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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, 16 June 14
API 8 CFR SOUTH CHINA COAL SWAPS FALL CONTINUES THIS PAST WEEK
COALspot.com: API 8 CFR South China Coal swaps for average Q3 14 deliveries lost 4.34 percent month on month and closed at US$ 71.05 per mt a ...
Sunday, 15 June 14
COAL FREIGHT RATES FALL FURTHER ON LACK OF DEMANDS - CAPT. REDDY
COALspot.com: The BDI softened this week as all segments fell this week. The Panamax sector being most affected. The Cape index was down 3.51 pct w ...
Friday, 13 June 14
US COAL PRODUCTION FELL 3% IN WEEK THAT ENDED JUNE 7, SAYS EIA
COALspot.com – United States the world's second largest coal producer, produced approximately 18.6 million short tons (mmst) of coal in a ...
Friday, 13 June 14
DRY BULK MARKET KEEPS ON FALLING, DESPITE RESPITE OF THE CAPESIZE SECTOR - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has kept on its lacklustre performance overall, with the Baltic Dry Index (BDI) still hovering below the 1,000 point mark. Yest ...
Thursday, 12 June 14
INDONESIA SETS HBA FOR MONTH OF JUNE AT US$ 73.64
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia has revised up first time in last four months the coal bench mark price. ...
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- Central Electricity Authority - India
- AsiaOL BioFuels Corp., Philippines
- New Zealand Coal & Carbon
- Coal and Oil Company - UAE
- Bhushan Steel Limited - India
- Bukit Makmur.PT - Indonesia
- Australian Commodity Traders Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Port Waratah Coal Services - Australia
- Madhucon Powers Ltd - India
- Antam Resourcindo - Indonesia
- The Treasury - Australian Government
- Riau Bara Harum - Indonesia
- Thiess Contractors Indonesia
- Semirara Mining and Power Corporation, Philippines
- Orica Mining Services - Indonesia
- Malabar Cements Ltd - India
- Independent Power Producers Association of India
- Dalmia Cement Bharat India
- Price Waterhouse Coopers - Russia
- Mercator Lines Limited - India
- San Jose City I Power Corp, Philippines
- Sarangani Energy Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Eastern Energy - Thailand
- Sinarmas Energy and Mining - Indonesia
- Bangladesh Power Developement Board
- SMC Global Power, Philippines
- Lanco Infratech Ltd - India
- Wilmar Investment Holdings
- Essar Steel Hazira Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Meenaskhi Energy Private Limited - India
- Kaltim Prima Coal - Indonesia
- Banpu Public Company Limited - Thailand
- CNBM International Corporation - China
- IHS Mccloskey Coal Group - USA
- Chamber of Mines of South Africa
- Bukit Baiduri Energy - Indonesia
- Standard Chartered Bank - UAE
- Posco Energy - South Korea
- Kumho Petrochemical, South Korea
- Indogreen Group - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Metalloyd Limited - United Kingdom
- Directorate General of MIneral and Coal - Indonesia
- Bhoruka Overseas - Indonesia
- Georgia Ports Authority, United States
- Holcim Trading Pte Ltd - Singapore
- Ministry of Transport, Egypt
- White Energy Company Limited
- Planning Commission, India
- Deloitte Consulting - India
- Rio Tinto Coal - Australia
- Leighton Contractors Pty Ltd - Australia
- Aboitiz Power Corporation - Philippines
- Borneo Indobara - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Africa Commodities Group - South Africa
- ASAPP Information Group - India
- Bulk Trading Sa - Switzerland
- Krishnapatnam Port Company Ltd. - India
- Mintek Dendrill Indonesia
- Energy Link Ltd, New Zealand
- The University of Queensland
- Ambuja Cements Ltd - India
- PTC India Limited - India
- Aditya Birla Group - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Vedanta Resources Plc - India
- Therma Luzon, Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kideco Jaya Agung - Indonesia
- Jindal Steel & Power Ltd - India
- Merrill Lynch Commodities Europe
- Global Business Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Sindya Power Generating Company Private Ltd
- Parliament of New Zealand
- Makarim & Taira - Indonesia
- Energy Development Corp, Philippines
- Tamil Nadu electricity Board
- Goldman Sachs - Singapore
- Coastal Gujarat Power Limited - India
- Anglo American - United Kingdom
- London Commodity Brokers - England
- Renaissance Capital - South Africa
- Power Finance Corporation Ltd., India
