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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, 09 June 14
INDO SUB-BIT COAL SWAPS FOR Q3,Q4 OF 2014 AND Q1 2015: LOST ON DAY AND MONTH
COALspot.com: Indonesian coal swaps for average Q3’ 2014 continue last week’s trend or lost on day, week and on month according to Asia ...
Monday, 09 June 14
API 8 CFR SOUTH CHINA COAL SWAP Q3 14 DELIVERIES LOST 4.61% M-O-M
COALspot.com: API 8 CFR South China Coal swaps for average Q3 14 deliveries lost 4.61 percent month on month and closed at US$ 71.62 per mt a ...
Sunday, 08 June 14
DRY BULK MARKET RATES FOR PANAMXES TO REMAIN VOLATILE; NO IMPROVEMENTS SEEN OVER THE WEEK
COALspot.com: Cape index increase pushes BDI index to 989 points week on week. The BDI firmed up by 5.88 pct and closed at 989 points week ended 6 ...
Saturday, 07 June 14
FIRST BITE AT ANTI-CORRUPTION CLAUSE - BIMCO
In recent years a number of countries have introduced anti-corruption legislation which, unfortunately, fails to recognise the practical implicatio ...
Saturday, 07 June 14
U.S. MONTHLY COAL PRODUCTION SLIGHTLY HIGHER IN MAY 2014
COALspot.com – United States the world's second largest coal producer, produced approximately 19.2 million short tons (mmst) of coal in a ...
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- Indika Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Aditya Birla Group - India
- Bukit Baiduri Energy - Indonesia
- Ministry of Mines - Canada
- Semirara Mining Corp, Philippines
- Sindya Power Generating Company Private Ltd
- Global Coal Blending Company Limited - Australia
- Wilmar Investment Holdings
- Gujarat Sidhee Cement - India
- Manunggal Multi Energi - Indonesia
- Antam Resourcindo - Indonesia
- India Bulls Power Limited - India
- Gujarat Electricity Regulatory Commission - India
- Coal and Oil Company - UAE
- GN Power Mariveles Coal Plant, Philippines
- Ceylon Electricity Board - Sri Lanka
- Straits Asia Resources Limited - Singapore
- Romanian Commodities Exchange
- SMG Consultants - Indonesia
- McConnell Dowell - Australia
- Thai Mozambique Logistica
- Ministry of Transport, Egypt
- Power Finance Corporation Ltd., India
- Agrawal Coal Company - India
- Energy Link Ltd, New Zealand
- CNBM International Corporation - China
- Maharashtra Electricity Regulatory Commission - India
- Vizag Seaport Private Limited - India
- The State Trading Corporation of India Ltd
- Semirara Mining and Power Corporation, Philippines
- Dalmia Cement Bharat India
- Rashtriya Ispat Nigam Limited - India
- Kaltim Prima Coal - Indonesia
- Maheswari Brothers Coal Limited - India
- Grasim Industreis Ltd - India
- Goldman Sachs - Singapore
- Kapuas Tunggal Persada - Indonesia
- Jindal Steel & Power Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Eastern Energy - Thailand
- Simpson Spence & Young - Indonesia
- Globalindo Alam Lestari - Indonesia
- Orica Mining Services - Indonesia
- Sree Jayajothi Cements Limited - India
- Sarangani Energy Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- PNOC Exploration Corporation - Philippines
- Parry Sugars Refinery, India
- GMR Energy Limited - India
- Aboitiz Power Corporation - Philippines
- Attock Cement Pakistan Limited
- Indogreen Group - Indonesia
- Interocean Group of Companies - India
- Coalindo Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
- Global Business Power Corporation, Philippines
- IEA Clean Coal Centre - UK
- Directorate Of Revenue Intelligence - India
- PTC India Limited - India
- TeaM Sual Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Coastal Gujarat Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Standard Chartered Bank - UAE
- Central Electricity Authority - India
- White Energy Company Limited
- Wood Mackenzie - Singapore
- Indonesian Coal Mining Association
- Carbofer General Trading SA - India
- Trasteel International SA, Italy
- Madhucon Powers Ltd - India
- London Commodity Brokers - England
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GVK Power & Infra Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Australian Coal Association
- South Luzon Thermal Energy Corporation
- Baramulti Group, Indonesia
- Sakthi Sugars Limited - India
- Ministry of Finance - Indonesia
- Siam City Cement PLC, Thailand
- Altura Mining Limited, Indonesia
- ASAPP Information Group - India
- Cigading International Bulk Terminal - Indonesia
- Videocon Industries ltd - India
