team would like to wish you all a Happy and Prosperous 2014! We begin the New Year with our firs ...
Tuesday, 31 December 13
INDONESIA'S COAL PRODUCTION COULD HIT 450 MMT IN 2014 - ICMA
COALspot.com: Indonesia, the fourth largest coal producer and largest coal exporter in the world, to increase coal output in year 2014 instead of th ...
Tuesday, 31 December 13
U.S. COAL PRODUCTION INCREASED WEEK ON WEEK, EIA SAYS
COALspot.com – United States the world’s second largest coal producer, produced approximately 19.5 million short tons (mmst) of coal in ...
Tuesday, 31 December 13
MORE THAN $21 BILLION INVESTED IN SECOND HAND SHIP PURCHASES IN 2013
One thing that was apparent in the sale and purchasing markets during 2013 was the ship owners' larger appetite for vessel acquisitions, as most so ...
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- SMG Consultants - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- TNB Fuel Sdn Bhd - Malaysia
- Power Finance Corporation Ltd., India
- European Bulk Services B.V. - Netherlands
- Star Paper Mills Limited - India
- Independent Power Producers Association of India
- Thai Mozambique Logistica
- PetroVietnam Power Coal Import and Supply Company
- Manunggal Multi Energi - Indonesia
- Minerals Council of Australia
- Bukit Makmur.PT - Indonesia
- Salva Resources Pvt Ltd - India
- Edison Trading Spa - Italy
- Grasim Industreis Ltd - India
- Sindya Power Generating Company Private Ltd
- White Energy Company Limited
- Sakthi Sugars Limited - India
- Coastal Gujarat Power Limited - India
- Therma Luzon, Inc, Philippines
- Posco Energy - South Korea
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Timah Investasi Mineral - Indoneisa
- London Commodity Brokers - England
- Parry Sugars Refinery, India
- New Zealand Coal & Carbon
- Larsen & Toubro Limited - India
- The State Trading Corporation of India Ltd
- LBH Netherlands Bv - Netherlands
- Riau Bara Harum - Indonesia
- Bhushan Steel Limited - India
- Indika Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- Simpson Spence & Young - Indonesia
- Barasentosa Lestari - Indonesia
- Parliament of New Zealand
- Chamber of Mines of South Africa
- Banpu Public Company Limited - Thailand
- SMC Global Power, Philippines
- Tata Chemicals Ltd - India
- Central Electricity Authority - India
- Agrawal Coal Company - India
- Australian Commodity Traders Exchange
- OPG Power Generation Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Georgia Ports Authority, United States
- Vedanta Resources Plc - India
- Altura Mining Limited, Indonesia
- Rashtriya Ispat Nigam Limited - India
- Malabar Cements Ltd - India
- Tamil Nadu electricity Board
- Siam City Cement - Thailand
- GN Power Mariveles Coal Plant, Philippines
- Directorate Of Revenue Intelligence - India
- Aditya Birla Group - India
- Indo Tambangraya Megah - Indonesia
- Kobexindo Tractors - Indoneisa
- Sree Jayajothi Cements Limited - India
- Samtan Co., Ltd - South Korea
- Leighton Contractors Pty Ltd - Australia
- Jindal Steel & Power Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Bayan Resources Tbk. - Indonesia
- Medco Energi Mining Internasional
- Semirara Mining and Power Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Toyota Tsusho Corporation, Japan
- Indonesian Coal Mining Association
- Bulk Trading Sa - Switzerland
- Kapuas Tunggal Persada - Indonesia
- Indogreen Group - Indonesia
- Eastern Energy - Thailand
- Makarim & Taira - Indonesia
- Madhucon Powers Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- IHS Mccloskey Coal Group - USA
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Bhoruka Overseas - Indonesia
- Latin American Coal - Colombia
- Marubeni Corporation - India
- Africa Commodities Group - South Africa
- Orica Mining Services - Indonesia
- Energy Development Corp, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Wood Mackenzie - Singapore
- Electricity Generating Authority of Thailand
- Cigading International Bulk Terminal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Gujarat Sidhee Cement - India
- Binh Thuan Hamico - Vietnam
- Economic Council, Georgia
- Wilmar Investment Holdings
