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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, 12 June 14
HANDY : TA MARKET IS CONTINUING SOUTH WITH A DECREASE OF 26% W-O-W
Handy
The week started off with holidays in most European countries and the TA market is continuing south with a decrease of 26% w-o-w. We do see ...
Thursday, 12 June 14
CONSOLIDATION IS THE ' NAME OF THE GAME' WHEN IT COMES TO SHIPYARDS ACROSS ASIA - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Intense competition, a swelling of new greenfield shipyards over the past few years mainly in China, especially prior to the 2008 global financial ...
Wednesday, 11 June 14
INDONESIA'S COAL EXPORT VOLUME AND REVENUE SLIPS 2.75% AND 6.73% RESPECTIVELY IN APRIL
COALspot.com: Indonesia, one of the world's largest coal producer and the global largest multi grade coal exporter shipped around $1.8* b ...
Wednesday, 11 June 14
BPI TOUCHING A NEW LOW FOR THE YEAR
The Dry Bulk market closed off the week positively, on the back of firming Capesize rates, while the market overall continues to face a very challe ...
Monday, 09 June 14
GOVT GETS TOUGH ON ILLEGAL MINING, SUSPENDS LICENSES - THE JAKARTA POST
The government has temporarily suspended the licenses of 62 mineral and coal transportation companies as part of its efforts to curb illegal mining ...
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- Larsen & Toubro Limited - India
- White Energy Company Limited
- Heidelberg Cement - Germany
- Timah Investasi Mineral - Indoneisa
- Oldendorff Carriers - Singapore
- Kaltim Prima Coal - Indonesia
- Australian Coal Association
- Bulk Trading Sa - Switzerland
- Simpson Spence & Young - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Maheswari Brothers Coal Limited - India
- Interocean Group of Companies - India
- Uttam Galva Steels Limited - India
- Coal and Oil Company - UAE
- Bukit Makmur.PT - Indonesia
- New Zealand Coal & Carbon
- Jaiprakash Power Ventures ltd
- LBH Netherlands Bv - Netherlands
- San Jose City I Power Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Price Waterhouse Coopers - Russia
- Chamber of Mines of South Africa
- Madhucon Powers Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- CIMB Investment Bank - Malaysia
- OPG Power Generation Pvt Ltd - India
- Bhatia International Limited - India
- Semirara Mining and Power Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Australian Commodity Traders Exchange
- Global Green Power PLC Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Sindya Power Generating Company Private Ltd
- PNOC Exploration Corporation - Philippines
- Parliament of New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sojitz Corporation - Japan
- Tamil Nadu electricity Board
- European Bulk Services B.V. - Netherlands
- Chettinad Cement Corporation Ltd - India
- Georgia Ports Authority, United States
- Ceylon Electricity Board - Sri Lanka
- Borneo Indobara - Indonesia
- Banpu Public Company Limited - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Ministry of Mines - Canada
- Essar Steel Hazira Ltd - India
- Globalindo Alam Lestari - Indonesia
- Kobexindo Tractors - Indoneisa
- Formosa Plastics Group - Taiwan
- The Treasury - Australian Government
- Mercuria Energy - Indonesia
- CNBM International Corporation - China
- Mercator Lines Limited - India
- Kepco SPC Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Kumho Petrochemical, South Korea
- Trasteel International SA, Italy
- Indogreen Group - Indonesia
- Indika Energy - Indonesia
- Independent Power Producers Association of India
- Videocon Industries ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Dalmia Cement Bharat India
- VISA Power Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Latin American Coal - Colombia
- Parry Sugars Refinery, India
- The University of Queensland
- Commonwealth Bank - Australia
- Central Electricity Authority - India
- Energy Link Ltd, New Zealand
- PTC India Limited - India
- Toyota Tsusho Corporation, Japan
- Medco Energi Mining Internasional
- PetroVietnam Power Coal Import and Supply Company
- Binh Thuan Hamico - Vietnam
- Indo Tambangraya Megah - Indonesia
- The State Trading Corporation of India Ltd
- Thai Mozambique Logistica
- Leighton Contractors Pty Ltd - Australia
- International Coal Ventures Pvt Ltd - India
- Electricity Authority, New Zealand
- SMC Global Power, Philippines
- Krishnapatnam Port Company Ltd. - India
- Iligan Light & Power Inc, Philippines
- Makarim & Taira - Indonesia
- ICICI Bank Limited - India
- Orica Australia Pty. Ltd.
