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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, 26 May 14
Q3 14 CFR SOUTH CHINA COAL SWAPS LOST 2.24% MONTH ON MONTH
COALspot.com: API 8 CFR South China Coal swaps for average Q3 14 deliveries lost 2.24 percent month on month and closed at US$ 73.88 per mt as on F ...
Monday, 26 May 14
NEWBUILDING ORDERING ACTIVITY RISES BY 78% IN DWT TONNAGE OVER THE FIRST 4 MONTHS OF THE YEARS, AS OWNERS INVEST$40.5 BN - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Ship owners have plunged into newbuilding orders during the first four months of the year, as overall newbuilding business ended for the first four ...
Sunday, 25 May 14
FREIGHT RATES FROM SOUTH KALIMANTAN TO EAST COAST INDIAN PORTS WERE ASSESSED AT $9.50/MT
COALspot.com: The BDI was closed at 964 points down by 6.13 pct week on week. The Cape Index was lost 172 points or 11.24% week on week and closing ...
Saturday, 24 May 14
DRY BULK MARKET'S RECOVERY IS JUST AROUND THE CORNER SAYS SHIPOWNER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Despite the weaker than expected market sentiment in the dry bulk market over the course of the past few months, analysts and shipowners alike appe ...
Friday, 23 May 14
U.S. WEEKLY COAL PRODUCTION SLIPS 1.8% WEEK ENDED MAY 17, 2014
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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Showing 3686 to 3690 news of total 6871 |
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- Billiton Holdings Pty Ltd - Australia
- European Bulk Services B.V. - Netherlands
- Heidelberg Cement - Germany
- Global Business Power Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Deloitte Consulting - India
- Kartika Selabumi Mining - Indonesia
- Vizag Seaport Private Limited - India
- AsiaOL BioFuels Corp., Philippines
- Dalmia Cement Bharat India
- Semirara Mining Corp, Philippines
- Singapore Mercantile Exchange
- Marubeni Corporation - India
- Indonesian Coal Mining Association
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- India Bulls Power Limited - India
- Madhucon Powers Ltd - India
- Eastern Coal Council - USA
- Pipit Mutiara Jaya. PT, Indonesia
- Bharathi Cement Corporation - India
- Semirara Mining and Power Corporation, Philippines
- Thai Mozambique Logistica
- Binh Thuan Hamico - Vietnam
- International Coal Ventures Pvt Ltd - India
- Independent Power Producers Association of India
- Chamber of Mines of South Africa
- Savvy Resources Ltd - HongKong
- Wood Mackenzie - Singapore
- LBH Netherlands Bv - Netherlands
- Kobexindo Tractors - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- Merrill Lynch Commodities Europe
- Directorate Of Revenue Intelligence - India
- Barasentosa Lestari - Indonesia
- Kumho Petrochemical, South Korea
- Coalindo Energy - Indonesia
- New Zealand Coal & Carbon
- Wilmar Investment Holdings
- Trasteel International SA, Italy
- Vijayanagar Sugar Pvt Ltd - India
- Rio Tinto Coal - Australia
- TeaM Sual Corporation - Philippines
- Latin American Coal - Colombia
- IHS Mccloskey Coal Group - USA
- Edison Trading Spa - Italy
- Bhushan Steel Limited - India
- Power Finance Corporation Ltd., India
- McConnell Dowell - Australia
- Ministry of Mines - Canada
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Parliament of New Zealand
- Sree Jayajothi Cements Limited - India
- Aditya Birla Group - India
- Oldendorff Carriers - Singapore
- Coal and Oil Company - UAE
- Price Waterhouse Coopers - Russia
- Sindya Power Generating Company Private Ltd
- South Luzon Thermal Energy Corporation
- Sakthi Sugars Limited - India
- Posco Energy - South Korea
- Timah Investasi Mineral - Indoneisa
- Meralco Power Generation, Philippines
- Siam City Cement - Thailand
- Port Waratah Coal Services - Australia
- White Energy Company Limited
- Bulk Trading Sa - Switzerland
- Gujarat Sidhee Cement - India
- Chettinad Cement Corporation Ltd - India
- Parry Sugars Refinery, India
- Intertek Mineral Services - Indonesia
- Eastern Energy - Thailand
- SMG Consultants - Indonesia
- Global Coal Blending Company Limited - Australia
- CIMB Investment Bank - Malaysia
- Orica Australia Pty. Ltd.