- Semirara Mining Corp, Philippines
- CIMB Investment Bank - Malaysia
- Petron Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Cement Manufacturers Association - India
- PowerSource Philippines DevCo
- Formosa Plastics Group - Taiwan
- Jorong Barutama Greston.PT - Indonesia
- Alfred C Toepfer International GmbH - Germany
- AsiaOL BioFuels Corp., Philippines
- Australian Coal Association
- Thiess Contractors Indonesia
- CNBM International Corporation - China
- Uttam Galva Steels Limited - India
- PTC India Limited - India
- McConnell Dowell - Australia
- Neyveli Lignite Corporation Ltd, - India
- Lanco Infratech Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Mercator Lines Limited - India
- Ind-Barath Power Infra Limited - India
- Holcim Trading Pte Ltd - Singapore
- Sojitz Corporation - Japan
- Bangladesh Power Developement Board
- Jaiprakash Power Ventures ltd
- Carbofer General Trading SA - India
- Miang Besar Coal Terminal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Savvy Resources Ltd - HongKong
- India Bulls Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- VISA Power Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Metalloyd Limited - United Kingdom
- Sical Logistics Limited - India
- Ministry of Transport, Egypt
- Bharathi Cement Corporation - India
- Coal and Oil Company - UAE
- Mintek Dendrill Indonesia
- GVK Power & Infra Limited - India
- Energy Link Ltd, New Zealand
- Baramulti Group, Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- The Treasury - Australian Government
- Bhatia International Limited - India
- Central Java Power - Indonesia
- Videocon Industries ltd - India
- Romanian Commodities Exchange
- Mercuria Energy - Indonesia
- Coalindo Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Dalmia Cement Bharat India
- Antam Resourcindo - Indonesia
- Meralco Power Generation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Price Waterhouse Coopers - Russia
- Globalindo Alam Lestari - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Electricity Authority, New Zealand
- Global Coal Blending Company Limited - Australia
- Goldman Sachs - Singapore
- Indian Energy Exchange, India
- The University of Queensland
- Merrill Lynch Commodities Europe
- Kideco Jaya Agung - Indonesia
- PNOC Exploration Corporation - Philippines
- Singapore Mercantile Exchange
- International Coal Ventures Pvt Ltd - India
- MS Steel International - UAE
- Bukit Baiduri Energy - Indonesia
- ICICI Bank Limited - India
- Krishnapatnam Port Company Ltd. - India
- TeaM Sual Corporation - Philippines
- Standard Chartered Bank - UAE
- Planning Commission, India
- Maharashtra Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- GMR Energy Limited - India
- Karaikal Port Pvt Ltd - India
- Indian Oil Corporation Limited
- Pendopo Energi Batubara - Indonesia
- Anglo American - United Kingdom
- Intertek Mineral Services - Indonesia
- Ambuja Cements Ltd - India
- Mjunction Services Limited - India
- ASAPP Information Group - India
- Attock Cement Pakistan Limited
- Ministry of Mines - Canada
- Meenaskhi Energy Private Limited - India
- Maheswari Brothers Coal Limited - India
- San Jose City I Power Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Oldendorff Carriers - Singapore
- Commonwealth Bank - Australia
- Deloitte Consulting - India
- Eastern Coal Council - USA
- IEA Clean Coal Centre - UK
- Vizag Seaport Private Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chettinad Cement Corporation Ltd - India
- Renaissance Capital - South Africa
- GAC Shipping (India) Pvt Ltd
- SN Aboitiz Power Inc, Philippines
- Interocean Group of Companies - India
- Straits Asia Resources Limited - Singapore
- Siam City Cement PLC, Thailand
- Aboitiz Power Corporation - Philippines
- Rio Tinto Coal - Australia
- Sarangani Energy Corporation, Philippines
- Port Waratah Coal Services - Australia
- Xindia Steels Limited - India
- Ministry of Finance - Indonesia
- Kartika Selabumi Mining - Indonesia
- Borneo Indobara - Indonesia
- Trasteel International SA, Italy
- Heidelberg Cement - Germany
- Global Green Power PLC Corporation, Philippines
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