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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, 22 December 13
QUIET FREIGHT MARKET DUE TO LONG HOLIDAYS
COALspot.com: The market was soft this week with all indices down. However towards second half of the week the futures on segments was firming up.
...
Friday, 20 December 13
US PRODUCED 2.71% MORE COAL WEEK ON WEEK
COALspot.com – United States the world’s second largest coal producer, produced approximately 18.9 million short tons (mmst) of coal in ...
Friday, 20 December 13
DRY BULK MARKET SLUMPS AHEAD OF HOLIDAY SEASON - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
As has been the case in recent years, the dry bulk market has been on a downward trend ahead of the Holiday Season for a large part of the world. Th ...
Thursday, 19 December 13
SHIPPING CONFIDENCE HITS THREE-YEAR HIGH - MOORE STEPHENS
Overall confidence levels in the shipping industry rose to their highest level for more than three years over the three-month period to November 201 ...
Wednesday, 18 December 13
SNP ACTIVITY IN CHINA SEEMS TO BE SLOWING DOWN - CHRISTOS TRAGEAS
Approaching the end of the year, SnP activity in China seems to be slowing down in comparison to the first half of this quarter, as most Chinese Shi ...
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- Indogreen Group - Indonesia
- Orica Australia Pty. Ltd.
- Star Paper Mills Limited - India
- GVK Power & Infra Limited - India
- Wilmar Investment Holdings
- Bhushan Steel Limited - India
- Trasteel International SA, Italy
- SMG Consultants - Indonesia
- Antam Resourcindo - Indonesia
- Australian Commodity Traders Exchange
- Ambuja Cements Ltd - India
- Rio Tinto Coal - Australia
- Directorate General of MIneral and Coal - Indonesia
- Oldendorff Carriers - Singapore
- Independent Power Producers Association of India
- Bukit Makmur.PT - Indonesia
- Chamber of Mines of South Africa
- Jindal Steel & Power Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Heidelberg Cement - Germany
- Georgia Ports Authority, United States
- ICICI Bank Limited - India
- South Luzon Thermal Energy Corporation
- Directorate Of Revenue Intelligence - India
- Coastal Gujarat Power Limited - India
- Thiess Contractors Indonesia
- Coalindo Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- McConnell Dowell - Australia
- Grasim Industreis Ltd - India
- Barasentosa Lestari - Indonesia
- Central Java Power - Indonesia
- PTC India Limited - India
- Marubeni Corporation - India
- Kaltim Prima Coal - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Iligan Light & Power Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Xindia Steels Limited - India
- Baramulti Group, Indonesia
- Singapore Mercantile Exchange
- Central Electricity Authority - India
- Indian Oil Corporation Limited
- Kepco SPC Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- VISA Power Limited - India
- Videocon Industries ltd - India
- Sojitz Corporation - Japan
- PowerSource Philippines DevCo
- London Commodity Brokers - England
- Siam City Cement PLC, Thailand
- Deloitte Consulting - India
- Semirara Mining and Power Corporation, Philippines
- Bangladesh Power Developement Board
- Commonwealth Bank - Australia
- LBH Netherlands Bv - Netherlands
- Maharashtra Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- GN Power Mariveles Coal Plant, Philippines
- Ind-Barath Power Infra Limited - India
- CIMB Investment Bank - Malaysia
- Orica Mining Services - Indonesia
- Sakthi Sugars Limited - India
- Ceylon Electricity Board - Sri Lanka
- Africa Commodities Group - South Africa
- Malabar Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Straits Asia Resources Limited - Singapore
- The State Trading Corporation of India Ltd
- Lanco Infratech Ltd - India
- Mjunction Services Limited - India
- Miang Besar Coal Terminal - Indonesia
- Economic Council, Georgia
- Cement Manufacturers Association - India
- Sarangani Energy Corporation, Philippines
- Semirara Mining Corp, Philippines
- Salva Resources Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Toyota Tsusho Corporation, Japan
- Simpson Spence & Young - Indonesia
- Ministry of Transport, Egypt
- Borneo Indobara - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- GMR Energy Limited - India
- Attock Cement Pakistan Limited
- Australian Coal Association
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Parry Sugars Refinery, India
- Agrawal Coal Company - India