- Energy Development Corp, Philippines
- Sical Logistics Limited - India
- Bhatia International Limited - India
- GAC Shipping (India) Pvt Ltd
- Economic Council, Georgia
- Petron Corporation, Philippines
- VISA Power Limited - India
- PTC India Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Georgia Ports Authority, United States
- Straits Asia Resources Limited - Singapore
- Leighton Contractors Pty Ltd - Australia
- Renaissance Capital - South Africa
- Vedanta Resources Plc - India
- Toyota Tsusho Corporation, Japan
- Iligan Light & Power Inc, Philippines
- The State Trading Corporation of India Ltd
- Kapuas Tunggal Persada - Indonesia
- Africa Commodities Group - South Africa
- Maharashtra Electricity Regulatory Commission - India
- Agrawal Coal Company - India
- Kaltim Prima Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Ministry of Finance - Indonesia
- London Commodity Brokers - England
- Central Java Power - Indonesia
- Bhoruka Overseas - Indonesia
- Sarangani Energy Corporation, Philippines
- Larsen & Toubro Limited - India
- Medco Energi Mining Internasional
- CNBM International Corporation - China
- Romanian Commodities Exchange
- Star Paper Mills Limited - India
- Rashtriya Ispat Nigam Limited - India
- GVK Power & Infra Limited - India
- Anglo American - United Kingdom
- Manunggal Multi Energi - Indonesia
- Australian Commodity Traders Exchange
- Alfred C Toepfer International GmbH - Germany
- Thiess Contractors Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- The University of Queensland
- Antam Resourcindo - Indonesia
- Jaiprakash Power Ventures ltd
- Attock Cement Pakistan Limited
- PetroVietnam Power Coal Import and Supply Company
- Neyveli Lignite Corporation Ltd, - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- GN Power Mariveles Coal Plant, Philippines
- Meenaskhi Energy Private Limited - India
- Electricity Generating Authority of Thailand
- Mintek Dendrill Indonesia
- Planning Commission, India
- Central Electricity Authority - India
- Holcim Trading Pte Ltd - Singapore
- Borneo Indobara - Indonesia
- Formosa Plastics Group - Taiwan
- Bayan Resources Tbk. - Indonesia
- Sinarmas Energy and Mining - Indonesia
- MS Steel International - UAE
- Altura Mining Limited, Indonesia
- PowerSource Philippines DevCo
- Miang Besar Coal Terminal - Indonesia
- Indian Energy Exchange, India
- OPG Power Generation Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Global Green Power PLC Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Standard Chartered Bank - UAE
- Australian Coal Association
- Salva Resources Pvt Ltd - India
- Ministry of Transport, Egypt
- Riau Bara Harum - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- ASAPP Information Group - India
- Karbindo Abesyapradhi - Indoneisa
- Uttam Galva Steels Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- PNOC Exploration Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Lanco Infratech Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Tata Chemicals Ltd - India
- Globalindo Alam Lestari - Indonesia
- ICICI Bank Limited - India
- Interocean Group of Companies - India
- Carbofer General Trading SA - India
- Mercuria Energy - Indonesia
- Indian Oil Corporation Limited
- Indo Tambangraya Megah - Indonesia
- Ind-Barath Power Infra Limited - India
- Banpu Public Company Limited - Thailand
- Energy Link Ltd, New Zealand
- Petrochimia International Co. Ltd.- Taiwan
- Makarim & Taira - Indonesia
- San Jose City I Power Corp, Philippines
- Indogreen Group - Indonesia
- GMR Energy Limited - India
- Minerals Council of Australia
- Malabar Cements Ltd - India
- SN Aboitiz Power Inc, Philippines
- Indika Energy - Indonesia
- Metalloyd Limited - United Kingdom
- Krishnapatnam Port Company Ltd. - India
- Siam City Cement PLC, Thailand
- Karaikal Port Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Aboitiz Power Corporation - Philippines
- Xindia Steels Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Mercator Lines Limited - India
- Electricity Authority, New Zealand
- Baramulti Group, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Tamil Nadu electricity Board
- Grasim Industreis Ltd - India
- IEA Clean Coal Centre - UK
- Bangladesh Power Developement Board
- Essar Steel Hazira Ltd - India
- Simpson Spence & Young - Indonesia
- Coastal Gujarat Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ambuja Cements Ltd - India
- Bukit Makmur.PT - Indonesia
- Bukit Baiduri Energy - Indonesia
- Commonwealth Bank - Australia
- Mjunction Services Limited - India
- SMC Global Power, Philippines
- Pendopo Energi Batubara - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Samtan Co., Ltd - South Korea
- Sojitz Corporation - Japan
- Videocon Industries ltd - India
- Orica Mining Services - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Cement Manufacturers Association - India
- The Treasury - Australian Government
- Goldman Sachs - Singapore
- Maheswari Brothers Coal Limited - India
- Kepco SPC Power Corporation, Philippines
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