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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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Wednesday, 14 May 14
COAL PRICES IN CHINA HAVE DROPPED TO THEIR LOWEST LEVELS SINCE END-2008
COALspot.com: Coal prices in China have dropped to their lowest levels since end-2008, Fitch says in its latest rating report on one of the coal ...
Wednesday, 14 May 14
ALMOST THROUGH THE HALF OF THE YEAR, THE DRY BULK INDEX SHOW SIGNS OF WEAKNESS; CREATING TO BOTH EXISTING SHIP OWNERS AND POTENTIAL INVESTORS A LOT OF INSECURITY - PANOS MAKRINOS
Almost through the half of the year, the overall shipping market and more specifically the Dry Bulk Index show signs of weakness, creating to bo ...
Tuesday, 13 May 14
NPC COAL EXPORT VOLUMES PLUNGE TO 2.48 MMT WEEK ON WEEK
COALspot.com: In the week ended 07:00 hours 12 May 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Quee ...
Tuesday, 13 May 14
YET ANOTHER POSIDONIA EXHIBITION IS ON ITS WAY - INTERMODAL
With less than a month to go before another Posidonia exhibition starts and all the parties and celebrations get under way we thought that it wo ...
Monday, 12 May 14
TAIPOWER TO IMPORT AROUND 1 MMT OF SUB-BITUMINOUS COAL DURING AUGUST 2014 THROUGH NOVEMBER 2014
COALspot.com - Taiwan Power Company intends to procure 1.050 million tons of sub-bituminous coal for Taipower thermal power plant through open t ...
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Showing 3706 to 3710 news of total 6871 |
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- Sree Jayajothi Cements Limited - India
- Parry Sugars Refinery, India
- Kalimantan Lumbung Energi - Indonesia
- Star Paper Mills Limited - India
- Antam Resourcindo - Indonesia
- Indo Tambangraya Megah - Indonesia
- Kaltim Prima Coal - Indonesia
- Petron Corporation, Philippines
- Uttam Galva Steels Limited - India
- PTC India Limited - India
- Kartika Selabumi Mining - Indonesia
- SN Aboitiz Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Cement Manufacturers Association - India
- Timah Investasi Mineral - Indoneisa
- Altura Mining Limited, Indonesia
- Kapuas Tunggal Persada - Indonesia
- Ministry of Mines - Canada
- Thiess Contractors Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Bangladesh Power Developement Board
- Simpson Spence & Young - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Heidelberg Cement - Germany
- The State Trading Corporation of India Ltd
- Thai Mozambique Logistica
- Semirara Mining and Power Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Mjunction Services Limited - India
- Malabar Cements Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Ministry of Finance - Indonesia
- Directorate Of Revenue Intelligence - India
- Deloitte Consulting - India
- Standard Chartered Bank - UAE
- Central Java Power - Indonesia
- Mercuria Energy - Indonesia
- TeaM Sual Corporation - Philippines
- SMC Global Power, Philippines
- Goldman Sachs - Singapore
- Ind-Barath Power Infra Limited - India
- Aboitiz Power Corporation - Philippines
- Global Green Power PLC Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Interocean Group of Companies - India
- Bayan Resources Tbk. - Indonesia
- Jaiprakash Power Ventures ltd
- Sakthi Sugars Limited - India
- Commonwealth Bank - Australia
- Australian Coal Association
- Marubeni Corporation - India
- Central Electricity Authority - India
- CNBM International Corporation - China
- Australian Commodity Traders Exchange
- Bharathi Cement Corporation - India
- Bulk Trading Sa - Switzerland
- Trasteel International SA, Italy
- Borneo Indobara - Indonesia
- Price Waterhouse Coopers - Russia
- AsiaOL BioFuels Corp., Philippines
- Bhoruka Overseas - Indonesia
- Larsen & Toubro Limited - India
- Coal and Oil Company - UAE
- Orica Australia Pty. Ltd.
