"Iran Petrochemicals Report Q3 2016" is now available at Fast Market Research
Recently published research from Business Monitor International, "Iran Petrochemicals Report Q3 2016", is now available at Fast Market Research
[ClickPress, Tue Jun 14 2016] The lifting of sanctions will stimulate an immediate export boost for the Iranian petrochemicals industry, which has been operating well under capacity even as it has expanded in recent years. The government has ambitious plans for the sector with the hope that foreign investment will enable it to leverage its massive upstream resources to expand basic chemicals output. However, Iran continues to face infrastructural and regulatory difficulties and a depressed market outlook. Until these are overcome, the industry will struggle to meet the target of more than doubling petrochemicals capacity to 129mn tonnes per annum (tpa) by 2021.
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The surge in capacity will not be sustainable if feedstock supply is not forthcoming and markets do not absorb output. Some complexes are suffering feedstock shortages, particularly during winter months. Iranian petrochemical complexes need 30-35mn cubic metres of gas per day. Besides pressure on supply, Iranian ethane feedstock is nearly three times more expensive than in Saudi Arabia. While the plants may nominally come on stream, operation rates could be low and plants will be operating at a loss unless Iranian producers can pass on the full costs of production onto consumers in export markets.
Investor wariness will affect Iran's hopes of diversifying downstream operations, but also its ability to increase upstream capacities, which are crucial to the development of the petrochemical sector. The political will to liberalise the petrochemicals sector is also wavering. Overbearing state interventionism and price fixing have prevented the growth of the industry. A reduction in state involvement in the sector and the provision of more facilities to investors are essential to secure future growth in petrochemicals capacity. A growing export market is also essential to help offset the negative impact of domestic sales at government fixed rates.
Planned projects would raise Iran's petrochemicals capacity three-fold to 180mn tpa by 2022, although it is uncertain whether this target will be reached. BMI expects the next five years to see the completion of the Olefins 11 and 12 project, which will have capacities of 2.0mn tpa and 1.2mn tpa respectively. Meanwhile, the USD12bn petrochemical hub at Chabahar - the Makran Petrochemical Plan - will add 1.2mn tpa of ethylene and 900,000tpa of PE.
Iran's main export market, China, will move towards self-sufficiency, while Asian markets will be increasingly supplied by low-cost US petrochemicals output. Low-capacity utilisation is therefore going to be an enduring problem. Moreover, although Iran will be keen to secure tie-ups with European petrochemicals producers, the country will retain a highly risky business environment, and there is no certainty that Iran's isolation will end. The industry will need foreign skills and equipment if it is to add value to output and diversify its product portfolio.
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