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