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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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Thursday, 19 June 14
PANAMAX: VERY CLOSE TO BREAKING THE ALL TIME LOW RECORD - FEARNLEYS AS
Handy
The Supra-Handy market is experiencing the same market slow down as its bigger sister markets however not to the same extent. We see TA rat ...
Wednesday, 18 June 14
CHINESE STEEL PRODUCTION SETS RECORD DURING FIRST TEN DAYS OF JUNE - COMMODORE RESEARCH & CONSULTANCY
Recently released data shows that average daily crude steel production at China's key steel mills hit a record high of 1.833 million tons durin ...
Wednesday, 18 June 14
MARKET INSIGHT - TIMOS PAPADIMITRIOU
Back in January the expectations for Q3 and Q4 were more than great. Talks and claims for a rising BDI and a healthy market were coming from everyw ...
Tuesday, 17 June 14
DRY BULK FREIGHT RATES TO RISE DURING THE SECOND HALF OF 2014, AS CHINA IS EXPECTED TO START IMPORTING MORE IRON ORE FROM BRAZIL - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
In its latest analysis of the dry bulk market, BIMCO said that it doesn’t expect freight rates to react significantly to increased demand bef ...
Monday, 16 June 14
INDONESIAN COAL SWAPS FOR Q3 DELIVERY FALL 2.34 % MONTH ON MONTH
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 ...
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Showing 3651 to 3655 news of total 6871 |
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- Indika Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Bangladesh Power Developement Board
- Semirara Mining and Power Corporation, Philippines
- Merrill Lynch Commodities Europe
- The State Trading Corporation of India Ltd
- Indonesian Coal Mining Association
- Altura Mining Limited, Indonesia
- AsiaOL BioFuels Corp., Philippines
- Sinarmas Energy and Mining - Indonesia
- Bharathi Cement Corporation - India
- Karaikal Port Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Leighton Contractors Pty Ltd - Australia
- White Energy Company Limited
- Electricity Authority, New Zealand
- Price Waterhouse Coopers - Russia
- Sakthi Sugars Limited - India
- Port Waratah Coal Services - Australia
- Star Paper Mills Limited - India
- Intertek Mineral Services - Indonesia
- Electricity Generating Authority of Thailand
- Petrochimia International Co. Ltd.- Taiwan
- IEA Clean Coal Centre - UK
- Interocean Group of Companies - India
- GN Power Mariveles Coal Plant, Philippines
- Manunggal Multi Energi - Indonesia
- Australian Coal Association
- GVK Power & Infra Limited - India
- Makarim & Taira - Indonesia
- Rio Tinto Coal - Australia
- TeaM Sual Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- Borneo Indobara - Indonesia
- Madhucon Powers Ltd - India
- Bulk Trading Sa - Switzerland
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PTC India Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Planning Commission, India
- Riau Bara Harum - Indonesia
- Iligan Light & Power Inc, Philippines
- Parry Sugars Refinery, India
- Independent Power Producers Association of India
- McConnell Dowell - Australia
- Simpson Spence & Young - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Coal and Oil Company - UAE
- Kideco Jaya Agung - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Kalimantan Lumbung Energi - Indonesia
- Lanco Infratech Ltd - India
- Sojitz Corporation - Japan
- Mercuria Energy - Indonesia
- Minerals Council of Australia
- Dalmia Cement Bharat India
- ICICI Bank Limited - India
- Ambuja Cements Ltd - India
- Siam City Cement PLC, Thailand
- Wood Mackenzie - Singapore
- Petron Corporation, Philippines
- Bhatia International Limited - India
- Coastal Gujarat Power Limited - India
- Kaltim Prima Coal - Indonesia
- CNBM International Corporation - China
- Bhoruka Overseas - Indonesia
- Jindal Steel & Power Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Central Electricity Authority - India
- MS Steel International - UAE
- Latin American Coal - Colombia
- Ministry of Transport, Egypt
- Semirara Mining Corp, Philippines
- Chamber of Mines of South Africa
- Bukit Baiduri Energy - Indonesia
- Goldman Sachs - Singapore
- Binh Thuan Hamico - Vietnam
- Directorate General of MIneral and Coal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- GMR Energy Limited - India
- CIMB Investment Bank - Malaysia
- Miang Besar Coal Terminal - Indonesia
- India Bulls Power Limited - India
- Kepco SPC Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Sical Logistics Limited - India
- Edison Trading Spa - Italy
- Ministry of Mines - Canada
- The University of Queensland
- Kohat Cement Company Ltd. - Pakistan
- Energy Link Ltd, New Zealand
- Grasim Industreis Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Metalloyd Limited - United Kingdom
- Parliament of New Zealand
- PNOC Exploration Corporation - Philippines
- Kartika Selabumi Mining - Indonesia
- Banpu Public Company Limited - Thailand
- Australian Commodity Traders Exchange
- Vijayanagar Sugar Pvt Ltd - India
- Mintek Dendrill Indonesia
- Chettinad Cement Corporation Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Tata Chemicals Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Power Finance Corporation Ltd., India
- Trasteel International SA, Italy
- Asmin Koalindo Tuhup - Indonesia
- The Treasury - Australian Government
- Sree Jayajothi Cements Limited - India
- SN Aboitiz Power Inc, Philippines
- Kumho Petrochemical, South Korea
- Larsen & Toubro Limited - India
- Coalindo Energy - Indonesia
- Tamil Nadu electricity Board
- Agrawal Coal Company - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Orica Australia Pty. Ltd.
