2009-05-12 11:11:03 -
Iran Petrochemicals Report Q2 2009 - a new market research report on companiesandmarkets.com www.companiesandmarkets.com/Summary-Market-Report/Iran-Petrochem ..
The Iranian petrochemical industry will not escape the effects of the global economic crisis, with the latest Iran Petrochemicals Report noting lower output growth and slower progress on projects currently underway or planned.
BMI believes that sales and therefore production have been affected, with a contraction in output of up to 10% in the second half of 2008/09. We are mindful
of the Iranian governments desire to play down and suppress bad news, particularly in the run up to a presidential election in which the incumbent will be defending his track record on the economy. It is hard to believe that the collapse in the Gulf property market, with its resulting effects on construction, and the slump in the automotive industry two major petrochemicals consumers will not have a major negative impact on the Iranian petrochemicals industry, both in terms of current output and planned capacity expansion.
The fall in oil prices will have varying effects on the Iranian petrochemicals industry. As naphtha prices fall, Iranian petrochemicals producers reliant on ethane will find the export market increasingly competitive at a time of economic downturn. Lower oil prices also mean lower oil revenue, reductions in foreign exchange reserves and worsening liquidity problems in the financial sector. Domestic liquidity will be impacted by fewer petrodollars entering the banking system, leading to a slowdown in lending to businesses. Petrochemicals companies will find it harder to obtain finance and the import material and machinery for the construction of petrochemical projects. As regards the crucial hydrocarbons sector, we expect that much-needed investment will remain subdued until the oil market recovers. In addition, foreign investment into the hydrocarbon sector is likely to remain muted as long as Iran faces international sanctions relating to its nuclear program; international oil companies (IOCs) will continue to come under, and most likely accede to, US pressure to shun investing in the Islamic Republic.
BMI estimates Iranian petrochemicals exports reached 11.2mn tonnes in 2008/09, which is 1.8mn tonnes below the target set by Irans petrochemicals exporter, the Iran Petrochemical Commercial Company (IPCC). In terms of value, we project the value of exports to be around US$7.9bn, US$1.1bn below IPCCs target but still 32% above the previous year. The situation may have been worse if it had not been for the completion of the Jam Petrochemicals Complex in December 2008, three years behind schedule.
There are therefore doubts over the governments hopes to establish 47 petrochemical operations by the end of the Fifth Five-Year Economic Development Plan in 2015, adding a total of 43mn tonnes per annum (tpa) of capacity. According to officials, once the projects become operational, Iran will represent at least 5.3% of global petrochemical output and 36% of Middle Eastern production. The Oil Ministry has set targets for annual production of 11.5mn tpa of ethylene, 11.5mn tpa of polymer and 3.4mn tpa of urea, with a target of becoming the worlds leading producer of methanol with 7.5mn tpa of methanol capacity representing 18% of global capacity. BMI believes that these targets are unrealistic in view of the difficulties the petrochemicals industry is facing in relation to financing. At the same time, elevated risk associated with emerging markets as well as the sanctions facing Iran will make it difficult to tap international financial markets and foreign investors.
