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Saturday, 07 June 14
EVERYTHING CHANGES, AND NOTHING ABIDES - HERACLITUS
 A couple of weeks ago, and while everyone was focusing on the struggling freight market, Russia and China made history by signing a three-decade long gas deal. Gazprom, the world’s largest extractor of natural gas, in which the Russian government holds a majority stake, has agreed to provide China with up to 38 billion cubic meters of natural gas a year starting probably in 2018. This represents more than China’s total pipeline imports throughout 2013 and 1/5 of Russia’s yearly exports. The deal, which is estimated at $400 billion, is the biggest gas contract in Russia’s history and one of the biggest energy deals to ever be reached worldwide and came after a decade of negotiations between the two countries.
The “why now?” was quickly explained as Russia’s effort to retaliate US and EU policy. Amidst sanctions from the US and Europe and the threat of further economic isolation from the West, Russia’s move was seen as an effort to expedite the process of diversifying its gas export markets, as energy represents roughly one third of the country’s GDP. The truth lies somewhere in the middle. The reality is that Gazprom and China National Petroleum Corporation (CNPC) had already agreed to most of the basic terms of the deal back in September 2013, way before tensions in Ukraine mounted. Did Russia push for resolution of those points that were holding up the deal from materializing? The answer would be yes as it probably wanted to send the West a message that sanctions can’t harm its economy that much.
The “what is the significance?” touches upon a few aspects, a couple of which are fairly interesting to look at, even at this early stage of the agreement. The impact on the natural gas market is the first and most obvious one. Once the Russian pipeline becomes active the supply could reach to over 61 billion cbm a year, almost 40% of what Russia exports to the E.U. and therefore a good hedge if Europe diverts its energy sources away from Russian gas. Would China’s appetite be satisfied though?
The Chinese demand for gas is expected to keep growing. Only last year Chinese gas imports via pipe-lines increased by more than 20% and despite the fact that the country is still very much dependant on coal, it is estimated that by 2017, gas will amount for roughly 10% of the domestic energy mix. As gas satisfies around 30% of global energy needs, one can understand the vast opportunities that lie in the Chinese market, should the country reaches these levels going forward. With demand set to grow, this also means that pipeline supplies can only keep satisfying a certain portion of it, rendering LNG imports equally necessary. Therefore the real question here is not whether LNG will still be in the picture for China but at what cost.
The Chinese will pay Russia more or less the price they currently pay for gas from the Turkmenistan pipeline. The cost of importing LNG in China is estimated to be 30% more than that. With China increasing its pipeline imports there will be pressure on the price of LNG in the Asia region, which by next year is set to become the 2nd biggest gas market worldwide. With the Chinese being charged considerably less for Russian natural gas and potentially in the future Russian LNG as well, other LNG heavy importers like Japan and S. Korea will add on to the need for discounts on the LNG price in Asian countries, which are already paying more than what the rest of the world does. China’s preference to natural gas could lead to a point where future or even current LNG projects across Australia, Canada and the U.S.A, partly scheduled to serve the country’s LNG needs, won’t be as lucrative, or in some cases even economically viable, as they were before this deal. After all, the high price of LNG in the region was the reason why so many pricey investments were inked in the first place, with predictions up until recently insisting that China’s demand would continue to primarily be met by LNG.
Another interesting aspect of the deal is that it will be paid in local currencies rather than US Dollars, as Russia is trying to protect itself from possible additional sanctions that will impede monetizing of the deal. At the same time, the Chinese government, being already the biggest holder of US debt, is trying to further distance itself from the US currency that has been losing value following the FED’s pro-longed low interest rate policy. Although per se the impact on the reserve currency doesn’t appear to be great, the reality is that this point of the deal represents another hit on the greenback dominance.
As a matter of fact, for the past few years, the BRICs – Brazil, Russia, India and China - have been taking meaningful steps away from the US currency, continuously challenging its reserve currency status by “snubbing” it in their mutual trading and this is the case here as well. No, the Dollar cannot be that easily dropped, but steps like that are undeniable hits on the market’s confidence on the currency and most importantly steps that become the ground for further similar agreements of even bigger impact on the currency.
The control of energy supply has always been a powerful weapon on the hands of anyone who had access to a sizeable portion of it and a weapon responsible for big changes in the global chessboard once fired. It usually takes time for change to happen, global trade patterns to shift and geopolitics to make a big scale impact but one thing is certain; change is unavoidable and it usually comes gradually rather than in one big bang.
