Iran's petrochemicals exports have been boosted by the lifting of sanctions, opening the possibility for major inward investment in the years ahead. In the first three months of FY2016/17, petrochemicals comprised over a third of Iran's exports with 27.9mn tonnes sold on external markets worth a total of USD3.54bn. Iran projects that its total petrochemicals output will reach 54.7mn tonnes in FY2016/17, an increase of 18% that will be based on exports and supported by increased capacity utilisation and new plants coming onstream.
NPC has said the country's petrochemical output could increase by nearly 12% in FY2016/17 due to capacity expansion and export recovery. NPC plans to launch 15 new petrochemical units by FY2016/17, thereby increasing the country's capacity by 8.5mn tonnes.
A number of projects are due to be completed by 2016. The government has already confirmed the 14th olefins complex, which will be built at Firouzabad and produce 1mn tonnes per annum (tpa) ethylene, and the 15th olefins complex, planned at Genaveh with 500,000tpa of ethylene. The 17th olefins complex will be built at Dehloran in Ilam Province by Dehloran Petrochemical Company, and will have a mixed-feed cracker with the capacity to produce 607,000tpa ethylene. The 16th olefins and methanol complex is already being constructed by Bushehr Petrochemical Company as part of Phase II of the Pars special economic zone (SEZ) at Asaluyeh, with capacity for 1mn tpa ethylene and 1.65mn tpa methanol.
However, 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, local industry is faced with major problems and demand is low.
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.
The construction industry is set for slightly better growth than previously forecast, which should improve the market performance of construction-related petrochemicals such as polyvinyl chloride (PVC) and certain applications of polyethylene (PE) and PP. We forecast 4.5% y-o-y real construction industry growth in Iran in 2016, but have reduced our five-year average growth from 6.1% to 5.9% as a result of the effect of low oil prices on the economy.
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.
By 2021, Iran hopes to have achieved total production capacity of 90mn tpa with natural gas contributing around 50% of the feedstock. BMI forecasts that by 2020, ethylene capacity alone will total 12.28mn tpa upon the completion of the Olefins 11 and 12 projects, which will have capacities of 2.0mn tpa and 1.2mn tpa respectively.
This quarter, Iran has seen a 0.7 point increase in its overall Petrochemicals Risk/Reward Index (RRI) score to 64.3, due to an eight-point increase in its market risk score. This comes following the lifting of sanctions and growing investor interest in the petrochemicals sector and strong post-sanctions export growth. Further detailed investment agreements could hike the score further. 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. It remains in third place - it falls 1.7 points behind the UAE in the regional RRI rankings, but has increased its lead over Kuwait to 4.1 points.
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.