Broadening US Sanctions Could Impact CFR India Phenol Trade
Broader U.S. sanctions targeting India-based entities allegedly engaged in the purchase and sale of Iranian-origin petroleum and petrochemical products are expected to negatively impact spot phenol trades into India, market sources said on Friday.
On Thursday, the U.S. Department of the Treasury expanded its list of Specially Designated Nationals, targeting buyers, shippers, terminal operators and vessels across multiple jurisdictions from Asia to the Middle East. Among the India-based individuals and companies accused of engaging in the trading of Iran-origin products are three key importers of petrochemicals, including phenol and acetone, several market participants noted.
“This will have a big impact. They are major importers and my estimate is that 70% of the imports will be affected by this new list. No supplier will provide material to them,” said an India-based market participant.
The latest move follows a similar announcement by the U.S. Department of State on July 30, which also targeted alleged violations of sanctions on Iran, as previously reported by OPIS. At the time, some market participants viewed the action as a precursor to wider restrictions.
Beyond the immediate disruption to trading activity, the sanctions pose significant challenges for international payment processing — particularly for transactions involving U.S. dollars. More broadly, producers and international trading companies will no longer be able to engage with sanctioned companies, or sell to non-sanctioned importers if there are concerns that the cargoes
could ultimately be diverted to sanctioned parties.
“Even if the sanctioned companies try to pay in other currencies, the sanctions mean nobody can deal with them,” another market source said.
Producers and international trading firms are expected to steer clear of the named companies, significantly narrowing the pool of viable counterparties in India.
“We cannot do any business with any importers who have business with Iran,” said a regional petrochemical producer.
With an existing domestic nameplate production capacity of 372,000 metric tons per year, India remains a net importer of phenol, serving as a key outlet for regional producers grappling with rising supply and subdued demand. The country needs to import about 17,000 mt of phenol per month, according to market participants’ estimate, with the bulk of the volumes originating from Southeast Asia.
While China remains the largest phenol market in Asia, rapid domestic capacity expansion is increasing its self-sufficiency, while the enforcement of protective trade measures has made it increasingly challenging for regional producers to sell spot cargoes into the country. In late August, China’s Ministry of Commerce extended existing antidumping duties on imports of phenol originating from Japan, South Korea, Thailand, the U.S. and the EU for another five years, maintaining protective tariffs first introduced in 2004.
The weekly average spot CFR India phenol prices have been largely range bound around the mid-$800s/mt CFR India, subject to the full 7.5% import duty, since early July, according to OPIS assessments. Higher inflows from Northeast Asia in recent months — combined with steady demand — has led to an inventory build at the key western port of Kandla. Northeast Asia is expected to ship 5,000 mt to India this month, following shipments of 7,000 mt in September and
6,000 mt in August.
Inventories at Kandla were at about 28,000 mt as of the end of September, said a market source, an increase of 55% from mid-September. Stockpiles were last higher in March.
On the other hand, some market participants anticipate tighter inflows due to increased trade restrictions stemming from the expanded SDN list.
“The local market will be super tight because many of the key importers are out. Only a small number of buyers are available now,” the first market participant said.
“The supply of many petrochemical products will tighten,” a fourth market participant said.
Spot trades of phenol co-product acetone into India have similarly been under pressure due to ample regional supply and rising trade barriers. Inventories at Kandla were at about 10,000 mt as of end-September, said a market source, the highest count year to date. According to another source, nationwide acetone inventories exceeded 20,000 mt as of end-September.
U.S. President Donald Trump last month announced that, effective Oct. 1, a 100% tariff will be applicable on imported branded or patented pharmaceutical products entering the U.S., with exemptions for manufacturers actively constructing drug-manufacturing facilities within U.S. borders.
While the new tariff is not expected to impact India’s generic drug exports to the U.S., some market participants said tariff policy clarity was lacking and some impact could be expected. Pharmaceutical manufacturing accounts for as much as 70% of India’s acetone demand, according to market sources.
–Reporting by Trisha Huang, thuang@opis.com; Editing by Hanwei Wu, hwu@opis.com