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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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- Chettinad Cement Corporation Ltd - India
- Ministry of Transport, Egypt
- ASAPP Information Group - India
- Barasentosa Lestari - Indonesia
- ICICI Bank Limited - India
- GN Power Mariveles Coal Plant, Philippines
- SN Aboitiz Power Inc, Philippines
- Australian Commodity Traders Exchange
- London Commodity Brokers - England
- The University of Queensland
- Lanco Infratech Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Directorate General of MIneral and Coal - Indonesia
- Medco Energi Mining Internasional
- South Luzon Thermal Energy Corporation
- Meenaskhi Energy Private Limited - India
- Wilmar Investment Holdings
- VISA Power Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Salva Resources Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- SMC Global Power, Philippines
- Bhoruka Overseas - Indonesia
- Heidelberg Cement - Germany
- Economic Council, Georgia
- Cement Manufacturers Association - India
- Bahari Cakrawala Sebuku - Indonesia
- Meralco Power Generation, Philippines
- Trasteel International SA, Italy
- Deloitte Consulting - India
- Karaikal Port Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Indogreen Group - Indonesia
- TeaM Sual Corporation - Philippines
- Rio Tinto Coal - Australia
- Ambuja Cements Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Miang Besar Coal Terminal - Indonesia
- Kideco Jaya Agung - Indonesia
- Parry Sugars Refinery, India
- Port Waratah Coal Services - Australia
- Thai Mozambique Logistica
- Romanian Commodities Exchange
- The Treasury - Australian Government
- Global Green Power PLC Corporation, Philippines
- Sical Logistics Limited - India
- Samtan Co., Ltd - South Korea
- Bhatia International Limited - India
- Africa Commodities Group - South Africa
- Coal and Oil Company - UAE
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Orica Mining Services - Indonesia
- Rashtriya Ispat Nigam Limited - India
- MS Steel International - UAE
- Indo Tambangraya Megah - Indonesia
- Sindya Power Generating Company Private Ltd
- White Energy Company Limited
- Oldendorff Carriers - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Cigading International Bulk Terminal - Indonesia
- Marubeni Corporation - India
- GMR Energy Limited - India
- Billiton Holdings Pty Ltd - Australia
- Kapuas Tunggal Persada - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Ministry of Mines - Canada
- Vedanta Resources Plc - India
- Riau Bara Harum - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Ind-Barath Power Infra Limited - India
- Energy Link Ltd, New Zealand
- Indika Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Latin American Coal - Colombia
- Ceylon Electricity Board - Sri Lanka
- Mercator Lines Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Petron Corporation, Philippines
- Anglo American - United Kingdom
- Siam City Cement - Thailand
- International Coal Ventures Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Semirara Mining and Power Corporation, Philippines
- Goldman Sachs - Singapore
- Intertek Mineral Services - Indonesia
- Malabar Cements Ltd - India
- Singapore Mercantile Exchange
- CIMB Investment Bank - Malaysia
- GVK Power & Infra Limited - India
- Planning Commission, India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Energy Development Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indian Energy Exchange, India
- Binh Thuan Hamico - Vietnam
- Mintek Dendrill Indonesia
- Directorate Of Revenue Intelligence - India
- Essar Steel Hazira Ltd - India
- Power Finance Corporation Ltd., India
- Tata Chemicals Ltd - India
- Sarangani Energy Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Chamber of Mines of South Africa
- Commonwealth Bank - Australia
- Price Waterhouse Coopers - Russia
- Kepco SPC Power Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Renaissance Capital - South Africa
- Bangladesh Power Developement Board
- Carbofer General Trading SA - India
- Banpu Public Company Limited - Thailand
- Savvy Resources Ltd - HongKong
- Posco Energy - South Korea
- San Jose City I Power Corp, Philippines
- Global Business Power Corporation, Philippines
- Georgia Ports Authority, United States
- Aditya Birla Group - India
- Borneo Indobara - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Xindia Steels Limited - India
- Mercuria Energy - Indonesia
- Ministry of Finance - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- CNBM International Corporation - China
- OPG Power Generation Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Jaiprakash Power Ventures ltd
- Merrill Lynch Commodities Europe
- Global Coal Blending Company Limited - Australia
- Coastal Gujarat Power Limited - India
- Agrawal Coal Company - India
- Siam City Cement PLC, Thailand
- IHS Mccloskey Coal Group - USA
- Altura Mining Limited, Indonesia
- Therma Luzon, Inc, Philippines
- Australian Coal Association
- GAC Shipping (India) Pvt Ltd
- Videocon Industries ltd - India
- PowerSource Philippines DevCo
- Bukit Baiduri Energy - Indonesia
- Interocean Group of Companies - India
- Vizag Seaport Private Limited - India
- Aboitiz Power Corporation - Philippines
- Edison Trading Spa - Italy
- Independent Power Producers Association of India
- Indonesian Coal Mining Association
- Bharathi Cement Corporation - India
- Neyveli Lignite Corporation Ltd, - India
- Bukit Makmur.PT - Indonesia
- Bulk Trading Sa - Switzerland
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kartika Selabumi Mining - Indonesia
- Thiess Contractors Indonesia
- Bayan Resources Tbk. - Indonesia
- Metalloyd Limited - United Kingdom
- Sakthi Sugars Limited - India
- Attock Cement Pakistan Limited
- Sree Jayajothi Cements Limited - India
- Central Electricity Authority - India
- Manunggal Multi Energi - Indonesia
- Wood Mackenzie - Singapore
- SMG Consultants - Indonesia
- Jindal Steel & Power Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Madhucon Powers Ltd - India
- Standard Chartered Bank - UAE
- Gujarat Mineral Development Corp Ltd - India
- PTC India Limited - India
- Star Paper Mills Limited - India
- Gujarat Sidhee Cement - India
- New Zealand Coal & Carbon
- Dalmia Cement Bharat India
- Coalindo Energy - Indonesia
- Tamil Nadu electricity Board
- Minerals Council of Australia
- Sinarmas Energy and Mining - Indonesia
- European Bulk Services B.V. - Netherlands
- Asmin Koalindo Tuhup - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Larsen & Toubro Limited - India
- India Bulls Power Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Mjunction Services Limited - India
- The State Trading Corporation of India Ltd
- IEA Clean Coal Centre - UK
- Indian Oil Corporation Limited
- Simpson Spence & Young - Indonesia
- Bhushan Steel Limited - India
- Timah Investasi Mineral - Indoneisa
- McConnell Dowell - Australia
- Kobexindo Tractors - Indoneisa
- Electricity Generating Authority of Thailand
- Krishnapatnam Port Company Ltd. - India
- Orica Australia Pty. Ltd.
- Semirara Mining Corp, Philippines
- Eastern Energy - Thailand
- Baramulti Group, Indonesia
- Maharashtra Electricity Regulatory Commission - India
- LBH Netherlands Bv - Netherlands
- Makarim & Taira - Indonesia
- Globalindo Alam Lestari - Indonesia
- Electricity Authority, New Zealand
- Antam Resourcindo - Indonesia
- Formosa Plastics Group - Taiwan
- Iligan Light & Power Inc, Philippines
- Eastern Coal Council - USA
- Parliament of New Zealand
- Central Java Power - Indonesia
- Sojitz Corporation - Japan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Uttam Galva Steels Limited - India
- Grasim Industreis Ltd - India
- Toyota Tsusho Corporation, Japan
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