- Eva Tzima -
Analysts:
Mr. George Lazaridis
Ms. Eva Tzima
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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Monday, 23 June 14
INDONESIAN COAL SWAP FOR Q3 DELIVERY LOST 8.60% Y-O-Y;4.80% M-O-M
COALspot.com: Indonesian coal swaps for average Q3’ 2014 lost on day, week and on month according to AsiaClear OTC coal swap's reports re ...
Monday, 23 June 14
COAL SWAPS DROPS FURTHER MONTH ON MONTH ON WEAK DEMAND
COALspot.com: API 8 CFR South China Coal swaps for average Q3 14 deliveries lost 6.91 percent month on month and closed at US$ 69.00 per mt a ...
Sunday, 22 June 14
THE PANAMAX COAL FREIGHT FROM INDONESIA TO INDIA SLIPPED THIS WEEK
COALspot.com: The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry bulk commodities, fell slightly on Friday ...
Friday, 20 June 14
DRY BULK MARKET LOOKING FOR UPSIDE ON ROBUST SEABORNE IRON ORE TRADE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market hasn’t been able to justify the heightened expectations this year. Yesterday, the Baltic Dry Index managed to inch forwar ...
Friday, 20 June 14
US WEEKLY COAL PRODUCTION DROPS 1.8% WEEK ON WEEK
COALspot.com – United States the world's second largest coal producer, produced approximately 18.3 million short tons (mmst) of coal in a ...
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- Coastal Gujarat Power Limited - India
- Renaissance Capital - South Africa
- Borneo Indobara - Indonesia
- Bhushan Steel Limited - India
- Eastern Energy - Thailand
- Simpson Spence & Young - Indonesia
- Chamber of Mines of South Africa
- Coalindo Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Australian Commodity Traders Exchange
- Siam City Cement PLC, Thailand
- Romanian Commodities Exchange
- Indian Oil Corporation Limited
- Aditya Birla Group - India
- Sree Jayajothi Cements Limited - India
- MS Steel International - UAE
- Sarangani Energy Corporation, Philippines
- Formosa Plastics Group - Taiwan
- IEA Clean Coal Centre - UK
- International Coal Ventures Pvt Ltd - India
- Grasim Industreis Ltd - India
- Goldman Sachs - Singapore
- Bukit Makmur.PT - Indonesia
- Straits Asia Resources Limited - Singapore
- Merrill Lynch Commodities Europe
- Karaikal Port Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- Intertek Mineral Services - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Riau Bara Harum - Indonesia
- Central Electricity Authority - India
- Semirara Mining and Power Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Energy Development Corp, Philippines
- Marubeni Corporation - India
- Medco Energi Mining Internasional
- Kalimantan Lumbung Energi - Indonesia
- Bhatia International Limited - India
- Heidelberg Cement - Germany
- McConnell Dowell - Australia
- Maharashtra Electricity Regulatory Commission - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- CNBM International Corporation - China
- Essar Steel Hazira Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Power Finance Corporation Ltd., India
- Oldendorff Carriers - Singapore
- Electricity Generating Authority of Thailand
- Indogreen Group - Indonesia
- Timah Investasi Mineral - Indoneisa
- Samtan Co., Ltd - South Korea
- Cement Manufacturers Association - India
- Thai Mozambique Logistica
- GMR Energy Limited - India
- New Zealand Coal & Carbon
- Gujarat Mineral Development Corp Ltd - India
- Carbofer General Trading SA - India
- Indonesian Coal Mining Association
- Jorong Barutama Greston.PT - Indonesia
- Australian Coal Association
- Trasteel International SA, Italy
- Karbindo Abesyapradhi - Indoneisa
- Directorate Of Revenue Intelligence - India
- Billiton Holdings Pty Ltd - Australia
- The State Trading Corporation of India Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Tamil Nadu electricity Board
- Meenaskhi Energy Private Limited - India
- Edison Trading Spa - Italy
- PNOC Exploration Corporation - Philippines
- Xindia Steels Limited - India
- Sinarmas Energy and Mining - Indonesia
- Parry Sugars Refinery, India
- Africa Commodities Group - South Africa
- Planning Commission, India
- TeaM Sual Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- ICICI Bank Limited - India
- Agrawal Coal Company - India
- Dalmia Cement Bharat India
- Orica Mining Services - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Meralco Power Generation, Philippines
- Kumho Petrochemical, South Korea
- Barasentosa Lestari - Indonesia
- Lanco Infratech Ltd - India
- Mjunction Services Limited - India
- Thiess Contractors Indonesia
- OPG Power Generation Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- London Commodity Brokers - England
- Pipit Mutiara Jaya. PT, Indonesia
- Savvy Resources Ltd - HongKong
- India Bulls Power Limited - India
- Orica Australia Pty. Ltd.
