FocusChina eyes alternative PE sources on concerns over Iran supply

22 November 2011 11:04  [Source: ICIS news]

By Ong Sheau Ling

SINGAPORE (ICIS)--Major Chinese importers are seeking alternative sources of polyethylene (PE) resins as supply from Iran may be disrupted after the US imposed new sanctions on the Middle Eastern country over its nuclear programme, industry sources said on Tuesday.

“We have to find alternatives to our [Iranian] suppliers. It is forbidden for China to export [product] to Iran because of the sanctions. Sooner or later, Iran will be forbidden to export [product] into China,” said an eastern China-based importer.

A sizeable chunk of China's PE imports is at risk because of growing international pressure to isolate Iran.

In the first nine months of 2011, Iran exported 228,780 tonnes of low density polyethylene (LDPE) film and 305,000 tonnes of all high density polyethylene (HDPE) grades to China. Iran’s LDPE supply accounted for 21.4% of China’s total imports of the material, while the HDPE supply has a 12.0% share to total imports of the polymer for the period, China Customs data showed.

The impact on supply will be most felt on the HDPE injection and blow moulding grades given that there are few such suppliers in the market, said a second Chinese importer.

“LDPE film supply is currently still outstripping the demand, so even if Iranian goods are out of the picture, the supply availability will still meet the demand,” the importer added.

A third Chinese importer said it has reduced its monthly LDPE film import volumes from Iran by more than half this year from 15,000 tonnes/month in 2010, and is likely to cut import volumes further in 2012.

But a source from Petrochemical Commercial Co (PCC) - the biggest trading firm in Iran that markets some of the country’s polymers output abroad - said that China will not stop getting Iranian material completely because of the sanctions. 

Iranian polymer producers Arya Sasol, Laleh, Mehr and Marun export more than a third of their polymers output to China.

“Many of the petrochemical plants here [in Iran] are either semi-privatised or privatised, and so they are not subjected to the sanctions, which are imposed directly on government-based petrochemical units,” said the PCC source.

In an unlikely event that the China will not be allowed to take in Iranian polymer exports, the PCC source said Laleh and ASPC, which sell more than 70% of LDPE to China, can always diversify markets.

Additional reporting by Kitty Li

For more information on PE, visit ICIS chemical intelligence
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Ong Sheau Ling
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