Iran's petrochemicals exports have not received the expected boost following the lifting of international sanctions. While output has grown, the rate of growth is well below the double digits the government had expected. Feedstock supply and technical problems are constraints, but the ongoing uncertainty over the US's unilateral sanctions is making traders additionally nervous. This will feed into foreign investor anxiety and risk aversion, which is not helped by delays in confirming the terms of oil and gas contracts.
Iran produced 46.4mn tonnes of petrochemicals in FY2015/16, but for the current year (FY2016/17), the government has forecast 54.7mn tonnes, representing annual growth of nearly 18%. However, the petrochemicals growth rate in the first seven months of the current Iranian year was just 6% year-on-year (y-o-y) with exports up 4%, falling well short of expectations.
While export growth has been meagre, sanctions relief has been insufficient to raise domestic demand for petrochemicals. At issue is the decline in the funding for construction projects, a decline in demand for housing and the growing recession in the industrial sector. Domestic producers of various goods - including petrochemicals - are reliant on selling to state-owned enterprises that are, in turn, dependent on the government buying their products. Due to low oil prices and government subsidies largely being extended to consumers rather than producers, the local industry is faced with major problems, and demand is low.
BMI projects petrochemicals output of 50mn tonnes, with output growth reaching 7.8% and capacity utilisation at 77% up from 68% in FY2015/16. Factors keeping back growth include a shortage of gas feedstock, ageing production units and the continued effects of sanctions. Even existing capacity could spur massive growth in output, although feedstock problems will place a constraint on growth. To operate at reasonable levels of capacity utilisation, olefins output would have to increase by one-third and polymers by one-third. BMI believes that, even with the rates of growth observed in recent months, capacity utilisation rates will remain suboptimal in FY2016/17.
In October 2016, Japan's Sojitz signed a memorandum of understating (MoU) with Iran's National Petrochemical Company (NPC) to carry out a feasibility study on the construction of a methanol-to-propylene plant in Iran. Royal Dutch Shell also signed a preliminary MoU with NPC for cooperation in the petrochemical industry. In the same month, talks began with an Italian consortium led by Fiat to investigate potential petrochemicals complexes. Reports suggest an interest in propylene dehydrogenation (PDH) and propylene units of Jam Petrochemical Company.
Domestic consumption is set to rise over the next five years. The automotive industry is undergoing a resurgence of activity as a result of economic recovery. We forecast total vehicle production to grow 11.2% in 2016, and at an annual average of 10.8% to 2020. This will, in turn, stimulate domestic consumption of a wide range of petrochemicals used in car-making, including synthetic rubber, engineering plastics and polyurethanes.
BMI has revised forecasts to take into account the NPC's announced timeline of projects along the West Ethylene Pipeline. We envisage 15.3mn tonnes per annum (tpa) of ethylene capacity by 2021 with 9.9mn tpa of polyethylene and 1.9mn tpa of polypropylene. Other major growth areas are methanol 24mn tpa and fertilisers with ammonia at 9.8mn tpa and urea at 15.4mn tpa. However, this is conditioned by the ability to realise its targets, which frequently slipped while the country was under sanctions.
This quarter, Iran has seen a 0.7-point decline in its overall Petrochemicals Risk/Reward Index score to 63.6, due to a decline in in its Country Risk score. Detailed investment agreements could hike the score in the future. However, significant obstacles to investment remain, and further reform to investment regulations is necessary - alongside infrastructural improvements - if Iran is to match its Arabian Gulf neighbours.
The Iran Petrochemicals Report has been researched at source, and features BMI Research's market assessment and independent forecasts for key petrochemicals sub-sectors. The report also analyses the impact of regulatory changes, recent developments and the background macroeconomic outlook and features competitive landscapes comparing companies by products and services, sales, market share, investments, projects, partners and expansion strategies.
BMI's Iran Petrochemicals Report provides industry professionals and strategists, sector analysts, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the Iranian petrochemicals industry.
- Benchmark BMI's independent petrochemicals industry forecasts to test other views - a key input for successful budgetary and planning in the Iranian petrochemicals market.
- Target business opportunities and risks in the Iranian petrochemicals sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Iran.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis, covering the petrochemicals markets, regulatory changes, major investments, projects and company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the petrochemicals sector and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (2009-2013) and forecasts to end-2019 for key industry and economic indicators, supported by explicit assumptions, plus analysis of key risks to the main forecasts. Indicators include:
- Energy: Oil production (‘000 b/d), oil consumption (‘000 b/d), net oil exports (‘000 b/d), gas production (bcm), gas consumption (bcm), net gas exports (bcm), oil refinery capacity (‘000 b/d).
- Petrochemicals: Ethylene capacity (‘000 tpa), ethylene production (‘000 tpa), ethylene consumption (‘000 tpa), polyethylene capacity (‘000 tpa), polypropylene capacity (‘000 tpa), polyvinyl chloride capacity (‘000 tpa), polyolefins consumption (‘000 tpa).
- Oil Products Prices: Price forecasts for all major oil-based products (USD/bbl) at major global energy trading hubs.
- Economic: Nominal GDP (USDbn), real GDP growth (%), GDP per capita (USD), population (mn), unemployment (%), exchange rate (against USD).
BMI’s Petrochemicals Risk Reward Index
BMI’s Risk Reward Indices provide investors (both corporate and financial) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
Structure, size and value of the industry sector; overview of the industry landscape and key players; assessment of the business operating environment and the latest regulatory developments.
Industry Trends & Developments
Evaluation of company and sector-wide developments, including key projects (as well as expansion plans), latest company financial details and proposed international ventures.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
Global & Regional Market Overview
Analysis of the key trends driving the global industry, including worldwide output/capacity and demand analysis across ethylene, polyethylene, polyvinyl chloride, polystyrene, polyethylene terephthalate and polypropylene. The regional analysis looks at the implications of local and global trends on specific company activity.
Sub-sectors covered by the Petrochemicals Reports include:
Oil & Gas, Oil Refining, Olefins (ethylene, propylene), Polyolefins (polyethylene, polypropylene), Polyvinyl Chloride, Polystyrene
Please note – not all country Reports cover all sub-sectors – see website for details.
The Petrochemicals Market Reports are based on a network of primary sources, such as multilateral organisations (ACC, APLA, Cefi c, ICCA, ICMA), national chambers of commerce and industry, national statistical offi ces, government ministries and central banks, and multinational companies.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.