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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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Friday, 06 June 14
RICHARDS BAY COAL TERMINAL SHIPPED 4.221 MMT OF COAL TO SOUTHERN ASIAN COUNTRIES IN MAY
COALspot.com: South Africa's Richards Bay Coal Terminal (RBCT) the single largest export coal terminal in the world, shipped 5.58 million tons ...
Thursday, 05 June 14
RBCT SOUTH AFRICA SHIPPED 21% LESS COAL IN APRIL COMPARED TO MARCH EXPORTS
COALspot.com: South Africa's Richards Bay Coal Terminal (RBCT) the single largest export coal terminal in the world, shipped 5.45 million tons ...
Thursday, 05 June 14
PANAMAX : THIS WEEK STARTED IN A SLOW PACE - FEARNLEYS
Handy
After last week's silent and unexciting week we see some more activity this week, especially from the South American market. The rates ...
Thursday, 05 June 14
PORT OF NEWCASTLE SHIPPED 2.91 MMT OF COAL IN THIS PAST WEEK
COALspot.com: The figure constitutes a 4.30 percent higher compared to the previous week, following a week on week decreased of 19.13 percent recor ...
Wednesday, 04 June 14
SKULD: DIVERSIFICATION AND A ROBUST BOTTOM LINE
In February, I was delighted to ring in the new policy year with the Skuld team following a solid renewal round and a strong year. 2013 was, in man ...
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- Meralco Power Generation, Philippines
- Anglo American - United Kingdom
- Semirara Mining Corp, Philippines
- Sojitz Corporation - Japan
- Gujarat Mineral Development Corp Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Carbofer General Trading SA - India
- San Jose City I Power Corp, Philippines
- Altura Mining Limited, Indonesia
- Australian Coal Association
- SN Aboitiz Power Inc, Philippines
- McConnell Dowell - Australia
- Chettinad Cement Corporation Ltd - India
- Mercator Lines Limited - India
- India Bulls Power Limited - India
- Parry Sugars Refinery, India
- Riau Bara Harum - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Parliament of New Zealand
- Interocean Group of Companies - India
- Kapuas Tunggal Persada - Indonesia
- IHS Mccloskey Coal Group - USA
- Kohat Cement Company Ltd. - Pakistan
- Videocon Industries ltd - India
- Simpson Spence & Young - Indonesia
- Minerals Council of Australia
- Eastern Energy - Thailand
- Sical Logistics Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Energy Link Ltd, New Zealand
- Mjunction Services Limited - India
- Trasteel International SA, Italy
- Indian Energy Exchange, India
- Bulk Trading Sa - Switzerland
- ICICI Bank Limited - India
- Grasim Industreis Ltd - India
- GMR Energy Limited - India
- Petron Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Singapore Mercantile Exchange
- Electricity Generating Authority of Thailand
- Star Paper Mills Limited - India
- Medco Energi Mining Internasional
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- TeaM Sual Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Timah Investasi Mineral - Indoneisa
- Manunggal Multi Energi - Indonesia
- Bukit Makmur.PT - Indonesia
- Oldendorff Carriers - Singapore
- Standard Chartered Bank - UAE
- Indogreen Group - Indonesia
- Latin American Coal - Colombia
- Commonwealth Bank - Australia
- Vizag Seaport Private Limited - India
- Energy Development Corp, Philippines
- Romanian Commodities Exchange
- Thiess Contractors Indonesia
- Sree Jayajothi Cements Limited - India
- South Luzon Thermal Energy Corporation
- Global Business Power Corporation, Philippines
- SMG Consultants - Indonesia
- Baramulti Group, Indonesia
- Bukit Baiduri Energy - Indonesia
- The Treasury - Australian Government
- Samtan Co., Ltd - South Korea
- Formosa Plastics Group - Taiwan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coal and Oil Company - UAE
- Bahari Cakrawala Sebuku - Indonesia
- Jaiprakash Power Ventures ltd
- Antam Resourcindo - Indonesia
- IEA Clean Coal Centre - UK
- Indian Oil Corporation Limited
- Power Finance Corporation Ltd., India
- Intertek Mineral Services - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- New Zealand Coal & Carbon
- Straits Asia Resources Limited - Singapore
- Globalindo Alam Lestari - Indonesia
- Posco Energy - South Korea
- Salva Resources Pvt Ltd - India
- Port Waratah Coal Services - Australia
- ASAPP Information Group - India
- Orica Australia Pty. Ltd.