- Oldendorff Carriers - Singapore
- Marubeni Corporation - India
- Tamil Nadu electricity Board
- CIMB Investment Bank - Malaysia
- Electricity Generating Authority of Thailand
- Indo Tambangraya Megah - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Deloitte Consulting - India
- Karaikal Port Pvt Ltd - India
- Rio Tinto Coal - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chamber of Mines of South Africa
- SMC Global Power, Philippines
- Kepco SPC Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Krishnapatnam Port Company Ltd. - India
- VISA Power Limited - India
- Essar Steel Hazira Ltd - India
- Formosa Plastics Group - Taiwan
- Renaissance Capital - South Africa
- Borneo Indobara - Indonesia
- Kideco Jaya Agung - Indonesia
- Planning Commission, India
- Iligan Light & Power Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- IHS Mccloskey Coal Group - USA
- Toyota Tsusho Corporation, Japan
- Vedanta Resources Plc - India
- Ind-Barath Power Infra Limited - India
- Bhoruka Overseas - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Larsen & Toubro Limited - India
- The University of Queensland
- Kalimantan Lumbung Energi - Indonesia
- Barasentosa Lestari - Indonesia
- International Coal Ventures Pvt Ltd - India
- MS Steel International - UAE
- Bahari Cakrawala Sebuku - Indonesia
- European Bulk Services B.V. - Netherlands
- Heidelberg Cement - Germany
- Mercuria Energy - Indonesia
- Metalloyd Limited - United Kingdom
- OPG Power Generation Pvt Ltd - India
- Indian Oil Corporation Limited
- Medco Energi Mining Internasional
- Karbindo Abesyapradhi - Indoneisa
- Indian Energy Exchange, India
- Anglo American - United Kingdom
- Commonwealth Bank - Australia
- Africa Commodities Group - South Africa
- Xindia Steels Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Economic Council, Georgia
- Independent Power Producers Association of India
- Australian Commodity Traders Exchange
- Price Waterhouse Coopers - Russia
- Bharathi Cement Corporation - India
- Port Waratah Coal Services - Australia
- Makarim & Taira - Indonesia
- Mercator Lines Limited - India
- SN Aboitiz Power Inc, Philippines
- Meralco Power Generation, Philippines
- Minerals Council of Australia
- Eastern Coal Council - USA
- Petron Corporation, Philippines
- Uttam Galva Steels Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cement Manufacturers Association - India
- ICICI Bank Limited - India
- Kartika Selabumi Mining - Indonesia
- Ambuja Cements Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Central Java Power - Indonesia
- Timah Investasi Mineral - Indoneisa
- Orica Australia Pty. Ltd.
- Singapore Mercantile Exchange
- Star Paper Mills Limited - India
- San Jose City I Power Corp, Philippines
- Savvy Resources Ltd - HongKong
- New Zealand Coal & Carbon
- Edison Trading Spa - Italy
- AsiaOL BioFuels Corp., Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Thiess Contractors Indonesia
- Banpu Public Company Limited - Thailand
- Pendopo Energi Batubara - Indonesia
- Merrill Lynch Commodities Europe
- Asmin Koalindo Tuhup - Indonesia
- Chettinad Cement Corporation Ltd - India
- Posco Energy - South Korea
- Bangladesh Power Developement Board
- Jaiprakash Power Ventures ltd
- Malabar Cements Ltd - India
- GAC Shipping (India) Pvt Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mintek Dendrill Indonesia
- Siam City Cement - Thailand
- Bulk Trading Sa - Switzerland
- Kobexindo Tractors - Indoneisa
- Intertek Mineral Services - Indonesia
- Bhatia International Limited - India
- Lanco Infratech Ltd - India
- Georgia Ports Authority, United States
- Parliament of New Zealand
- Kumho Petrochemical, South Korea
- Sinarmas Energy and Mining - Indonesia
- Electricity Authority, New Zealand
- PowerSource Philippines DevCo
- Global Green Power PLC Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Tata Chemicals Ltd - India
- Bhushan Steel Limited - India
- Sojitz Corporation - Japan
- Holcim Trading Pte Ltd - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Alfred C Toepfer International GmbH - Germany
- Sical Logistics Limited - India
- Riau Bara Harum - Indonesia
- LBH Netherlands Bv - Netherlands
- Samtan Co., Ltd - South Korea
- Mjunction Services Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Energy Development Corp, Philippines
- Latin American Coal - Colombia
- The Treasury - Australian Government
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