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