BMI View: Iran is witnessing rising levels of foreign direct investment in its petrochemicals industry, whichare crucial to achieving the country's ambitions for rapid expansion. However, difficulties experienced bycargoes to China are undermining petrochemicals exports and reducing prices for Iranian products on theinternational market. If exports do not perform as well as expected, the industry will suffer low capacityutilisation levels and expansion targets will be put in doubt.
In FY2016/17, petrochemicals capacity reached 62mn tonnes and average capacity utilisation was 86%.
Around 44% of idled capacity was caused by a lack of feedstock, with 21 of Iran's 53 petrochemicalscomplexes running at below half capacity. Although net profit averaged 25% in 2016, plants that rely onliquid feedstocks instead of ethane have been running at very low margins. As such, foreign investors arelikely to be looking to invest in ethane-based petrochemicals as well as downstream polymer plants.
However, Iran is behind the curve in terms of adding value and will be focused on basic chemicals, whilerivals in the Arabian Gulf are seeking to expand and diversify their production portfolios.