- Mercator Lines Limited - India
- Makarim & Taira - Indonesia
- Manunggal Multi Energi - Indonesia
- CNBM International Corporation - China
- Vizag Seaport Private Limited - India
- Edison Trading Spa - Italy
- Meenaskhi Energy Private Limited - India
- Holcim Trading Pte Ltd - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- India Bulls Power Limited - India
- Indonesian Coal Mining Association
- TeaM Sual Corporation - Philippines
- Goldman Sachs - Singapore
- San Jose City I Power Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Medco Energi Mining Internasional
- Tamil Nadu electricity Board
- Kobexindo Tractors - Indoneisa
- Meralco Power Generation, Philippines
- IEA Clean Coal Centre - UK
- Siam City Cement - Thailand
- Jaiprakash Power Ventures ltd
- Coal and Oil Company - UAE
- Vijayanagar Sugar Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Therma Luzon, Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Parliament of New Zealand
- Eastern Coal Council - USA
- Mercuria Energy - Indonesia
- Renaissance Capital - South Africa
- The University of Queensland
- Rashtriya Ispat Nigam Limited - India
- Alfred C Toepfer International GmbH - Germany
- Sical Logistics Limited - India
- Wood Mackenzie - Singapore
- Energy Development Corp, Philippines
- Metalloyd Limited - United Kingdom
- International Coal Ventures Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Bayan Resources Tbk. - Indonesia
- Minerals Council of Australia
- Tata Chemicals Ltd - India
- Eastern Energy - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Madhucon Powers Ltd - India
- Planning Commission, India
- Vedanta Resources Plc - India
- Intertek Mineral Services - Indonesia
- Kumho Petrochemical, South Korea
- Bhoruka Overseas - Indonesia
- Bharathi Cement Corporation - India
- Sinarmas Energy and Mining - Indonesia
- Indika Energy - Indonesia
- Uttam Galva Steels Limited - India
- Kapuas Tunggal Persada - Indonesia
- OPG Power Generation Pvt Ltd - India
- Altura Mining Limited, Indonesia
- IHS Mccloskey Coal Group - USA
- Interocean Group of Companies - India
- Petrochimia International Co. Ltd.- Taiwan
- ASAPP Information Group - India
- Indo Tambangraya Megah - Indonesia
- Indian Energy Exchange, India
- Karaikal Port Pvt Ltd - India
- Posco Energy - South Korea
- Carbofer General Trading SA - India
- Ministry of Mines - Canada
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Aditya Birla Group - India
- Petron Corporation, Philippines
- Bhatia International Limited - India
- Pendopo Energi Batubara - Indonesia
- Gujarat Sidhee Cement - India
- SN Aboitiz Power Inc, Philippines
- Anglo American - United Kingdom
- Samtan Co., Ltd - South Korea
- Bukit Asam (Persero) Tbk - Indonesia
- Banpu Public Company Limited - Thailand
- Riau Bara Harum - Indonesia
- Formosa Plastics Group - Taiwan
- Romanian Commodities Exchange
- Dalmia Cement Bharat India
- Thai Mozambique Logistica
- PNOC Exploration Corporation - Philippines
- Electricity Generating Authority of Thailand
- Savvy Resources Ltd - HongKong
- Leighton Contractors Pty Ltd - Australia
- New Zealand Coal & Carbon
- Timah Investasi Mineral - Indoneisa
- The Treasury - Australian Government
- Bukit Baiduri Energy - Indonesia
- Bulk Trading Sa - Switzerland
- Larsen & Toubro Limited - India
- Energy Link Ltd, New Zealand
- Gujarat Electricity Regulatory Commission - India
- Krishnapatnam Port Company Ltd. - India
- Global Coal Blending Company Limited - Australia
- Port Waratah Coal Services - Australia
- Billiton Holdings Pty Ltd - Australia
- Global Business Power Corporation, Philippines
- SMC Global Power, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Chettinad Cement Corporation Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Mintek Dendrill Indonesia
- Maheswari Brothers Coal Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Green Power PLC Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Standard Chartered Bank - UAE
- European Bulk Services B.V. - Netherlands
- Sree Jayajothi Cements Limited - India
- Latin American Coal - Colombia
- Price Waterhouse Coopers - Russia
- MS Steel International - UAE
- Electricity Authority, New Zealand
- White Energy Company Limited
- Asmin Koalindo Tuhup - Indonesia
- GAC Shipping (India) Pvt Ltd
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Finance - Indonesia
- Power Finance Corporation Ltd., India
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