A trade expert in the petrochemical industry has named three main challenges businesses in Iran’s petrochemical sector face when doing trade, these include: hurdles in transferring money abroad, low-quality machinery imported from non-western countries, and the high price of foreign currencies.
Western sanctions have basically had negative impacts on financial transactions between Iranian and non-Iranian companies, Mohamadreza Doosttalab, sales engineer of Varzidehkar Co. said in an interview with Financial Tribune on Friday on the sidelines of a petrochemical exhibition held in Tehran. “Our trade with our partners in Europe has been affected, accordingly” he added.
He said his company had been active for 40 years in the industry but it has never had as many challenges as it has now.
The European companies currently dealing with his group include the Austrian Greiner, the Austrian-German Battenfeld-Cincinnati and Italy’s Cica, he explained, “which export machinery used in the plastic industry, including extrusion machines that produce pipe and profiles.”
Referring to ongoing nuclear negotiations between Tehran and the six world powers, known as P5+1, he expressed hope that the situation will improve if the two sides reach a comprehensive deal by the Nov. 24 deadline. However, he said, “In case, sanctions are not lifted, the import of machinery will continue as the equipment is not at all related to Iran’s nuclear activities.”
Quality of Imported Machinery
Doosttalab said the depreciation of the rial against foreign currencies in recent years have also affected the industry. “Though most clients would prefer high-quality machineries, they have had no choice but to buy from China, as they are cheaper, though they may face problems in few years.”
Top Iranian companies usually go for high-quality equipment, especially when some have already installed western-made equipment, he said. “In that case, they do not want a Chinese or Turkish line to be installed in their factory.”
Chinese machineries are offered at a variety of different grade levels. For example, high quality machinery produced by China cost clients about 30% less than that of a European counterpart. So, it’s not economical for the top 20 percent Iranian industrialists to take risk by buying Chinese stuff,” Doosttalab argued.
In recent years, China and Turkey have captured a great share of the Iranian market, he said.
“Given the high price of plastic machineries, another problem with Far Eastern companies is their weak after-sale services,” he said. “European companies, however, are very good in this. That makes customers satisfied as the machines they buy may work for 40 years, while high-quality after sale service is also available just in case.”
Europeans currently have a 20 percent share of the market and that could be doubled if sanctions are lifted, he noted.
Foreign Currency
Another factor having an impact on the industry is the devaluation of the rial against foreign currencies. If the government wants the plastic industry to grow faster it should adopt a policy to strengthen the national currency, he said. “The US dollar must be traded at 27,000 to 28,000 rials in the free market, not at 32,000 rials.”
Officials believe Iran’s petrochemical industry has many advantages that could be beneficial for western investors and manufacturers. Among them are: the easy access to feedstock, availability of skilled manpower, access to international waterways, growing domestic market, well-developed infrastructure in the sector, and renewed investment regulations.
Over 500 Iranian exhibitors and 250 foreign companies from at least 15 countries including, Italy, Germany, Russia, Austria, Korea, China and Taiwan, have participated in the 9th Iranplast Exhibition which seeks to cater for Iran’s burgeoning packaging and manufacturing industries. It opened Friday and will run through to Monday.
