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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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Friday, 13 December 13
HARD COAL : VOLUMES POSSIBLY AT RECORD-BREAKING HIGH; PRICES POSSIBLY AT A RECORD-BREAKING LOW - VDKI
Press Release : World Hard Coal Market 2013: volumes possibly at record-breaking high, prices possibly at a record-breaking low. German and UK impor ...
Friday, 13 December 13
DRY BULK SHIPPING TO WITNESS HEALTHY DEMAND MOVING FORWARD - ICS
The Institute of Chartered Shipbrokers Greek Branch organised its 9th Annual Forum at Eugenides Foundation, on Wednesday, 11th of December, with a r ...
Friday, 13 December 13
US PRODUCED APPROXIMATELY 18.4 MILLION SHORT TONS OF COAL W/E 7 DECEMBER 2013
COALspot.com – United States the world’s second largest coal producer, produced approximately 18.4 million short tons (mmst) of coal in ...
Thursday, 12 December 13
DRY BULK MARKET RATES FOR CAPESIZES TO REMAIN VOLATILE SAYS BIMCO
The dry bulk market has reached multi year highs this week, as the BDI is standing at the 2,300-point mark. In its analysis of the market, BIMCO pre ...
Wednesday, 11 December 13
THE INDONESIAN GOVERNMENT IS CONSIDERING SETTING A REGULATION ON THE MINIMUM PURITY TO REGULATE UNPROCESSED ORE BAN
COALspot.com: Energy and Mineral Resources Minister Jero Wacik recently proposed to house those mining (mineral) companies that had shown a commitme ...
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- Interocean Group of Companies - India
- White Energy Company Limited
- The Treasury - Australian Government
- VISA Power Limited - India
- Carbofer General Trading SA - India
- Port Waratah Coal Services - Australia
- Vizag Seaport Private Limited - India
- Bhatia International Limited - India
- Parliament of New Zealand
- Rashtriya Ispat Nigam Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Parry Sugars Refinery, India
- Larsen & Toubro Limited - India
- Power Finance Corporation Ltd., India
- Global Coal Blending Company Limited - Australia
- McConnell Dowell - Australia
- Holcim Trading Pte Ltd - Singapore
- Marubeni Corporation - India
- PetroVietnam Power Coal Import and Supply Company
- Wood Mackenzie - Singapore
- Meenaskhi Energy Private Limited - India
- Ambuja Cements Ltd - India
- Straits Asia Resources Limited - Singapore
- Barasentosa Lestari - Indonesia
- GVK Power & Infra Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Tata Chemicals Ltd - India
- Sree Jayajothi Cements Limited - India
- India Bulls Power Limited - India
- Pendopo Energi Batubara - Indonesia
- Medco Energi Mining Internasional
- IEA Clean Coal Centre - UK
- AsiaOL BioFuels Corp., Philippines
- Metalloyd Limited - United Kingdom
- Australian Coal Association
- Chettinad Cement Corporation Ltd - India
- ASAPP Information Group - India
- Ministry of Mines - Canada
- PTC India Limited - India
- Ind-Barath Power Infra Limited - India
- Anglo American - United Kingdom
- London Commodity Brokers - England
- Jaiprakash Power Ventures ltd
- Standard Chartered Bank - UAE
- Global Green Power PLC Corporation, Philippines
- CNBM International Corporation - China
- Karaikal Port Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Coastal Gujarat Power Limited - India
- Baramulti Group, Indonesia
- Sarangani Energy Corporation, Philippines
- Global Business Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Independent Power Producers Association of India
- Vedanta Resources Plc - India
- Coalindo Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
- Semirara Mining Corp, Philippines
- International Coal Ventures Pvt Ltd - India
- Deloitte Consulting - India
- The State Trading Corporation of India Ltd
- Karbindo Abesyapradhi - Indoneisa
- Formosa Plastics Group - Taiwan
- Cement Manufacturers Association - India
- Minerals Council of Australia
- Semirara Mining and Power Corporation, Philippines
- Uttam Galva Steels Limited - India
- Maheswari Brothers Coal Limited - India
- Mintek Dendrill Indonesia
- Banpu Public Company Limited - Thailand
- Borneo Indobara - Indonesia
- Commonwealth Bank - Australia
- Petron Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Electricity Generating Authority of Thailand
- Eastern Energy - Thailand
- Central Electricity Authority - India
- Directorate Of Revenue Intelligence - India
- Petrochimia International Co. Ltd.- Taiwan
- Xindia Steels Limited - India
- Edison Trading Spa - Italy
- SMG Consultants - Indonesia