- Ministry of Finance - Indonesia
- Romanian Commodities Exchange
- Wood Mackenzie - Singapore
- Sical Logistics Limited - India
- Directorate Of Revenue Intelligence - India
- Ceylon Electricity Board - Sri Lanka
- Indian Oil Corporation Limited
- MS Steel International - UAE
- Ministry of Mines - Canada
- Agrawal Coal Company - India
- Siam City Cement PLC, Thailand
- Savvy Resources Ltd - HongKong
- Sojitz Corporation - Japan
- Indonesian Coal Mining Association
- VISA Power Limited - India
- McConnell Dowell - Australia
- Vijayanagar Sugar Pvt Ltd - India
- PowerSource Philippines DevCo
- Kartika Selabumi Mining - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Rashtriya Ispat Nigam Limited - India
- Videocon Industries ltd - India
- Timah Investasi Mineral - Indoneisa
- Commonwealth Bank - Australia
- Sakthi Sugars Limited - India
- Ind-Barath Power Infra Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Attock Cement Pakistan Limited
- Iligan Light & Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- Global Green Power PLC Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Petron Corporation, Philippines
- IEA Clean Coal Centre - UK
- International Coal Ventures Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Bukit Asam (Persero) Tbk - Indonesia
- Marubeni Corporation - India
- Tata Chemicals Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Globalindo Alam Lestari - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Larsen & Toubro Limited - India
- OPG Power Generation Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- LBH Netherlands Bv - Netherlands
- Parry Sugars Refinery, India
- Gujarat Mineral Development Corp Ltd - India
- Cement Manufacturers Association - India
- The State Trading Corporation of India Ltd
- Eastern Coal Council - USA
- European Bulk Services B.V. - Netherlands
- Latin American Coal - Colombia
- Manunggal Multi Energi - Indonesia
- Star Paper Mills Limited - India
- Siam City Cement - Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Straits Asia Resources Limited - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Mjunction Services Limited - India
- SMG Consultants - Indonesia
- Formosa Plastics Group - Taiwan
- Edison Trading Spa - Italy
- Kobexindo Tractors - Indoneisa
- Central Java Power - Indonesia
- GMR Energy Limited - India
- Bhatia International Limited - India
- Uttam Galva Steels Limited - India
- Minerals Council of Australia
- Salva Resources Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PNOC Exploration Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Bharathi Cement Corporation - India
- Grasim Industreis Ltd - India
- Jaiprakash Power Ventures ltd
- Oldendorff Carriers - Singapore
- CIMB Investment Bank - Malaysia
- Baramulti Group, Indonesia
- Orica Australia Pty. Ltd.
- Heidelberg Cement - Germany
- Singapore Mercantile Exchange
- Trasteel International SA, Italy
- Electricity Generating Authority of Thailand
- GVK Power & Infra Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Electricity Authority, New Zealand
- Global Coal Blending Company Limited - Australia
- Indo Tambangraya Megah - Indonesia
- Gujarat Sidhee Cement - India
- Coalindo Energy - Indonesia
- ICICI Bank Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Vizag Seaport Private Limited - India
- Semirara Mining Corp, Philippines
- Thai Mozambique Logistica
- Medco Energi Mining Internasional
- Indian Energy Exchange, India
- Bayan Resources Tbk. - Indonesia
- Carbofer General Trading SA - India
- Binh Thuan Hamico - Vietnam
- Australian Coal Association
- Economic Council, Georgia
- Barasentosa Lestari - Indonesia
- Miang Besar Coal Terminal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Altura Mining Limited, Indonesia
- Mercuria Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Interocean Group of Companies - India
- Indika Energy - Indonesia
- Xindia Steels Limited - India
- Toyota Tsusho Corporation, Japan
- Sree Jayajothi Cements Limited - India
- Meralco Power Generation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Simpson Spence & Young - Indonesia
- India Bulls Power Limited - India
- Kohat Cement Company Ltd. - Pakistan
- GAC Shipping (India) Pvt Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Chettinad Cement Corporation Ltd - India
- Jorong Barutama Greston.PT - Indonesia
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