FocusIran's polyolefin flow to Asia continues despite UN sanctions

26 July 2010 07:13  [Source: ICIS news]

By Chow Bee Lin

iranian flag2SINGAPORE (ICIS news)--Iran's polyolefins trade with Asia is expected to continue normally despite the tougher sanctions imposed by the United Nations on the country recently to halt its nuclear programme, industry sources said on Monday.

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

While the sanctions had made payment and shipping processes for Iranian cargoes more complex, they had not completely stopped trade as some banks and shipping companies had been excluded from the list of restricted firms, sources added.

"The Bank of China stopped accepting letters of credit (LCs) for Iranian cargoes around two weeks ago, but Iranian suppliers can still accept LCs through other Chinese banks,” a key east China-based trader said.

China is a major buyer of Iranian polyolefins and exports to the country had increased significantly in the past two years after several new Iranian plants, including Laleh Petrochemicals, Jam Petrochemical, and Arya Sasol Petrochemical, came on stream.

Iran exported 38,443 tonnes of LLDPE, 215,919 tonnes of HDPE and 127,893 tonnes of LDPE to China during the January-May period, which were 15%, 79% and 266% higher, respectively, over the same period last year (see graphs below), according to data from China Customs.

Polyolefins exports to Japanese traders were, however, continuing normally with traders making payment in Japanese yen, sources said.

Traders were issuing LCs or making telegraphic transfers through Japanese banks directly to banks in Iran and Dubai, a Japan-based trader said.

Japanese trading houses usually sold the Iranian cargoes to buyers in China and southeast (SE) Asia, he added.

Trading houses in South Korea, which also sold the Iranian cargoes to Chinese buyers, had been forced to reduce their offtakes since 7 July when domestic banks stopped issuing LCs for Iranian cargoes, a South Korean trader said.

However, as most Iranian cargoes were sold to Japanese traders or to buyers in China, the lack of South Korean traders would not impact the sales much, an Iranian polyolefins producer said.

Exports of Iranian polyolefins to China may, however, reduce over the next few weeks as producers had begun diverting their cargoes to more lucrative markets in Europe and Africa, the producer added.

"We sold linear low density PE (LLDPE) and high density PE (HDPE) this week to European traders who have paid us in euros and [Moroccan] dirham through banks in Iran and Dubai,” he said.

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By: Chow Bee Lin
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