2013-03-19 13:23:17 - Recently published research from Business Monitor International, "Iran Petrochemicals Report Q2 2013", is now available at Fast Market Research
BMI View: We believe there are a number of problems in store for the sector as it continues its rapid expansion at a time of domestic economic turmoil and slumping growth in the few significant markets still open to Iranian producers. However, there has been some progress in ongoing projects and the government is attempting to overcome restraints and the negative impact of the withdrawal of several foreign partners with exposure to North American and European markets. Although the government wishes to raise national petrochemicals capacity to 100mn tonnes per annum (tpa) by 2017, we think this is unlikely due to the impact of the sanctions and the lack of imports of technology and basic materials needed to make Iran
a world class petrochemicals hub.
The punitive international sanctions regime faced by Iran coupled with heightened political risk associated with the threat of military action and the presidential elections in 2013 provide a bleak outlook for Iran. The government's decision in November 2012 to exempt certain petrochemicals from its exports ban will provide some modest upside. Poly ethylene (PE), polyvinyl chloride (PVC), styrene monomer, benzene, caustic soda, melamine and linear alkyl benzene (LAB) were all taken off the list of commodities banned for export in October 2012. With the best part of a month in lost exports at a time when the country is facing European sanctions, the ban will certainly undermine the government's target of US$15bn of petrochemicals exports in the 2012/13 Iranian year, which ends on March 20. In the first 10 months of the year, the government reported that it had exported around 14.5mnt of petrochemicals, including gas condensates, propane and butane in the figure, but did not provide a value. The resulting confusions over trade and the current regulatory climate reflect the distress experienced by the Iranian petrochemicals industry. While the government remains upbeat in its conviction that the domestic petrochemicals industry will be able to post strong annual growth rates over the next five years, BMI is increasingly pessimistic.
Full Report Details at
- www.fastmr.com/prod/552325_iran_petrochemicals_report_q2_2013.as ..
In spite of the difficulties facing the sector, petrochemicals producers continue to complete expansion plans with the inauguration of eight new projects in the 2012/13 Iranian year (staring March 20) that are set to increase total petrochemicals capacity by 6.5mntpa. Most recently, the industry has seen the start-up of Kavyan Petrochemicals' 1mntpa ethane cracker in Bushehr, four months behind schedule.
BMI has made the following revisions to its forecasts:
* We project Iran's economy to expand 0.5% and 2.0% in real terms in 2013 and 2014, respectively, from our estimate of a 3.4% contraction in 2012. Growth will return this year, however we stress that this is largely a product of a collapse in imports, which highlights a sharp decline in domestic demand. Moreover, with sanctions unlikely to be lifted anytime soon, the economy will grow below potential over the coming years. In line with this trend, we expect petrochemicals to benefit from increased protectionism, but demand growth will be weak owing to the expected stagnation in domestic consumer markets.
* In January 2013, Iran's National Development Fund (NDF) announced it had allocated US$3.6bn for the development of the country's petrochemical industry, including the construction of 11 petrochemicals projects. These are likely to be projects currently under development. The NDF claims it has provided the foreign currency credit for the projects. However, the second phase of the Assaluyeh complex, which includes 26 projects, is not progressing to schedule due to problems in securing financing, largely due to international sanctions.
* With a surge in capacity coinciding with a decline in key industrial consumers, BMI believes that new capacity is unlikely to provide growth in production. While the plants may nominally come onstream, operation rates are likely to be low and plants will be operating at a loss.
* This quarter, Iran is in sixth place in BMI's proprietary Middle East and Africa Petrochemicals Rankings with a score of 56.9 points, unchanged since the previous quarter with risks remaining on the downside. It lies 0.9 points behind Israel and 1.7 points ahead of South Africa in the regional ranking.
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