Trade Resources Economy Iranian Petrochemical Traders Sell Products on a CFR Basis to Avoid Payment Issues

Iranian Petrochemical Traders Sell Products on a CFR Basis to Avoid Payment Issues

Iranian petrochemical traders currently sell all their products on a CFR basis in Asia instead of FOB to avoid payment issues, trade sources in Iran and Dubai said Tuesday.

"We sell products on a CFR basis in countries like China so as to ensure that the cargo is handed over only when the payment is made," a Tehran-based source close to Petrochemical Kala Company said. PKC trades a range of petrochemicals and refined products in and out of Tehran.

"While an amount ranging between 25-30% of the total value of shipment is paid by the customer at the time of loading of cargo, the rest is paid when the cargo is delivered at the destination," the source said. "This is to avoid the risk of default as Iranian companies do not want to enter into litigations. With the uncertainty over sanctions continuing, that's the last thing we want."

Iran received limited sanctions relief in November to export petrochemical products and import technology and machinery in a deal struck with six world powers in exchange for a promise to stop enriching uranium over 5%. The six-month relief period began January 20.

Subsequently, the EU lifted its ban on the provision of insurance for tankers and ships carrying crude oil and petrochemicals from Iran. "Major European shipping lines now carry Iran-origin products. The ships are either being loaded at Iranian ports or through small feeder ships in ports of Dubai and Singapore," a Dubai-based trader who deals in Iran-origin polymers said.

Since the payments for Iranian cargoes are mostly made in cash, major companies like Sinopec stay away from Iranian cargoes. "We need to open a letter of credit in a bank as per Chinese government regulations. We are not allowed even telegraphic transfers. We can't do it for Iranian companies as they continue to remain off the global financial network," a source at Chinese major Sinopec said.

Banking restrictions have continued on Iran, even during the current six-month waiver on sanctions. It remains difficult for international banks to open letters of credit for payments in and out of Iran, sources say, with banks from Japan, South Korea and Switzerland handling revenues related to the deal. Iran also remains off global financial networks such as Western Union and it's not possible to remit money into Iran through official channels.

Audited data on Iranian petrochemicals exports is not available. Local media quoted the Customs Office director, Khodadad Rahimi, as saying in early May that the country exported that more than 1.4 million mt of petrochemicals worth $1.266 billion in the period March 21-April 20.

China imported 156,556 mt of methanol from Iran in April, which was the largest share of its global imports of the commodity during the month, the latest data from Chinese customs showed.

Iran was also the largest exporter of low-density polyethylene to Iran in April and exported 39,953 mt of the polymer during the month, Chinese customs data showed. "Iranian companies have bonded warehouses in China and prefer to hand over products to local customers after payment in cash," the Dubai-based trader said.

Source: http://news.chemnet.com/Chemical-News/detail-2321667.html
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Iranian Petrochemical Companies Prefer CFR Deals Over FOB
Topics: Chemicals