The gas feedstock price for petrochemicals reached 29,749 tomans per cubic meter in August of this year, indicating a significant upward trend. This figure has increased by nearly 65.7 percent compared to the beginning of the year. The rise in gas feedstock costs exerts additional pressure on the production costs of petrochemicals, making a detailed analysis of these changes essential for the petrochemical industry.
Upward trend in gas feedstock prices
The gas feedstock price has been on an upward trend since the beginning of this year. In Farvardin and Ordibehesht, the price of gas feedstock was 17,956 tomans per cubic meter. This figure rose to 20,127 tomans in Khordad, 26,570 tomans in Tir, and finally reached 29,749 tomans in Mordad. This trend indicates significant pressure on the energy costs of petrochemical industries.
Read more: TotalEnergies invests up to $17 billion annually
Impact of price increase on production costs
The increase in gas feedstock prices directly impacts the production costs of petrochemicals. Natural gas is used not only as an energy source but also as a raw material in some petrochemical production chains. Therefore, the distinction between "feedstock gas" and "fuel gas" must be carefully considered. Currently, the price of fuel gas has also increased to 17,849 tomans in Shahrivar, which is about 65.7 percent higher than in the first three months of the year.
For example, in urea production units, natural gas is one of the main elements in the production process, and an increase in feedstock prices can directly affect cost calculations. Additionally, companies with high gas consumption will be more affected by these changes.
As a result, to accurately analyze the financial impacts of the feedstock price increase, three main variables must be considered: product price, production volume, and gas consumption volume. If the final product price in the market increases, part of the cost pressure will be alleviated. However, if the product price remains stable or decreases, profit margins will be under pressure.
Financial and managerial implications
Petrochemical companies are currently assessing the financial impacts of these changes. Khorasan Petrochemical and Lordegan Petrochemical are among the companies that have informed about the announcement of new rates and the reflection of their financial impacts in their semi-annual financial statements. Additionally, methanol production units can benefit from a 5 percent discount on the natural gas feedstock price if they pay the feedstock price. This discount can particularly help methanol complexes that consume a large volume of gas reduce their annual costs.
Overall, the increase in gas feedstock prices for petrochemicals can be seen as a significant challenge for this industry, but proper management of costs and product pricing can alleviate some of these challenges. Ultimately, attention to financial details and smart decision-making in these circumstances can help maintain the profitability of companies.
Read more: Marinakis Investment Group has purchased a new Suezmax tanker · Gas prices in Europe rise to €73.62 amid the Hormuz crisis
