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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, 02 June 14
SUB-BIT FOB INDONESIA COAL SWAPS LOST GROUND THIS WEEK
COALspot.com: Indonesian coal swaps for average Q3’ 2014 lost on day, week and on month according to AsiaClear OTC coal swap's reports re ...
Monday, 02 June 14
SOUTH CHINA COAL SWAP WAS SHOWING A POSITIVE MOVE IN Q4, INSTEAD OF THIS WEEK'S WEAK TREND
COALspot.com: API 8 CFR South China Coal swaps for average Q3 14 deliveries lost 3.39 percent month on month and closed at US$ 72.65 per mt as on F ...
Sunday, 01 June 14
INDO - INDIA SUPRMAX FREIGHT RATES CONTINUED TO DOWN THIS WEEK
COALspot.com: The freight market was soft this past week as all sectors soften particularly Panamax index was lost 129 points or 12.88% week on wee ...
Friday, 30 May 14
CLEAN COAL PROCESSING & CONVERSION ASIA SUMMIT 2014
Clean Coal Processing & Conversion Asia Summit 2014 will be held on Nov 20-21st, 2014 in Jakarta, Indonesia.
With the cooperation of ...
Friday, 30 May 14
US COAL PRODUCTION RELATIVELY FLAT WEEK ON WEEK
COALspot.com – United States the world's second largest coal producer, produced approximately 18.6 million short tons (mmst) of coal in a ...
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- Gujarat Electricity Regulatory Commission - India
- VISA Power Limited - India
- Merrill Lynch Commodities Europe
- Ministry of Finance - Indonesia
- CIMB Investment Bank - Malaysia
- Straits Asia Resources Limited - Singapore
- Alfred C Toepfer International GmbH - Germany
- Jaiprakash Power Ventures ltd
- Maharashtra Electricity Regulatory Commission - India
- Ambuja Cements Ltd - India
- Formosa Plastics Group - Taiwan
- Marubeni Corporation - India
- Videocon Industries ltd - India
- Coastal Gujarat Power Limited - India
- Oldendorff Carriers - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Energy Development Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- PowerSource Philippines DevCo
- Cement Manufacturers Association - India
- Mercuria Energy - Indonesia
- Singapore Mercantile Exchange
- Semirara Mining Corp, Philippines
- Vedanta Resources Plc - India
- Jindal Steel & Power Ltd - India
- Aboitiz Power Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Meralco Power Generation, Philippines
- International Coal Ventures Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Krishnapatnam Port Company Ltd. - India
- Bhushan Steel Limited - India
- ASAPP Information Group - India
- Rashtriya Ispat Nigam Limited - India
- Renaissance Capital - South Africa
- Globalindo Alam Lestari - Indonesia
- Coalindo Energy - Indonesia
- Parliament of New Zealand
- Mercator Lines Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Tata Chemicals Ltd - India
- Makarim & Taira - Indonesia
- Wood Mackenzie - Singapore
- Kaltim Prima Coal - Indonesia
- Maheswari Brothers Coal Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Parry Sugars Refinery, India
- SMG Consultants - Indonesia
- Price Waterhouse Coopers - Russia
- Ind-Barath Power Infra Limited - India
- The Treasury - Australian Government
- Global Coal Blending Company Limited - Australia
- Economic Council, Georgia
- Barasentosa Lestari - Indonesia
- Sindya Power Generating Company Private Ltd
- Riau Bara Harum - Indonesia
- Larsen & Toubro Limited - India
- Indian Energy Exchange, India
- Baramulti Group, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- McConnell Dowell - Australia
- Billiton Holdings Pty Ltd - Australia
- Central Java Power - Indonesia
- Bangladesh Power Developement Board
- Georgia Ports Authority, United States
- Indonesian Coal Mining Association
- Timah Investasi Mineral - Indoneisa
- Dalmia Cement Bharat India
- Deloitte Consulting - India
- Global Business Power Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Trasteel International SA, Italy
- Malabar Cements Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PetroVietnam Power Coal Import and Supply Company
- Australian Coal Association
- Electricity Generating Authority of Thailand
- Planning Commission, India
- Kideco Jaya Agung - Indonesia
- Petron Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Carbofer General Trading SA - India
- Indika Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Xindia Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Cigading International Bulk Terminal - Indonesia
- IEA Clean Coal Centre - UK
