Media: Iran’s gas and power shortages worsened, petrochemical sector in peril

Iran is facing an escalating energy crisis that has crippled industrial operations, disrupted daily life, and further darkened an already precarious economic landscape. Despite possessing some of the world's largest natural gas and crude oil reserves, the country’s inability to meet domestic energy demands underscores systemic inefficiencies and longstanding vulnerabilities. These include the cumulative effects of longstanding international sanctions, ageing infrastructure, and alleged sabotage efforts by Israel.

The crisis has forced Iranian authorities to resort to drastic measures, including cutting off electricity to industrial sectors and plunging manufacturing activities into near stasis. Urban areas, from highways to shopping malls, have been plunged into darkness as authorities grapple with diminishing power supplies. 

By 20 December 2024, 17 power plants had gone offline entirely, while the remaining facilities operated at significantly reduced capacity.

The petrochemical industry, a linchpin of Iran’s economy and a vital source of foreign currency, is particularly imperilled. Already operating at just 70% capacity last year due to energy shortages, the sector now faces the prospect of even steeper declines. Such disruptions threaten to exacerbate Iran’s economic instability, with potential repercussions for global markets.

Iran’s role as a major player in the global petrochemical supply chain magnifies the potential consequences. The country is a key supplier of LDPE to China, accounting for 19.3% of China’s imports in this category or 459,532 tons in the first ten months of 2024.

Uncertainties about Iran’s ability to maintain export volumes are already affecting global trade dynamics. Chinese market participants have noted that these uncertainties are among the key factors preventing sharper declines in China’s local LDPE market, despite weakening domestic demand.