Economy, Business And Markets

German Plastics Industry Eyes Return to Iran Market

German Plastics Industry Eyes Return to Iran MarketGerman Plastics Industry Eyes Return to Iran Market

Ten years ago, half of the imported plastics and rubber machines sold in Iran came from Germany. Today, after years of western sanctions over Iran’s nuclear programs, it’s virtually zero.

But with those sanctions set to be lifted in early 2016, Germany’s machinery industry, like many, is keenly interested in getting back through that door, wrote US-based newspaper Plastics News in its website.

With that in mind, the German plastics and rubber machinery trade association VDMA held its Iran German Plast 2015 conference in Tehran during December 7-8. VDMA said 500 people attended, the majority from Iranian plastics processing companies.

“Iran used to be one of the top sales destinations for German machinery,” said Thorsten Kuhmann, managing director of VDMA’s Plastic and Rubber Machinery Committee, in comments that VDMA prepared for the Tehran conference.

Plastics machines were not covered under the sanctions. The hurdle was largely financial—the sanctions essentially cut Iran out of global financial systems and forced companies to find other ways to move money.

Some sectors, like extrusion machinery, saw a big increase in Chinese and Turkish machinery after the sanctions started to bite. China also did well exporting injection molding machines.

“Chinese injection molding machinery producers have gained market share in Iran dramatically, especially this year,” said Engel CEO Peter Neumann.

“It has something to do with financing: Iran is the main supplier of crude oil for China and there is an instrument applied on using export of crude oil to finance purchase of machines.”

He noted that Engel maintained its services organization in Iran with a local partner during the sanctions.

The lifting of sanctions could also lead to a form of Iranian “reshoring.”

Iran imports a lot of packaging from Turkey, for example, but some German companies are looking for Iran to start its own version of reshoring, with some of that manufacturing shifting back home as Iranian processors can more easily maintain their equipment.

Interest in Iran is growing in other parts of the industry.

Germany’s K Fair, the world’s largest plastics trade fair, announced a deal in September with the Iran Plast Fair to organize international visitor participation from Europe and parts of Asia.

Iran Plast is scheduled for April 13-17 in Tehran. The last edition in 2014 had 68,000 visitors and 800 exhibiting companies, with 250 from outside Iran.

At the Plast Eurasia 2015 show in Turkey this month, Iran’s Jam Petrochemicals Company said the sanctions relief would allow it to shift 20-25 percent of its polyethylene exports from Asia to Europe, as the ending of sanctions essentially allow Iran back into the world economy.

“Lifting of sanctions on the industry and on Iranian finances will rekindle foreign investment and allow Iran’s petrochemical industry to get back on a fast-track to growth,” said Michael Smith, vice president of Europe, the Middle East and Africa at consulting firm IHS Chemical.

“In the short-term of 12 to 24 months after sanctions are lifted, Iran will rapidly start taking advantage of easier access to foreign capital markets, trade financing, oil markets and technology providers.”