APIC ’12: 89% of Iran MEG capacity shut since early May – sources

17 May 2012 07:52  [Source: ICIS news]

By Becky Zhang

KUALA LUMPUR (ICIS)--About 90% of Iran’s monoethylene glycol (MEG) capacity is shut since early this month, as Farun Chemical and Marun Petrochemical halted operations at their plants that have a combined capacity of 845,000 tonnes/year, because of shipping issues, market sources said on Thursday.

Farsa runs a 445,000 tonne/year MEG plant at Asaluyeh, while Marun operates a 400,000 tonne/year MEG unit at Bandar Imam.

“They have to shut [production] because they cannot find vessel to ship out the material. Ship owners would not like to take the huge risks to move these cargoes without insurance,” an industry source said at the sidelines of the 34th annual Asia Petrochemical Industry Conference (APIC) in Kuala Lumpur.

Farsa Petrochemical and Marun Petrochemical were not immediately available for comment.

Effective 1 May, the EU banned the issuance of protection and indemnity (P&I) insurance to major ship owners that deal with large quantities of Iranian liquid chemicals, including Norway’s Odfjell and Malaysia’s MISC, the source added.

“The insurance ban could last for a certain period of time,” the source said, adding that this ban could be prolonged until after US election in the fourth quarter of this year.

International sanctions on Iran have been tightening on the country's suspected development of nuclear weapons.

MEG supply from Iran will decline sharply, and should partly relieve the oversupply situation in China, market sources said.

Iran exports around 40,000-50,000 tonnes/month of MEG to China. The volume accounts for 7% of China’s total monthly MEG imports, official data showed.

“Some Chinese ship owners can deliver Iranian material as they are able to get insurance from China, but the capacity is far from enough,” the industry source said.

Early this week, China-based commodities trader Sinochem has been working out on shipping issues and is likely to ship out Iranian material soon, a company source said.

Only the smallest MEG producer in Iran – Irak – continues to run its 105,000 tonne/year plant, which is currently operating at full capacity, the first source said.

“They can sell to Turkey by truck and they also provide material to a local PET producer, Shahid Tondgooyan,” he said.

Irak can still transport small MEG quantities of container and drummed cargoes, said a company source.

The two-day APIC 2012 runs from 17-18 May.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Becky Zhang
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