- Xindia Steels Limited - India
- Billiton Holdings Pty Ltd - Australia
- Formosa Plastics Group - Taiwan
- Energy Link Ltd, New Zealand
- Savvy Resources Ltd - HongKong
- Agrawal Coal Company - India
- Krishnapatnam Port Company Ltd. - India
- Sinarmas Energy and Mining - Indonesia
- Economic Council, Georgia
- Manunggal Multi Energi - Indonesia
- Mercator Lines Limited - India
- Kobexindo Tractors - Indoneisa
- Karaikal Port Pvt Ltd - India
- Parliament of New Zealand
- India Bulls Power Limited - India
- Coastal Gujarat Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- GVK Power & Infra Limited - India
- ICICI Bank Limited - India
- LBH Netherlands Bv - Netherlands
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Wilmar Investment Holdings
- Globalindo Alam Lestari - Indonesia
- Power Finance Corporation Ltd., India
- Baramulti Group, Indonesia
- Independent Power Producers Association of India
- Mintek Dendrill Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- London Commodity Brokers - England
- Intertek Mineral Services - Indonesia
- Anglo American - United Kingdom
- Miang Besar Coal Terminal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Latin American Coal - Colombia
- Indian Energy Exchange, India
- Indika Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Semirara Mining Corp, Philippines
- Sical Logistics Limited - India
- Straits Asia Resources Limited - Singapore
- IHS Mccloskey Coal Group - USA
- Sindya Power Generating Company Private Ltd
- Aditya Birla Group - India
- PetroVietnam Power Coal Import and Supply Company
- Chamber of Mines of South Africa
- European Bulk Services B.V. - Netherlands
- Medco Energi Mining Internasional
- Samtan Co., Ltd - South Korea
- Singapore Mercantile Exchange
- Kumho Petrochemical, South Korea
- Bank of Tokyo Mitsubishi UFJ Ltd
- Georgia Ports Authority, United States
- Siam City Cement PLC, Thailand
- Gujarat Sidhee Cement - India
- Metalloyd Limited - United Kingdom
- Electricity Generating Authority of Thailand
- Bhatia International Limited - India
- Meenaskhi Energy Private Limited - India
- Sojitz Corporation - Japan
- Indogreen Group - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Global Business Power Corporation, Philippines
- Eastern Coal Council - USA
- Essar Steel Hazira Ltd - India
- GMR Energy Limited - India
- Banpu Public Company Limited - Thailand
- Kideco Jaya Agung - Indonesia
- Tata Chemicals Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bhushan Steel Limited - India
- Jindal Steel & Power Ltd - India
- Electricity Authority, New Zealand
- Wood Mackenzie - Singapore
- Bukit Makmur.PT - Indonesia
- Carbofer General Trading SA - India
- Kohat Cement Company Ltd. - Pakistan
- Indonesian Coal Mining Association
- Lanco Infratech Ltd - India
- Energy Development Corp, Philippines
- McConnell Dowell - Australia
- GN Power Mariveles Coal Plant, Philippines
- New Zealand Coal & Carbon
- San Jose City I Power Corp, Philippines
- GAC Shipping (India) Pvt Ltd
- Makarim & Taira - Indonesia
- International Coal Ventures Pvt Ltd - India
- Dalmia Cement Bharat India
- Holcim Trading Pte Ltd - Singapore
- Videocon Industries ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Pendopo Energi Batubara - Indonesia
- IEA Clean Coal Centre - UK
- Binh Thuan Hamico - Vietnam
- Oldendorff Carriers - Singapore
- Tamil Nadu electricity Board
- Madhucon Powers Ltd - India
- Indian Oil Corporation Limited
- Therma Luzon, Inc, Philippines
- Global Coal Blending Company Limited - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ceylon Electricity Board - Sri Lanka
- Port Waratah Coal Services - Australia
- Merrill Lynch Commodities Europe
- Renaissance Capital - South Africa
- Ambuja Cements Ltd - India
- MS Steel International - UAE
- Ministry of Transport, Egypt
- VISA Power Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Barasentosa Lestari - Indonesia
- Planning Commission, India
- Siam City Cement - Thailand
- Minerals Council of Australia
- Maheswari Brothers Coal Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- ASAPP Information Group - India
- Posco Energy - South Korea
- The Treasury - Australian Government
- Kepco SPC Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Maharashtra Electricity Regulatory Commission - India
- The University of Queensland
- Riau Bara Harum - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Grasim Industreis Ltd - India
- Bukit Baiduri Energy - Indonesia
- PowerSource Philippines DevCo
- Vizag Seaport Private Limited - India
- PNOC Exploration Corporation - Philippines
- OPG Power Generation Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Orica Mining Services - Indonesia
- Attock Cement Pakistan Limited
- Coalindo Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Meralco Power Generation, Philippines
- Romanian Commodities Exchange
- Neyveli Lignite Corporation Ltd, - India
- Edison Trading Spa - Italy
- Rio Tinto Coal - Australia
- Vedanta Resources Plc - India
- Eastern Energy - Thailand
- White Energy Company Limited
- Salva Resources Pvt Ltd - India
- Africa Commodities Group - South Africa
- South Luzon Thermal Energy Corporation
- SMG Consultants - Indonesia
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