Wikiplast

Petrochemical Market Report: Second Week of June 2024

Decoding the Simultaneous Growth in Trades Amid Recession

In the past week, the trading volume of polymer products on the Iran Mercantile Exchange increased by nearly 11,000 tons, nearing the 100,000-ton mark. This increase comes despite many producers and market participants acknowledging a severe liquidity crunch, with many financial commitments being deferred.

According to Wiki Plast, as many producers closely monitor news from the stock exchange and potential changes in the pricing regulations for feedstock and refinery products, they are also preparing for any adjustments in the regulatory framework governing petrochemical products.

During the week, Mr. Eshghi, the head of the Securities and Exchange Organization, announced amendments to the pricing guidelines for feedstock and refinery products. He stated that since last year, the stock market has been affected by sector-specific decisions, severe monetary tightening policies, and rising interest rates. The widening gap between the NIMA exchange rate and the open market rate, coupled with price controls, has posed significant challenges. The organization is working to address these issues and return the stock market to its main trajectory.Spring purchases on the Mercantile Exchange are still being made using the exchange transfer dollar rate. The difference between the exchange transfer dollar at 426,000 rials and the open market dollar at 588,000 rials is 162,000 rials, equating to a 38% disparity. This gap is a significant concern that needs to be addressed sooner or later. Thus, one of the reasons for the continued and even increased trades could be the apprehension over potential changes in the base dollar rate used for pricing petrochemical products.

Another consequence of the 162,000-rial difference between the exchange transfer dollar and the open market dollar is the ongoing rise in exports of raw materials in compound form. If the base dollar rate used for pricing changes, these exports could lose their advantages. Consequently, part of the buying on the Mercantile Exchange can be attributed to the continuation of this export strategy to neighboring countries.

The increase in trades, bringing them close to the 100,000-ton mark, occurred despite the open market dollar remaining relatively stable throughout the week. The closing price on Wednesday, June 12, was 589,000 rials, showing a minimal increase of only 1,700 rials from the previous week. In other words, this week’s trades were largely unaffected by dollar fluctuations. Another factor contributing to the growth in trades was the increase in base prices.