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Maritime Research

Re-imposed Iran sanctions by the US will have a limited impact on the chemical shipping market

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Methanol exports to India and China will surge on the back of planned capacity additions and demand in both countries.

US President Trump signed an executive order on 8 May that will withdraw the US from the Iran nuclear deal and start a 180-day countdown for the Trump administration to re-impose all of the sanctions that were relaxed during the Obama presidency. The Trump administration has given businesses until early November 2018 to end all operations with Iran. The re-imposition of sanctions will affect ship-insurance premiums, lines of credit for moving cargo and fuel suppliers for Iranian ships and shipments.

Exports to China and India will surge, like previous sanctions

China and India are the top two countries that import chemical products from Iran. China is Iran’s biggest petrochemicals customer, buying 57% of its total exports in2017, while India imported 20% of Iran’s exports.


Before the previous sanctions on Iran were in January 2016, trade volumes from Iran to China and India were increasing steadily.

Iran exports by countries (‘000 tonnes)

Iran exports by countries (‘000 tonnes)

However volumes to India started to decline in 2016, when sanctions were lifted, and volumes to other neighbouring countries, such as the UAE and Egypt, increased. However, in our view the re-imposition of sanctions by November 2018 help to re-direct part of existing trade volume from neighbouring countries back to China and India.

 

Methanol exports expected to surge supported by planned capacity additions

In 2017, Iran exported 2.6 million tonnes of methanol to China, accounting for over two-thirds of total chemical products that were exported from Iran to China. Globally, Iran has the highest planned methanol capacity additions of any country with some 30 million tonnes of annual capacity scheduled to come on stream from2018 to 2022.

Iran exports by products (‘000 tonnes)

Iran exports by products (‘000 tonnes)

Given the increase in capacity methanol shipments from rise from Iran to China will almost certainly rise as new plants come on stream.


Moreover, trade volumes from Iran to India are also expected to pick up, as India will benefit from cheaper products such as methanol, MEG, liquid soda and aromatics.


All in all, we expect the volume of chemicals exported to China and India from Iran will increase in the wake on new sanctions on Iran. In particular, methanol volumes will surge on the back of upcoming methanol capacity additions in Iran.

Contact

Hu Qing

Hu Qing

Lead Analyst, Drewry Maritime Research

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