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