Petrochem Firms Challenged by Financial Constraints

Petrochem Firms Challenged by Financial ConstraintsPetrochem Firms Challenged by Financial Constraints

Iranian petrochemical companies continue to be affected by difficulties in obtaining letters of credits, a source at a local petrochemical company said on the sidelines of the “K 2016” trade fair in Dusseldorf.

“International banks have been unwilling to engage with Iran as some US restrictions remain in place, which do not allow US dollar transactions with Tehran,” Platts quoted the source as saying who was speaking on condition of anonymity.

“Although no such transaction restrictions exist in euro terms or other major currencies, banks remain vary of providing credit facilities to Iran,” the source added.

This has adversely affected the ability of Iranian petrochemical companies to freely and efficiently trade with the market.

The US Treasury Department announced this month that it had eased some rules and restrictions on foreigners doing dollar-denominated transactions with businesses in Iran. But some analysts and market watchers are skeptical about the efficacy of the announcement.

The source noted that currently, most payments are received through "title transfer (the act of point in place or time at which ownership of a thing is passed from one person to another) via banks in the Emirates."

Meanwhile, the source said that Tehran has had little success in raising funds for capacity expansions and new additions to its petrochemical units. At present, the only possibility is to "run existing plants at maximum capacity," he added.

The source said he does not expect much to change in 2017 due to the upcoming US elections, as well as elections in Iran in eight months. However, the restrictions in obtaining letter of credits may ease subsequently near 2018, he said.

A letter of credit is a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. Due to the nature of international dealings, the use of letters of credit has become a very important aspect of international trade.

  H1 Exports

Iran’s total exports of petrochemical products in the first half of the current fiscal year that ends in March 2017 reached over 10 million tons generating $4.3 billion in revenues.

Iran produced close to 25 million tons of petrochemicals in the six-month period, Shana reported.

Complexes in the port city of Asalouyeh, Iran's largest petrochemical hub in the southern Bushehr Province, accounted for 11.4 million tons, while producers in Mahshahr Petrochemical Special Economic Zone in the oil-rich Khuzestan Province produced 8.6 million tons.

Marzieh Shahdaei, head of state-run National Petrochemical Company who  attended a conference in Dusseldorf, said on Thursday that Iran wants to attract $72 billion in foreign investment for 80 major petrochemical projects in line with plans to triple petrochemical production over a decade.

"We have 80 petrochemical projects, including 30 new ones, that require investment under the sixth five-year economic development plan (2016-21)," she added.

Iran's petrochemical production capacity is around 60 million tons a year. Tehran hopes to boost the capacity to 130 million tons a year by 2020 before reaching an ambitious goal of 180 million tons per annum by 2025.


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