Iranian petrochemicals

It is thought by BMI that the Iranian petrochemicals industry will continue struggling with over capacity in spite of predicted economic growth in 2014, due to ongoing international sanctions and slowing demand growth in China, its main export market. Protectionism is possibly the only shield to protect the industry from a severe contraction, but there are risks of plant idling, postponement of projects and effective insolvency that will undermine the government’s target of reaching a petrochemicals capacity of 100 million tpa within the next 5 years.

Exports

In the first half of the current Iranian calendar year, Iran exported US$ 4.84 billion and no figures were released by the government This indicates that the country is significantly undershooting its target of US$ 13 billion for FY 2013/14, in which it hopes to export 17.4 million t of petrochemical products. It is possible that the poorer than expected outcome could be partly explained by lower plant utilisation levels caused by feedstock shortages as well as some maintenance shutdowns. Yet, BMI believes that Iran is struggling with the continued effects of sanctions, the gradual shift towards a more even supply/demand balance in China and the lack of added value to exports.

To BMI it looks like Iran’s export oriented petrochemicals sector is facing a bleak future due to the sanctions that are cutting most of its global trade. EU financial sanctions have also prompted insurers to refuse cover for cargoes from Iran. Also, shippers do not want to touch any trade that could risk business with clients such as major oil firms.

Industry and economic growth

The domestic Iranian petrochemicals market is currently in a slump and unable to absorb the rapid increase in production capacity. In 2013, Iran’s economy contracted by an estimated 2%, but BMI expects a return of growth from this year. Yet, in spite of economic recovery, major petrochemicals consuming industries are likely to lag behind, whit the automotive industry set for anaemic growth while construction and agribusiness will flatline over the next five years.

Production forecasts

• By 2018, BMI expect ethylene capacity to total 11.08 million tpa with the scheduled completion of the olefins 11 and 12 projects, which will have capacities of 2 million tpa and 1.2 million tpa respectively.
• Between 2013 – 2018 1.7 million tpa of ethylene capacity, 1.8 million tpa of PE, 500 000 tpa of other polymers capacity, 5.84 million tpa of methanol, 1.68 million tpa of ammonia and 5.16 million tpa of urea capacity are expected online with reference to current plans.
• New complexes in Ilam and Assaluyeh are at the risk of being delayed or cancelled. Ilam is expected to come online this year and have an ethylene capacity of 500 000 tpa. Assaluyeh is expected to be online next year with an ethylene capacity of 1.2 million tpa.

Adapted from a press release by Claira Lloyd.

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