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