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Iranian petrochemical exports have plunged nearly 90 percent in the last two weeks as most maritime firms, including those in Iran, cannot find insurance to transport the cargo due to EU sanctions, according to traders and shipping data.
The impact EU sanctions are having on Iran’s $14 billion petrochemical industry offers a glimpse into how the OPEC member’s much larger crude and oil products trade could be affected once similar European measures are imposed in July.
EU sanctions prohibiting European insurers and reinsurers from covering tankers carrying Iranian petrochemicals came into effect on May 1, forcing out most of the ships operating in this niche market.
Around 90 percent of the world’s tanker fleet, including those operated by Iran’s Petrochemical Transportation Company, is covered by Western-based protection and indemnity (P&I) clubs, which insure against personal injury and environmental clean-up claims.
“So far, there has been no proper insurance available for shipping companies. The decline in exports is almost 90 percent and I don’t see that changing,” said a Singapore-based ship broker who used to be involved in the Iran to Asia trade.
Shipping data confirmed a sharp drop in Iranian petrochemical exports, which includes methanol, xylene and caustic soda, to around 60,000 tons a week in May from a weekly average of 350,000 tons last year.
However, Iran’s deputy oil minister, Abdolhossein Bayat, told local media earlier this month that the country’s petrochemical exports had not declined despite EU sanctions.
OPEC’s second largest oil producer could be exporting more petrochemicals than what is evident from shipping data, as captains on some of Iran’s ships have turned off the black box transponders that monitor vessel movements.
CHINA BUYS IRANIAN PETROCHEMICALS
China, Iran’s top oil customer, is believed to be the only buyer of Iranian petrochemicals so far this month, traders said. Chinese firms, such as Nanjing Tankers and Sinochem Corp have been able to get insurance from domestic providers and were reaping huge profits from conducting the niche trade.
Iran’s Petrochemical Transport Company has not had the same success. It asked Iran’s main ship insurer, Kish P&I club, to provide cover but the owners of the firm’s fleet would not allow such a move, a company official said.
“We have a problem with the P&I clubs. We are working on that and we have contacted some other P&I insurance companies, but up until now we cannot find any solution to that problem,” Ramtin Hassan, a Tehran-based marine manager for the Iranian company, told Reuters in a telephone interview.
Ship-owners from Iran’s top oil buyers – China, India, Japan and South Korea – have asked their governments to provide sovereign guarantees in place of Western-based maritime insurance to enable crude and oil product imports to continue past June.
Britain is seeking to persuade fellow European Union members to postpone the shipping insurance sanctions for crude by up to six months, arguing that it could lead to a damaging spike in oil prices, diplomats said earlier this month.
South Korea and Japan are asking the European Union to give them access to European insurance for Iranian oil shipments even after a July 1 embargo comes into effect, the Korean economy ministry said on Monday.
(Editing by Himani Sarkar)