Iran plans scheduled power cuts to tackle pollution; potential impact on petrochemical sector under review

Iran is preparing to implement scheduled power cuts in a bid to reduce pollution by limiting electricity generation at plants that rely on high-emission fuels, according to Bloomberg. The government has yet to confirm the timing or specific areas that may be affected by the anticipated power outages.

Despite being the holder of the world’s second-largest natural gas reserves, Iran remains heavily dependent on mazut—a type of heavy fuel oil—to meet electricity demands. This reliance is especially prominent in colder months, as domestic gas demand spikes, leading authorities to prioritize household heating over industrial consumption, leading power plants to switch to mazut as an alternative energy source. This shift has intensified health concerns, as burning mazut releases pollutants that severely degrade urban air quality and pose risks to public health.

The implications of Iran's planned power cuts may resonate beyond its borders, especially in the global petrochemical market. As a major supplier of PE to China, Iran plays a pivotal role in China's polymer industry. Iran is China's top exporter of LDPE, providing 18.9% of China's imports in this category, totaling 410,231 tons in the first nine months of 2024. Additionally, Iranian exports of HDPE and LLDPE to China reached 421,388 tons and 117,483 tons, respectively, during the same period.

Should Iran reduce its PE production as a result of the planned power cuts, China’s domestic supply may be impacted, potentially stabilizing or reversing recent price declines in China’s LDPE market. Market analysts and industry stakeholders are closely monitoring further announcements from Iranian authorities to assess how these changes might shape the international petrochemical landscape.

Written by: Derek Yong