- Kobexindo Tractors - Indoneisa
- London Commodity Brokers - England
- Ind-Barath Power Infra Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Straits Asia Resources Limited - Singapore
- Samtan Co., Ltd - South Korea
- Timah Investasi Mineral - Indoneisa
- Bukit Makmur.PT - Indonesia
- Antam Resourcindo - Indonesia
- VISA Power Limited - India
- Directorate Of Revenue Intelligence - India
- Attock Cement Pakistan Limited
- Economic Council, Georgia
- PowerSource Philippines DevCo
- Renaissance Capital - South Africa
- Indogreen Group - Indonesia
- Savvy Resources Ltd - HongKong
- Sindya Power Generating Company Private Ltd
- Maheswari Brothers Coal Limited - India
- Mjunction Services Limited - India
- Deloitte Consulting - India
- Maharashtra Electricity Regulatory Commission - India
- Siam City Cement - Thailand
- Indo Tambangraya Megah - Indonesia
- Vizag Seaport Private Limited - India
- Barasentosa Lestari - Indonesia
- Singapore Mercantile Exchange
- Global Coal Blending Company Limited - Australia
- Central Java Power - Indonesia
- Bhushan Steel Limited - India
- Sarangani Energy Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Georgia Ports Authority, United States
- New Zealand Coal & Carbon
- Oldendorff Carriers - Singapore
- International Coal Ventures Pvt Ltd - India
- Xindia Steels Limited - India
- Essar Steel Hazira Ltd - India
- OPG Power Generation Pvt Ltd - India
- Ministry of Finance - Indonesia
- Thiess Contractors Indonesia
- Gujarat Sidhee Cement - India
- PetroVietnam Power Coal Import and Supply Company
- Mercator Lines Limited - India
- Global Business Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- SMG Consultants - Indonesia
- Therma Luzon, Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Vedanta Resources Plc - India
- Eastern Energy - Thailand
- Videocon Industries ltd - India
- Toyota Tsusho Corporation, Japan
- Neyveli Lignite Corporation Ltd, - India
- Heidelberg Cement - Germany
- Cement Manufacturers Association - India
- Malabar Cements Ltd - India
- Gujarat Electricity Regulatory Commission - India
- IHS Mccloskey Coal Group - USA
- Africa Commodities Group - South Africa
- Commonwealth Bank - Australia
- Indian Oil Corporation Limited
- ASAPP Information Group - India
- Carbofer General Trading SA - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Medco Energi Mining Internasional
- Eastern Coal Council - USA
- Baramulti Group, Indonesia
- Meralco Power Generation, Philippines
- GAC Shipping (India) Pvt Ltd
- Bayan Resources Tbk. - Indonesia
- Energy Development Corp, Philippines
- Indian Energy Exchange, India
- Ceylon Electricity Board - Sri Lanka
- Aditya Birla Group - India
- SMC Global Power, Philippines
- Orica Mining Services - Indonesia
- Jaiprakash Power Ventures ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Formosa Plastics Group - Taiwan
- Karbindo Abesyapradhi - Indoneisa
- LBH Netherlands Bv - Netherlands
- Romanian Commodities Exchange
- Marubeni Corporation - India
- Aboitiz Power Corporation - Philippines
- Globalindo Alam Lestari - Indonesia
- Thai Mozambique Logistica
- Global Green Power PLC Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Standard Chartered Bank - UAE
- Posco Energy - South Korea
- Anglo American - United Kingdom
- Meenaskhi Energy Private Limited - India
- Wilmar Investment Holdings
- Salva Resources Pvt Ltd - India
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