Boston, MA -- (ReleaseWire) -- 06/03/2014 -- The expected boost to petrochemicals exports following the lifting of international sanctions did not occur in Q114, but BMI's latest Iran Petrochemicals report expects growth in coming months. Sustained growth will depend on a number of factors, including permanent removal of international sanctions, improved gas feedstock supply, foreign investment and domestic market growth. BMI believes Iran is far from securing these conditions.
Exports are crucial to the Iranian petrochemicals industry, as the domestic market, which is currently in a slump, is unable to absorb the rapid increase in production capacity. Iran's petrochemical exports rose just 1% y-o-y to USD10.72bn in the 2013/14 Iranian year, ending 20 March. In terms of volume, exports declined 4% y-o-y to 14.5mn tonnes. The outturn was far lower than the government's target of 17.4mn tonnes of petrochemicals exports, valued at USD13bn, indicating that the industry had been hit hard by the international sanctions regime.
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In H114, Iran is able to export crude and petrochemical products unhampered following the temporary lifting of international sanctions under the Geneva deal on its nuclear programme. The sanctions relief extends to associated services - including insurance, transportation or financial service - in trading the commodities.
However, in Q114 there was no perceptible improvement in the country's petrochemicals exports. While exports were up 3.6% m-o-m to USD868mn in the last month of the past Iranian year, they were still 2.9% below the average for the year. The problems were caused by a temporary halt in the supply of natural gas to petrochemicals complexes due to growth in domestic gas consumption during the winter months. Iranian petrochemical complexes need 30-35mn cubic metres of gas per day, but the gas supply to the petrochemical complexes was reportedly reduced to 15mn cubic metres in February. The oil ministry had ordered the petrochemical complexes to lower their production rate to the minimum, or even halt production until further notice. The cost of the shutdown to the petrochemicals industry was estimated at USD1.5bn.
- Iran requires USD31bn to initiate 60 semi-finished petrochemical projects of which an estimated USD5bn has already been spent. The projects are expected to increase the country's annual petrochemical output by 55mn tonnes once the projects come on stream. -
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