New Market Study Published: Iran Petrochemicals Report Q4 2013

New Energy market report from Business Monitor International: "Iran Petrochemicals Report Q4 2013"

[UKPRwire, Mon Sep 23 2013] In the first quarter of the current Iranian year (from March 20), Iran claims that five petrochemical projects came online with a total investment of IRR8.72trn. These projects have raised nameplate production of petrochemicals by 2.73mn tonnes per annum. While capacity continues to accelerate, it is certain that output is not growing at the same pace as the industry struggles with an international sanctions regime that has undermined exports and driven the economy into recession.

Iran's nominal petrochemical production capacity increased by about 13% to around 60mn tonnes per annum (tpa) in FY2012/13, according to official sources. BMI estimates that petrochemicals output was around 40mn tonnes, of which 15.8mn tonnes worth US$11.2bn was exported. This puts capacity utilisation at around two-thirds, which BMI believes is well below break-even. The value of exports was also below the government's US$15bn target, indicating that the industry was affected by both the impact of punitive international sanctions as well as slower economic activity in Asia. Nevertheless, in mid-2013, the managing director of National Petrochemical Company (NPC), Abdolhossein Bayat, claimed that Iran was approaching self-sufficiency in petrochemicals and over 80% of the country's petrochemical parts and technical expertise had been indigenized. Iran has frequently exaggerated its ability and capacity in a political effort to downplay the effect of sanctions on domestic industry.

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BMI has made the following revisions to its forecasts:

* Iran is planning to export 17.4mn tonnes of petrochemical products worth US$13bn in FY2013/14, which is a more realistic target than its FY2012/13 target. However, it will be insufficient to absorb the ongoing growth in capacity.
* BMI estimates that in 2012/13 Iranian petrochemicals production was around two-thirds of capacity, based on the government's figures for output and capacity expansion. With output unlikely to keep abreast of capacity growth, operating rates are likely to fall every further with the prospect that petrochemicals companies such as NPC will be effectively insolvent and reliant on state subsidies.
* The sanctions regime has led to a balancing of trade, with imports declining faster than exports as the economy contracts under the weight of sanctions on energy exports.
* The market outlook has slightly improved from in the previous quarter. We project Iran's economy to contract by 2.0% and then grow 2.8% in real terms in 2013 and 2014, respectively, compared to our previous forecasts of 2.3% contraction in 2013 and 2.4% growth in 2014.
* The one area that could provide growth is the Iranian automotive industry. The next five years will be focused on recovery in the car industry to pre-2012 levels, which should help support consumption of engineering plastics and synthetic rubbers.

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