28 November 2013 13:33 [Source: ICIS news]
LONDON (ICIS)--European polyethylene (PE) buyers and sellers are carefully watching the unfolding situation on the possible lightening of sanctions on imports from Iran into the European Union for the first time since 2012, according to sources, but details are still sketchy, several said on Thursday.
“Sanctions were imposed on material arriving later than April, I think, in 2012,” said one trader.
Before the sanctions hit, the European PE market was most affected by imports of Iranian high density polyethylene (HDPE), followed by low density polyethylene (LDPE), with linear low density polyethylene (LLDPE) volumes bringing up the rear, according to traders.
In recent months, several traders have found it hard to obtain alternative imported product at workable prices, but they do not intend to hold their breath while waiting for details of the possible easing of sanctions against Iran where PE is concerned.
“A lot of details need to be sorted out,” said another trader. “Insurance and banking for a start.”
“I think it will be liquids, like methanol, crude oil and caustic soda, for example, that are more affected in Europe than plastics.”
Iran has been selling PE tonnes to Asia and Turkey as normal, and some sources thought that now this business was established, Iranian sellers would not be so tempted to move back into Europe.
No immediate effect was expected in any case and even now quantities of Iranian HDPE for Turkey are not that high. Sources put this down to maintenance issues.
“It’s [imports] clearly not going to happen tomorrow,” said a European PE producer. “If sanctions are lifted, I can’t see product arriving before several months.”
The potential was not small, however.
“Lifting sanctions on Iran could potentially increase global PE exports by 500,000 tonnes/year in the near-term, along with a comparable amount of other ethylene derivatives,” US investment bank Jefferies said on Wednesday.
PE players were far from the only ones watching what the Iran-West nuclear deal might mean for the petrochemical business, as Iran has been at the centre of all the major oil market price spikes in the past few decades, according to Paul Hodges, chairman of International eChem, a London-based consulting firm.
“Lifting petrochemical sanctions will permit $1bn in exports for Iran, according to US officials close to the talks. Iran may not feel an immediate impact because it’s been able to ship materials such as PE resins to China in violation of sanctions,” said Hodges in an interview with Bloomberg on Tuesday.
“ Any future increase in Iranian supplies of oil and gas would trickle down to Europe’s chemical industry, creating a potential game-changer for energy-intensive industries,” he added.
“You’d have a traditional major producer coming back into the market and desperate to sell,” said Hodges. “This has suddenly the potential to change the whole outlook as there’s someone out there who wants to sell and also needs to sell. Every single chemical plant in Europe would benefit… as it would likely move oil prices back down towards their historical parity with US natural gas prices.”
So far, however, details of the deal were sketchy.
“It has been mentioned that some sanctions will be “softened”, that more oil will be available, that petrochemicals and the transportation of petrochemicals will be excluded. However, to date not one of the major political entities that were enforcing sanctions (the UN, the EU, and the USA) have published actual relaxations on their official websites – and until such a time as we have the written legal interpretation from each entity we cannot be sure of what exactly this means in relation to our business,” said Mark Mirosevic-Sorgo, managing director of the Singapore-headquartered shipbrokers Braemar Quincannon, in John Richardson’s ICIS Asian Chemical Connections blog on Wednesday.
He went on to mention the need for clarity in the sale, purchase and chartering of vessels for the transportation of cargoes including petrochemicals, and associated insurance details.
European PE sources expected this situation to run for a while before complete clarity could be had.
($1 = €0.74)
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