Saudi Arabia not able to launch price war in petrochemical sector
Tehran, Iran, Jan. 23
By Milad Fashtami - Trend:
International laws will prevent Saudi Arabia from launching a price war in the petrochemical sector.
Iranian Deputy Oil Minister Abbas She'ri-Moghadam said that Saudi Arabia lowered prices in the oil sector, but the same thing will not happen to petrochemical products, Iran's Tasnim News Agency reported on Jan. 23.
"Based on the dumping policy, if Saudi Arabia decides to sell petrochemical products at any price below the global markets' prices, it will face severe fines," he noted.
In economics, "dumping" is a kind of predatory pricing, especially in the context of international trade. It occurs when manufacturers export a product to another country at a price either below the price charged in its home market or below its cost of production.
According to the monthly Platts Global Petrochemical Index (PGPI), prices in the $3-trillion-plus global petrochemicals market fell another 18% in December, the biggest month-over-month drop since November 2008, as energy and naphtha prices continued to slide.
Petrochemical prices, expressed as a monthly average, spiraled down $222 per metric ton (/mt) from November to $984/mt in December.
The PGPI is a benchmark basket of seven widely used petrochemicals and is published by Platts, a leading global energy, petrochemicals and metals information provider and a top source of benchmark price references.
On a year-over-year basis, petrochemical prices were down 30% compared with the same month last year.
The price of oil has dropped 50 percent compared to the first half of the past year. The fall in the oil price has even been more in OPEC's basket, which plunged by 60 percent, mostly because the 12 members of OPEC are producing 1.3 million barrels of oil per day more than the global demand and giving increasingly discounts to their customers.
Iran is expected to face severe budget deficit in the current Iranian calendar year (to end March 20) due to the falling trend of oil prices in global markets.
The country may also encounter another blow from low oil price, to its petrochemical sector.
Iranian government was supposed to revise the oil and gas prices for petrochemical units for several months already, but no decision has been made as of yet. This imposes a big threat on Iran's petrochemical sector, as the global oil price has been driven down from $107 in June to about $40 last week.
The effect of declining oil price directly hits Iran's petrochemical industry, reducing the petrochemical products' prices.
Meanwhile, Iran aims to produce some $20-22 billion worth of petrochemical products in the current calendar year (to end March 20), $10 billion worth of which is planned for export. The remaining amount is planned to be supplied to the supplementary petrochemical industries.
Last year Iran produced $20 billion worth of petrochemicals, $9 billion worth of which the country exported.
Edited by CN