May 17, 2012 / 8:46 AM / 8 years ago

UPDATE 1-Iran petchem exports plunge due to EU sanctions-traders

* Petchem exports fall nearly 90 pct in last two weeks

* Follows EU insurance sanctions that took effect May 1

* Few ships able to find insurance to conduct trade

* Similar EU sanctions to come into effect for crude in July (Adds analyst comment, Japan official)

By Randy Fabi

SINGAPORE, May 17 (Reuters) - 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 cargoes 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 EU measures are imposed in July.

“Petrochemicals are definitely an indication of what could happen to crude, but I doubt the impact will be as strong,” said Erik Nikolai Stavseth, a shipping analyst with Arctic Securities.

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.

Shipping data confirmed a sharp drop in Iranian petrochemical exports, which includes methanol, xylene and caustic soda, to around 60,000 tonnes a week in May from a weekly average of 350,000 tonnes 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, Iran’s top oil customer, is probably 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 ship owners would not allow such a move, a PTC 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.


For crude shipments, Iran’s maritime companies do not face the same insurance problem.

The country’s main tanker operator NITC has coverage from the Kish P&I club, but it does not have the fleet capacity to transport all of Iran’s 2.2 million barrels per day in crude exports.

Shipowners 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 their tankers to transport Iranian crude past June.

“What Iran will have to do to sell their crude is just to provide a very large discount and they will find somebody to move their crude,” Stavseth said.

Iran’s production has already felt some impact from sanctions, dropping to a two-decade low of 3.15 million bpd in April from around 3.5 million bpd last year, a Reuters survey shows.

Britain is seeking to persuade fellow EU members to postpone the shipping insurance sanctions for crude by up to six months to avoid a spike in oil prices, diplomats said earlier this month.

South Korea and Japan are asking the EU to give them access to European insurance for Iranian oil shipments even after the July 1 embargo comes into effect, the Korean economy ministry said on Monday.

Asian oil buyers have also struggled to pay for Iranian oil as Western sanctions target Tehran’s central bank and financial institutions to pressure the OPEC member to halt its disputed nuclear programme.

China, India, Japan and South Korea made deep cuts in Iranian imports in the first quarter.

Bank of Tokyo-Mitsubishi UFJ, which handles most of Japan’s payments for oi imports from Iran, said on Thursday it had frozen transactions with Iranian banks after being ordered to do so by the New York District Court earlier this month. (Additional reporting by Ayai Tomisawa in Tokyo; Editing by Neil Fullick)

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