The lifting of sanctions will stimulate an immediate export boost for the Iranian petrochemicals industry, which has been operating well under capacity even as it has expanded in recent years. The government has ambitious plans for the sector with the hope that foreign investment will enable it to leverage its massive upstream resources to expand basic chemicals output. However, Iran continues to face infrastructural and regulatory difficulties and a depressed market outlook. Until these are overcome, the industry will struggle to meet the target of more than doubling petrochemicals capacity to 129mn tonnes per annum (tpa) by 2021.
The surge in capacity will not be sustainable if feedstock supply is not forthcoming and markets do not absorb output. Some complexes are suffering feedstock shortages, particularly during winter months. Iranian petrochemical complexes need 30-35mn cubic metres of gas per day. Besides pressure on supply, Iranian ethane feedstock is nearly three times more expensive than in Saudi Arabia. While the plants may nominally come on stream, operation rates could be low and plants will be operating at a loss unless Iranian producers can pass on the full costs of production onto consumers in export markets.
Investor wariness will affect Iran's hopes of diversifying downstream operations, but also its ability to increase upstream capacities, which are crucial to the development of the petrochemical sector. The political will to liberalise the petrochemicals sector is also wavering. Overbearing state interventionism and price fixing have prevented the growth of the industry. A reduction in state involvement in the sector and the provision of more facilities to investors are essential to secure future growth in petrochemicals capacity. A growing export market is also essential to help offset the negative impact of domestic sales at government fixed rates.
Planned projects would raise Iran's petrochemicals capacity three-fold to 180mn tpa by 2022, although it is uncertain whether this target will be reached. BMI expects the next five years to see the completion of the Olefins 11 and 12 project, which will have capacities of 2.0mn tpa and 1.2mn tpa respectively. Meanwhile, the USD12bn petrochemical hub at Chabahar - the Makran Petrochemical Plan - will add 1.2mn tpa of ethylene and 900,000tpa of PE.
Iran's main export market, China, will move towards self-sufficiency, while Asian markets will be increasingly supplied by low-cost US petrochemicals output. Low-capacity utilisation is therefore going to be an enduring problem. Moreover, although Iran will be keen to secure tie-ups with European petrochemicals producers, the country will retain a highly risky business environment, and there is no certainty that Iran's isolation will end. The industry will need foreign skills and equipment if it is to add value to output and diversify its product portfolio.
This quarter, Iran has seen a 0.2 point increase in its overall petrochemicals Risk/Reward Index (RRI) score to 63.6 due to a two-point increase in its market risk score. Further detailed investment agreements could hike the score further. 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. It remains in third place behind the UAE in the regional RRI rankings, but has increased its lead over Kuwait.
We forecast growth of 3-6% leading to a boost across a range of industrial sectors. Oil and gas will gain the most attention, but petrochemicals are also very well placed as the provider of raw material for growth industries, such as packaging and automotive sectors. Pent-up demand, a youthful population, a skilled workforce and a large hydrocarbon and consumer story all make Iran one of the most positive and relatively well-balanced growth stories in the Middle East over the next decade.
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.