Iran petchem players shrug off US pullout from nuclear deal
In Asia, petrochemical sources who actively conduct business with Iran were not so optimistic
PETROTAHLIL-SINGAPORE (ICIS)--Iran petrochemical players have learned to adapt to difficult business conditions over the years and were generally shrugging off US’ plans to re-impose sanctions
“Companies who have business in the US will probably follow the US rules, but other smaller companies may do business as usual,” said a source from a major Iranian producer
The US on 8 May announced its decision to pull out of the 2015 Iran nuclear deal, which was aimed at curbing Tehran’s nuclear development in exchange of lifting of some financial and economic sanctions against the Middle Eastern country
The Joint Comprehensive Plan of Action (JCPOA), or the Iran nuclear agreement, was signed three years ago between six world powers – the US, UK, France, Germany, Russia, China – and Iran
There were concerns that the US pullout will spell the collapse of the Iran nuclear deal. Much would depend on the commitment of the other five signatories to the pact
“As you know we were in the same situation before, so it is not new,” said one market source in Iran’s base oils industry
For Iran, dealing with international sanctions has largely become a way of life in the exports business
“The renewed sanctions don’t make any difference,” said one Iranian businessman
Still, the main risk would be on crude oil prices, which would directly affect production costs for petrochemicals
The US’ announcement of its withdrawal from the Iran deal sent crude prices surging last week to their highest since late 2014, on concerns that crude supply from Tehran would be curtailed
At midday, Brent was trading at $76.74/bbl, while US crude was at $70.46/bbl
“There’s a direct relation between [jet] kerosene which is LAB feedstock and crude oil,” said one LAB producer in Iran
Iran sells a sizeable proportion of LAB to buyers in India. A decision by Indian traders to continue business with Iran would simply hinge on whether the sanctions affect LAB prices, market sources said
“For sure [US president] Trump’s decision will impact the market, but we will have to see if downstream manufacturers or end-users will be willing to accept the higher offers,” said an Indian LAB trader
Iran is also a key supplier of base oils and lubricants for the Middle East region
So far, there has been little impact in that industry, although the market outlook has been clouded by uncertainties over the US sanctions
The country is also an important producer of isocyanates, used in the manufacture of polyurethane (PU) foam product
Iran’s Karoon Petrochemical is one of only two isocyanate producers the Middle East. It can produce 40,000 tonnes/year of methyl di-p-phenylene isocyanate (MDI) and 40,000 tonnes of toluene di-isocyanate (TDI) at its plant in the Bandar Imam Khomeini Petrochemical Complex
The majority of Karoon’s output is aimed at Iran’s domestic market, while much of its export cargoes are sold in the Middle East, where some market players said the US sanctions are applied less strictly
On a broader context, the likelihood of tighter international banking rules could hit the Iranian economy
“(The) economic downturn may become deeper but most of the business activists got used to such problems during years of similar situations,” another Iranian petrochemical industry source said
In Asia, petrochemical sources who actively conduct business with Iran were not so optimistic
“Banks have started to stop dealing with Iran… this is what I can confirm,” said one Asian source