- Bharathi Cement Corporation - India
- Posco Energy - South Korea
- Eastern Energy - Thailand
- Kumho Petrochemical, South Korea
- Bayan Resources Tbk. - Indonesia
- TeaM Sual Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Altura Mining Limited, Indonesia
- Latin American Coal - Colombia
- GMR Energy Limited - India
- Aditya Birla Group - India
- Goldman Sachs - Singapore
- Metalloyd Limited - United Kingdom
- Electricity Authority, New Zealand
- ICICI Bank Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Sakthi Sugars Limited - India
- Chamber of Mines of South Africa
- Iligan Light & Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Salva Resources Pvt Ltd - India
- CNBM International Corporation - China
- Ministry of Mines - Canada
- Neyveli Lignite Corporation Ltd, - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Antam Resourcindo - Indonesia
- Siam City Cement PLC, Thailand
- SMC Global Power, Philippines
- Manunggal Multi Energi - Indonesia
- Grasim Industreis Ltd - India
- Madhucon Powers Ltd - India
- GAC Shipping (India) Pvt Ltd
- Star Paper Mills Limited - India
- Bhoruka Overseas - Indonesia
- Directorate Of Revenue Intelligence - India
- Bhatia International Limited - India
- Mjunction Services Limited - India
- Romanian Commodities Exchange
- Indian Oil Corporation Limited
- Directorate General of MIneral and Coal - Indonesia
- Coal and Oil Company - UAE
- San Jose City I Power Corp, Philippines
- Central Electricity Authority - India
- Heidelberg Cement - Germany
- Power Finance Corporation Ltd., India
- European Bulk Services B.V. - Netherlands
- OPG Power Generation Pvt Ltd - India
- Minerals Council of Australia
- Standard Chartered Bank - UAE
- Semirara Mining and Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Interocean Group of Companies - India
- PNOC Exploration Corporation - Philippines
- Attock Cement Pakistan Limited
- Kartika Selabumi Mining - Indonesia
- Orica Mining Services - Indonesia
- White Energy Company Limited
- Kobexindo Tractors - Indoneisa
- Ministry of Transport, Egypt
- Therma Luzon, Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Indo Tambangraya Megah - Indonesia
- MS Steel International - UAE
- PTC India Limited - India
- SN Aboitiz Power Inc, Philippines
- Anglo American - United Kingdom
- Miang Besar Coal Terminal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Independent Power Producers Association of India
- Leighton Contractors Pty Ltd - Australia
- Samtan Co., Ltd - South Korea
- Bulk Trading Sa - Switzerland
- Thai Mozambique Logistica
- South Luzon Thermal Energy Corporation
- Thiess Contractors Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Simpson Spence & Young - Indonesia
- Bukit Baiduri Energy - Indonesia
- Vizag Seaport Private Limited - India
- Savvy Resources Ltd - HongKong
- Meenaskhi Energy Private Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Wilmar Investment Holdings
- Asmin Koalindo Tuhup - Indonesia
- Edison Trading Spa - Italy
- Global Green Power PLC Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- New Zealand Coal & Carbon
- Commonwealth Bank - Australia
- Gujarat Sidhee Cement - India
- India Bulls Power Limited - India
- The State Trading Corporation of India Ltd
- Mintek Dendrill Indonesia
- Port Waratah Coal Services - Australia
- Eastern Coal Council - USA
- Sree Jayajothi Cements Limited - India
- Uttam Galva Steels Limited - India
- Tamil Nadu electricity Board
- Lanco Infratech Ltd - India
- Toyota Tsusho Corporation, Japan
- Sojitz Corporation - Japan
- Bukit Makmur.PT - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Siam City Cement - Thailand
- Sical Logistics Limited - India
- Karbindo Abesyapradhi - Indoneisa
- The University of Queensland
- Africa Commodities Group - South Africa
- Borneo Indobara - Indonesia
- Australian Commodity Traders Exchange
- Kapuas Tunggal Persada - Indonesia
- Rio Tinto Coal - Australia
- Karaikal Port Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- LBH Netherlands Bv - Netherlands
- Essar Steel Hazira Ltd - India
- Medco Energi Mining Internasional
- Agrawal Coal Company - India
- Orica Australia Pty. Ltd.
- GVK Power & Infra Limited - India
- Indogreen Group - Indonesia
- London Commodity Brokers - England
- Intertek Mineral Services - Indonesia
- Banpu Public Company Limited - Thailand
- Sinarmas Energy and Mining - Indonesia
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