Iranian petchem pipeline slow to return after floods

Operations at Iran's West Ethylene Pipeline are still disrupted after floods hit parts of the country at the end of March.

The damaged pipeline runs from the Mideast Gulf port of Assaluyeh to Mahabad. It was expected to be fixed two to three weeks after the floods but repairs have been delayed. Repairs were delayed in the initial weeks as flood waters took time to fully subside. It is now likely to return in one or two weeks, although further delays cannot be ruled out.

The damaged pipeline has resulted in feedstock ethylene being stuck in onshore tanks and unable to reach Iranian domestic consumers. Iranian producers may be forced to export prompt ethylene cargoes if inventory pressures continue to persist.

The pipeline supplies feedstock to a number of petrochemical plants in Iran, including polymers units. Polyethylene (PE) plants connected to the pipeline are currently running at extremely low operating rates and even temporarily stopped production since the floods.

Asian polymer buyers and traders said they are seeing limited volumes of Iranian PE being offered in the spot market since the floods. Iran is a key supplier of low-density polyethylene, linear low-density polyethylene and high-density polyethylene film into China, Turkey and India.

Consumers in China and Taiwan said they have not received any offers for Iranian-origin ethylene cargoes. These consumers are also unwilling to bear the risk of these cargoes amid the continuing US sanctions on Tehran. US President Donald Trump on 22 April said he will not renew waivers from US sanctions for the remaining buyers of Iranian oil.

Finding vessels moving ethylene out of Iran may also prove to be a challenge as participants are likely to face difficulty securing financing. Banks globally continue to tighten regulations on Iran-origin material including oil products and petrochemicals such as ethylene and polymers.