- Antam Resourcindo - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Tata Chemicals Ltd - India
- Sarangani Energy Corporation, Philippines
- Altura Mining Limited, Indonesia
- Star Paper Mills Limited - India
- Riau Bara Harum - Indonesia
- Salva Resources Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Marubeni Corporation - India
- Vijayanagar Sugar Pvt Ltd - India
- Central Java Power - Indonesia
- Renaissance Capital - South Africa
- Indian Oil Corporation Limited
- Merrill Lynch Commodities Europe
- Global Coal Blending Company Limited - Australia
- London Commodity Brokers - England
- Romanian Commodities Exchange
- GVK Power & Infra Limited - India
- Anglo American - United Kingdom
- Coastal Gujarat Power Limited - India
- Bhushan Steel Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Bayan Resources Tbk. - Indonesia
- Eastern Energy - Thailand
- South Luzon Thermal Energy Corporation
- Mjunction Services Limited - India
- Siam City Cement - Thailand
- Sical Logistics Limited - India
- Directorate Of Revenue Intelligence - India
- MS Steel International - UAE
- India Bulls Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indian Energy Exchange, India
- Karaikal Port Pvt Ltd - India
- Energy Development Corp, Philippines
- Gujarat Electricity Regulatory Commission - India
- ASAPP Information Group - India
- Bhoruka Overseas - Indonesia
- Africa Commodities Group - South Africa
- Minerals Council of Australia
- PowerSource Philippines DevCo
- Miang Besar Coal Terminal - Indonesia
- Eastern Coal Council - USA
- Deloitte Consulting - India
- Economic Council, Georgia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Vizag Seaport Private Limited - India
- Gujarat Sidhee Cement - India
- Mintek Dendrill Indonesia
- Petron Corporation, Philippines
- Attock Cement Pakistan Limited
- Coalindo Energy - Indonesia
- Bharathi Cement Corporation - India
- Orica Mining Services - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Pendopo Energi Batubara - Indonesia
- SN Aboitiz Power Inc, Philippines
- Lanco Infratech Ltd - India
- Sakthi Sugars Limited - India
- SMG Consultants - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Vedanta Resources Plc - India
- Rio Tinto Coal - Australia
- Straits Asia Resources Limited - Singapore
- Port Waratah Coal Services - Australia
- IEA Clean Coal Centre - UK
- Wood Mackenzie - Singapore
- Singapore Mercantile Exchange
- Malabar Cements Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement PLC, Thailand
- Intertek Mineral Services - Indonesia
- Aboitiz Power Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Ministry of Finance - Indonesia
- Bukit Baiduri Energy - Indonesia
- GMR Energy Limited - India
- McConnell Dowell - Australia
- Xindia Steels Limited - India
- Electricity Generating Authority of Thailand
- Directorate General of MIneral and Coal - Indonesia
- Edison Trading Spa - Italy
- Standard Chartered Bank - UAE
- Goldman Sachs - Singapore
- Savvy Resources Ltd - HongKong
- Posco Energy - South Korea
- Agrawal Coal Company - India
- Holcim Trading Pte Ltd - Singapore
- Indonesian Coal Mining Association
- Barasentosa Lestari - Indonesia
- Kartika Selabumi Mining - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Samtan Co., Ltd - South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- GAC Shipping (India) Pvt Ltd
- Petrochimia International Co. Ltd.- Taiwan
- Neyveli Lignite Corporation Ltd, - India
- Baramulti Group, Indonesia
- Meenaskhi Energy Private Limited - India
- Ind-Barath Power Infra Limited - India
- Grasim Industreis Ltd - India
- TeaM Sual Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Meralco Power Generation, Philippines
- Power Finance Corporation Ltd., India
- Cigading International Bulk Terminal - Indonesia
- Cement Manufacturers Association - India
- Bangladesh Power Developement Board
- Planning Commission, India
- IHS Mccloskey Coal Group - USA
- Metalloyd Limited - United Kingdom
- Manunggal Multi Energi - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Ministry of Transport, Egypt
- Offshore Bulk Terminal Pte Ltd, Singapore
- Wilmar Investment Holdings
- Carbofer General Trading SA - India
- Kideco Jaya Agung - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Global Business Power Corporation, Philippines
- Aditya Birla Group - India
- Semirara Mining Corp, Philippines
- Sree Jayajothi Cements Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Thiess Contractors Indonesia
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