- Antam Resourcindo - Indonesia
- Toyota Tsusho Corporation, Japan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Videocon Industries ltd - India
- Renaissance Capital - South Africa
- CIMB Investment Bank - Malaysia
- Billiton Holdings Pty Ltd - Australia
- Therma Luzon, Inc, Philippines
- Trasteel International SA, Italy
- Thai Mozambique Logistica
- Singapore Mercantile Exchange
- Aditya Birla Group - India
- Intertek Mineral Services - Indonesia
- Jindal Steel & Power Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Eastern Coal Council - USA
- Economic Council, Georgia
- Salva Resources Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- The University of Queensland
- Globalindo Alam Lestari - Indonesia
- Ministry of Transport, Egypt
- Indika Energy - Indonesia
- Mercuria Energy - Indonesia
- Grasim Industreis Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Bahari Cakrawala Sebuku - Indonesia
- Sindya Power Generating Company Private Ltd
- Timah Investasi Mineral - Indoneisa
- Indonesian Coal Mining Association
- Electricity Authority, New Zealand
- Bharathi Cement Corporation - India
- Leighton Contractors Pty Ltd - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- PowerSource Philippines DevCo
- TeaM Sual Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Kaltim Prima Coal - Indonesia
- Lanco Infratech Ltd - India
- Indian Energy Exchange, India
- Wilmar Investment Holdings
- Bank of Tokyo Mitsubishi UFJ Ltd
- Orica Mining Services - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Star Paper Mills Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Essar Steel Hazira Ltd - India
- MS Steel International - UAE
- Sical Logistics Limited - India
- Sakthi Sugars Limited - India
- Romanian Commodities Exchange
- Bukit Baiduri Energy - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Gujarat Sidhee Cement - India
- Agrawal Coal Company - India
- ICICI Bank Limited - India
- IHS Mccloskey Coal Group - USA
- Orica Australia Pty. Ltd.
- Simpson Spence & Young - Indonesia
- Madhucon Powers Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Dalmia Cement Bharat India
- Kobexindo Tractors - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Price Waterhouse Coopers - Russia
- Kepco SPC Power Corporation, Philippines
- Bhushan Steel Limited - India
- Australian Commodity Traders Exchange
- European Bulk Services B.V. - Netherlands
- Planning Commission, India
- Binh Thuan Hamico - Vietnam
- Krishnapatnam Port Company Ltd. - India
- Jorong Barutama Greston.PT - Indonesia
- Heidelberg Cement - Germany
- Bangladesh Power Developement Board
- Neyveli Lignite Corporation Ltd, - India
- Oldendorff Carriers - Singapore
- Posco Energy - South Korea
- Bayan Resources Tbk. - Indonesia
- Kartika Selabumi Mining - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Energy Development Corp, Philippines
- LBH Netherlands Bv - Netherlands
- OPG Power Generation Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Siam City Cement - Thailand
- Makarim & Taira - Indonesia
- Meralco Power Generation, Philippines
- Bulk Trading Sa - Switzerland
- South Luzon Thermal Energy Corporation
- Bhoruka Overseas - Indonesia
- Aboitiz Power Corporation - Philippines
- Savvy Resources Ltd - HongKong
- TNB Fuel Sdn Bhd - Malaysia
- SMC Global Power, Philippines
- Iligan Light & Power Inc, Philippines
- Central Java Power - Indonesia
- Riau Bara Harum - Indonesia
- Ministry of Finance - Indonesia
- PNOC Exploration Corporation - Philippines
- Malabar Cements Ltd - India
- Kumho Petrochemical, South Korea
- Sojitz Corporation - Japan
- Miang Besar Coal Terminal - Indonesia
- Thiess Contractors Indonesia
- New Zealand Coal & Carbon
- Indogreen Group - Indonesia
- Goldman Sachs - Singapore
- Tamil Nadu electricity Board
- Latin American Coal - Colombia
- Siam City Cement PLC, Thailand
- GMR Energy Limited - India
- Chamber of Mines of South Africa
- Coal and Oil Company - UAE
- SN Aboitiz Power Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Attock Cement Pakistan Limited
- Africa Commodities Group - South Africa
- Kapuas Tunggal Persada - Indonesia
- Indian Oil Corporation Limited
- Mjunction Services Limited - India
- Energy Link Ltd, New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Mercator Lines Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Georgia Ports Authority, United States
- GN Power Mariveles Coal Plant, Philippines
- Rio Tinto Coal - Australia
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