FocusIran begins to feel pinch of UN sanctions; polymer imports slow

22 July 2010 11:05  [Source: ICIS news]

By Prema Viswanathan

SINGAPORE (ICIS news)--Iran's polymer imports have started to dwindle this month with the shutting down of its credit windows abroad, in the wake of tougher sanctions imposed by the United Nations aimed at halting the country’s nuclear programme, suppliers and buyers said on Thursday.

On the country’s exports, the impact had so far been minimal, they said.

“We have hardly seen any imports of black high density polyethylene (HDPE) pipe grade and copolymer grade polypropylene (PP), both of which Iran does not produce, in the past couple of weeks,” said a Tehran-based trader.

On 10 June, the UN issued its fourth round of sanctions on Iran. A few days after, the US and the European Union came up with their own set of sanctions against Iranian companies.

Based on a document obtained by ICIS, the Office of Foreign Assets Control of the US Treasury had directed banks not to honour transactions with affiliates of Iran’s Petrochemical Commercial Co in Dubai, Singapore, India, China and Turkey.

Iran’s PCC was not available for comment.

“We can’t afford to risk offering credit, as most banks won’t accept Iranian letters of credit (LCs) due to the sanctions,” said a source at a Thailand-based producer that usually sells black HDPE pipe grade to Iran on an advanced payment basis.

Iran may have to do a government-to-government negotiation with polymer exporting countries like South Korea for the re-opening of credit lines to Iranian buyers, industry sources said.

The full effect of the sanctions would likely be felt more after the fasting month of Ramadan which ends in mid-September, when industry players would all be back in the market, said an Iranian trader.

“Buyers don’t need to stock up during the holy month of Ramadan, which begins on 11 August, as this is typically a period of slow trade. But when they return from the Eid ul-Fitr holidays in mid-September, they will want to replenish their inventories,” he said.

Meanwhile, the impact of the sanctions on Iran’s polymer exports was not as pronounced as in imports so far, although foreign banks based in Dubai have lately refused to honour LCs for Iranian cargoes, industry sources said.

“Some local Dubai banks are still willing to offer credit for Iranian parcels, so we are seeing significant volumes of Iranian HDPE coming into the Gulf Cooperation Council (GCC) region,” said a Dubai-based trader.

Iranian exporters had been finding ways to get around the US guidelines on its banks not to transact with PCC affiliates, according to some traders. PCC sources were not available for comment.

 “Every day, we see a new Iranian company offering polymer cargoes, Iranian exporters change names like a chameleon changes its colour,” said the Dubai-based trader.

South Asian countries such as Pakistan and India were also continuing to import low density PE (LDPE) and HDPE from Iran, traders said.

And this despite a directive issued by Pakistan’s state controlled banks in June that banned the opening of LCs with Iranian state-owned banks.

“Iranian offers are at least $30-40/tonne lower than offers from other Middle East suppliers, which makes it attractive for buyers to buy cargoes from Iran,” said a Karachi-based trader.

The price gap offset the delays in delivery of cargoes which used to deter buyers from procuring Iranian cargoes, market sources said.

Pakistan is a major importer of PE and PP from Iran. Iran’s exports of PE and PP to Pakistan doubled in 2009 to 63,000 tonnes, according to Pakistani customs data.

In addition to polymers, Iran exports significant volumes of methanol, olefins and other products to Asia and Europe.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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By: Prema Viswanathan
+65 6780 4359



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