Experts’ views on the new guidelines for regulating the market of petrochemical products

Breaking the monopoly on the supply side Abuzar Ansari_Petrochemical and Petroleum Products Expert, Market Regulation Headquarters Monopolies on the supply side and broad demand, along with currency fluctuations and price shocks in the domestic market, all necessitated the development of guidelines for regulating the petrochemical market. In the petrochemical market, we see the superiority of […]

Breaking the monopoly on the supply side Abuzar Ansari_Petrochemical and Petroleum Products Expert, Market Regulation Headquarters Monopolies on the supply side and broad demand, along with currency fluctuations and price shocks in the domestic market, all necessitated the development of guidelines for regulating the petrochemical market. In the petrochemical market, we see the superiority of demand over supply in only 4 groups of domestic polymer goods and a few limited chemical compounds from domestic products, which is why the importance of writing market regulation guidelines has been emphasized. The point is exactly the opposite in the steel market; That is, the superiority of supply over demand is often evident. But the inflammation of this market and the criticism of the rules and regulations continue very strongly. But the main data affecting the market of petrochemical products are two signals of fluctuations in world prices and a change in the exchange rate. Global data is widely accepted, but a review of the performance of the foreign exchange market in Iran over the past few years shows that this market has always been subject to severe shocks. Fluctuations that make it possible to plan from production units and in most cases increase the cost of production and thus reduce the competitiveness of companies consuming petrochemical raw materials. Due to supply monopoly and inflation expectations in the macroeconomic fundamentals; And in order for the supplier not to refuse the supply or to delay its supply (requirement to observe the supply floor) we needed instructions. It is also necessary to write specific instructions and framework, which of course must comply with the upstream laws of the country, in order not to turn the raw materials to be used in the production line into commercial goods and capital and a burden for speculation and profit (demand management). It has been and is. To set guidelines for regulating the petrochemical market; Initially, in expert meetings (more than 30 sessions) with the presence of upstream and downstream private sector stakeholders and with the judgment and supervision of government organizations on each word and sentence and all clauses, a relative and not necessarily favorable understanding was created and then announced. . But in steel, one side wants to write a prescription for all sides. Unlike steel; We tried to make the implementation of approvals more important than the notification of approvals in the instructions for regulating the petrochemical market. In the petrochemical market regulation guidelines, the smallest changes were shared for the comment of all members. When drawing instructions; In the meetings of the Petrochemical Committee, none of the members of the committee had the right of veto, and the expert meetings were respectful and sometimes (especially on the issue of price) challenging and sometimes very explicit. According to the execution and registration of transactions in the commodity exchange; In the petrochemical market regulation guidelines, it has been tried to comply with the upstream rules as well as the capital market rules. The petrochemical market regulation guidelines try to establish a price balance by accepting the fundamental macroeconomic variables and with the least intervention and order in the price and only by intervening on the supply and demand side, because we believe that prices will not listen to government orders; The price is smart and dynamic and no one is responsible for listening to the command at any level. Market regulation means the balance of supply and demand in proportion to changes in macroeconomic variables and does not mean lower prices. Prices in the market are smart and fluctuate with macroeconomic variables, so they can not be controlled by order and pressure. However, in the meetings of the Petrochemical Committee, the Market Regulation Working Group has clearly criticized the members of the Committee for the lack of a fully competitive market in the Commodity Exchange in the Petrochemical Committee, and these reviews are still ongoing. This instruction tries to emphasize the culture of transparency and also tries to make all transactions and all producers (upstream and downstream) trade in the context of the commodity exchange. In this instruction, the supply side responds; Is the National Petrochemical Company and is in charge of demand management; The Deputy Minister of Industrial Affairs and the custodian of supervision is also the Consumers and Producers Protection Organization. Trading monitoring at three levels Soodabeh Forghani_ Expert in monitoring the market of petrochemical products Compared to the old instructions for regulating the market of petrochemical products, in the new version that was recently approved and announced, the topics and tasks of monitoring this market are listed separately and in an independent article, which mainly focuses on three axes of suppliers’ supply monitoring, unit performance monitoring. Production and monitoring of the activities of distribution agents is centralized. The importance and necessity of monitoring this market stems from the fact that petrochemical raw materials, feed a wide range of downstream industries, including the production of plastics, textiles, rubber, chemicals, detergents, fertilizers, packaging supplies, consumables in the construction industry and .. And any shortage or disruption in its supply will lead to a crisis in the final goods market and consequently violate the rights of consumers. Therefore, in the current laws and regulations, in order to cover domestic needs, facilitate the supply of raw materials for production units and also transparency in transactions, domestic sales of petrochemical raw materials only through the stock exchange and based on the optimization quota set by the Ministry of Industry, Mines and Trade. Approved, done. At the same time, petrochemical complexes, in addition to the requirement to comply with the supply floor (minimum amount determined and announced by the National Petrochemical Company), are required to comply with the distribution rules and in case of OTC sales, are subject to penalties specified by law. On the other hand, duties have been specified for the buyers, the violation of which will lead to the restriction of the purchase and the formation of a penalty file for the violating unit, because the units with optimized quotas have a comparative advantage.