India's petrochemical market faces turmoil after US sanctions

India's petrochemical market was in flux Oct. 10 after the US administration announced fresh sanctions against nine Indian entities trading Iranian petroleum products.

The new sanctions list from the Office of Foreign Assets Control, a branch of the US Treasury Department, includes BK Sales Corp., C.J. Shah and Co., Chemovick Private Ltd., Haresh Petrochem Private Ltd., Indisol Marketing Private Ltd., Mody Chem, Paarichem Resources LLP and Shiv Texchem Pvt Ltd. Additionally, Vega Star Ship Management Private Ltd., a ship management services company, was also sanctioned.

This move follows barely weeks after, OFAC imposed sanctions on eight India-based entities, including traders such as Ramniklal S Gosalia and Co., Jupiter Dye Chem Private Ltd., Global Industrial Chemicals Ltd. and Persistent Petrochem Private Ltd.

Trade sources said the sanctions could disrupt trade as many of these entities deal in multiple petrochemical commodities sourced from various countries.

"Some of the biggest petrochemical importers in India are on the list, so quite a big issue now," an East Asia-based seller said.

The move could cause "widespread disruption for the Indian chemical market," a Southeast Asia-based seller said, adding that "many cargoes are enroute which will be either stuck or will be sold at loss."

Sellers feared that payments would get stuck for the cargoes already sold to the sanctioned entities or en route to India, creating huge losses for them.

"The market could get short in the coming days. Hardly any players are left now who have not traded in Iranian petrochemicals," a Mumbai-based trader said.

Some sources indicated that the new list of sanctioned Indian entities could have a significant impact on the market.

"The chemical trading sector and Indian importers have been singularly targeted, and this will negatively impact the industry," a Middle East-based seller said. "Exporters from Asia and the US are unable to offer products as they do not know who will be impacted next, and they will not get paid despite having a confirmed Line of Credit in place. There will be turmoil in the short term until new instruments and companies are formed. This is surely not good for both importers and consumers in India."

An end-user said that sanctioned entities will find it difficult to import material.

"Methanol, styrene, MEG -- all markets are going to be affected," the end-user said. "Existing contracts for styrene may also be canceled or halted."

Domestic market reaction

Several Indian traders indicated that prices in the domestic markets are likely to increase.

"For now, the offers are on hold," said a Mumbai-based trader.

Another source based in Kolkata said: "Domestic prices are set to increase, and there will be supply tightness for chemical products in the near term."

An India-based trader said that they were assessing the situation for the isocyanates market. The customer base remains unaffected for now, but suppliers may start facing challenges, the trader said.

The market for butyl acrylate is currently in wait-and-watch mode, according to an Indian trader. "This is a repetition of what happened a couple of months ago; the impact is not just on the butyl acrylate market but the entire chemicals industry," the Indian trader said.

Platts, part of S&P Global Energy, assessed the CFR India toluene cash differential up $5/mt at FOB Korea plus $92/mt on Oct. 10. The CFR India Solvent MX cash differential was assessed at FOB Korea plus $99/mt, up $5/mt week over week

Platts assessed CFR India polymeric methylene diphenyl diisocyanate down $5/mt week over week at $1,645/mt Oct. 10. Platts also assessed CFR India toluene diisocyanate down $150/mt week over week at $1,910/mt Oct. 10. Platts assessed CFR India butyl acrylate stable at $949/mt on Oct. 10, amid largely stable market fundamentals.