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