- Independent Power Producers Association of India
- Wilmar Investment Holdings
- Wood Mackenzie - Singapore
- Ministry of Mines - Canada
- Energy Link Ltd, New Zealand
- White Energy Company Limited
- Directorate General of MIneral and Coal - Indonesia
- Tata Chemicals Ltd - India
- Electricity Authority, New Zealand
- Kaltim Prima Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Semirara Mining Corp, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Sical Logistics Limited - India
- Bangladesh Power Developement Board
- Interocean Group of Companies - India
- Global Business Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Siam City Cement - Thailand
- Ceylon Electricity Board - Sri Lanka
- Coal and Oil Company - UAE
- SMG Consultants - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Aboitiz Power Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Neyveli Lignite Corporation Ltd, - India
- Kobexindo Tractors - Indoneisa
- Commonwealth Bank - Australia
- Mercuria Energy - Indonesia
- Economic Council, Georgia
- ASAPP Information Group - India
- SN Aboitiz Power Inc, Philippines
- Mercator Lines Limited - India
- Georgia Ports Authority, United States
- Krishnapatnam Port Company Ltd. - India
- Attock Cement Pakistan Limited
- The University of Queensland
- Parliament of New Zealand
- Deloitte Consulting - India
- The Treasury - Australian Government
- Bharathi Cement Corporation - India
- Globalindo Alam Lestari - Indonesia
- Ministry of Finance - Indonesia
- Star Paper Mills Limited - India
- VISA Power Limited - India
- Sojitz Corporation - Japan
- GAC Shipping (India) Pvt Ltd
- Banpu Public Company Limited - Thailand
- Latin American Coal - Colombia
- Mintek Dendrill Indonesia
- Asmin Koalindo Tuhup - Indonesia
- South Luzon Thermal Energy Corporation
- Sindya Power Generating Company Private Ltd
- Uttam Galva Steels Limited - India
- Standard Chartered Bank - UAE
- Ind-Barath Power Infra Limited - India
- Rio Tinto Coal - Australia
- Rashtriya Ispat Nigam Limited - India
- Kideco Jaya Agung - Indonesia
- IHS Mccloskey Coal Group - USA
- Jindal Steel & Power Ltd - India
- European Bulk Services B.V. - Netherlands
- LBH Netherlands Bv - Netherlands
- Malabar Cements Ltd - India
- Madhucon Powers Ltd - India
- Indian Energy Exchange, India
- Gujarat Electricity Regulatory Commission - India
- Manunggal Multi Energi - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vedanta Resources Plc - India
- San Jose City I Power Corp, Philippines
- Videocon Industries ltd - India
- Bukit Baiduri Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- PTC India Limited - India
- Anglo American - United Kingdom
- Metalloyd Limited - United Kingdom
- PowerSource Philippines DevCo
- Global Coal Blending Company Limited - Australia
- Gujarat Sidhee Cement - India
- Bayan Resources Tbk. - Indonesia
- Makarim & Taira - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Salva Resources Pvt Ltd - India
- Ministry of Transport, Egypt
- Pendopo Energi Batubara - Indonesia
- Indo Tambangraya Megah - Indonesia
- Posco Energy - South Korea
- Petron Corporation, Philippines
- Ambuja Cements Ltd - India
- Kartika Selabumi Mining - Indonesia
- Therma Luzon, Inc, Philippines
- Altura Mining Limited, Indonesia
- GVK Power & Infra Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Indika Energy - Indonesia
- Central Java Power - Indonesia
- Baramulti Group, Indonesia
- Miang Besar Coal Terminal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bhoruka Overseas - Indonesia
- SMC Global Power, Philippines
- Toyota Tsusho Corporation, Japan
- Sakthi Sugars Limited - India
- Singapore Mercantile Exchange
- Vizag Seaport Private Limited - India
- Minerals Council of Australia
- Bulk Trading Sa - Switzerland
- Antam Resourcindo - Indonesia
- Price Waterhouse Coopers - Russia
- Eastern Coal Council - USA
- Leighton Contractors Pty Ltd - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Holcim Trading Pte Ltd - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- Port Waratah Coal Services - Australia
- Larsen & Toubro Limited - India
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