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