- Alfred C Toepfer International GmbH - Germany
- Coastal Gujarat Power Limited - India
- The State Trading Corporation of India Ltd
- Vedanta Resources Plc - India
- Kumho Petrochemical, South Korea
- Ministry of Finance - Indonesia
- Larsen & Toubro Limited - India
- Borneo Indobara - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Malabar Cements Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- White Energy Company Limited
- Eastern Coal Council - USA
- Jindal Steel & Power Ltd - India
- Karaikal Port Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- CNBM International Corporation - China
- Indika Energy - Indonesia
- Ambuja Cements Ltd - India
- Tata Chemicals Ltd - India
- Edison Trading Spa - Italy
- Indonesian Coal Mining Association
- VISA Power Limited - India
- International Coal Ventures Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Savvy Resources Ltd - HongKong
- Central Java Power - Indonesia
- Wilmar Investment Holdings
- Sarangani Energy Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Rio Tinto Coal - Australia
- Marubeni Corporation - India
- Heidelberg Cement - Germany
- PTC India Limited - India
- MS Steel International - UAE
- CIMB Investment Bank - Malaysia
- SMC Global Power, Philippines
- Gujarat Sidhee Cement - India
- Electricity Authority, New Zealand
- Aboitiz Power Corporation - Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bhoruka Overseas - Indonesia
- OPG Power Generation Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Merrill Lynch Commodities Europe
- Rashtriya Ispat Nigam Limited - India
- GVK Power & Infra Limited - India
- Leighton Contractors Pty Ltd - Australia
- Kideco Jaya Agung - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bayan Resources Tbk. - Indonesia
- PNOC Exploration Corporation - Philippines
- Therma Luzon, Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Sakthi Sugars Limited - India
- Renaissance Capital - South Africa
- Xindia Steels Limited - India
- Global Coal Blending Company Limited - Australia
- Siam City Cement PLC, Thailand
- Ministry of Transport, Egypt
- Sindya Power Generating Company Private Ltd
- Indo Tambangraya Megah - Indonesia
- Bharathi Cement Corporation - India
- Ceylon Electricity Board - Sri Lanka
- European Bulk Services B.V. - Netherlands
- Bhatia International Limited - India
- Makarim & Taira - Indonesia
- Wood Mackenzie - Singapore
- Banpu Public Company Limited - Thailand
- Asmin Koalindo Tuhup - Indonesia
- Lanco Infratech Ltd - India
- Kaltim Prima Coal - Indonesia
- Kepco SPC Power Corporation, Philippines
- Deloitte Consulting - India
- LBH Netherlands Bv - Netherlands
- Maheswari Brothers Coal Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Mercuria Energy - Indonesia
- Barasentosa Lestari - Indonesia
- Ministry of Mines - Canada
- Georgia Ports Authority, United States
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Tamil Nadu electricity Board
- Dalmia Cement Bharat India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Independent Power Producers Association of India
- Bangladesh Power Developement Board
- PetroVietnam Power Coal Import and Supply Company
- Sinarmas Energy and Mining - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Meenaskhi Energy Private Limited - India
- Attock Cement Pakistan Limited
- Karbindo Abesyapradhi - Indoneisa
- Agrawal Coal Company - India
- Cement Manufacturers Association - India
- Binh Thuan Hamico - Vietnam
- Economic Council, Georgia
- Pendopo Energi Batubara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bhushan Steel Limited - India
- Siam City Cement - Thailand
- The University of Queensland
- Gujarat Electricity Regulatory Commission - India
- Kartika Selabumi Mining - Indonesia
- Ind-Barath Power Infra Limited - India
- Coalindo Energy - Indonesia
- Metalloyd Limited - United Kingdom
- AsiaOL BioFuels Corp., Philippines
- Iligan Light & Power Inc, Philippines
- Mintek Dendrill Indonesia
- London Commodity Brokers - England
- Africa Commodities Group - South Africa
- Aditya Birla Group - India
- Madhucon Powers Ltd - India
- Price Waterhouse Coopers - Russia
- PowerSource Philippines DevCo
- Planning Commission, India
- Toyota Tsusho Corporation, Japan
- Uttam Galva Steels Limited - India
- Orica Mining Services - Indonesia
- Central Electricity Authority - India
- Cigading International Bulk Terminal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Chamber of Mines of South Africa
- Kobexindo Tractors - Indoneisa
- Australian Commodity Traders Exchange
- Thai Mozambique Logistica
- Goldman Sachs - Singapore
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