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Russia Petrochemicals Report Q4 2011
Business Monitor International, Sep 2011, Pages: 66
Business Monitor International's (BMI) Russia Petrochemicals Report (Q4 2011) provides industry professionals and strategists, corporate analysts, petrochemical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Russia's petrochemicals industry.
The Russian chemicals and petrochemicals markets will face headwinds in H211 and going into 2012. There are seeing increasing signs that the much-anticipated recovery in private consumption in Russia may struggle to take off in H211. BMI has therefore lowered its final household expenditure growth projections for this year to 3.0% from 4.1% previously. BMI cautions however, that failure to tame inflation expectations could force a more aggressive hiking cycle by the central bank in H211. This would weigh on the petrochemicals industry, particularly segments reliant on the production of consumer goods, exacerbating the already-adverse effects of rising inflation.
Petrochemicals production growth in 2011 has been led by Sibur’s expansion, with the company planning a 14% y-o-y rise in output to 18.8mn tonnes. Although the strong rouble will likely start to hurt external demand for manufactures at some point, for now BMI remains upbeat on the outlook for the petrochemicals sector.
Russian is expected to build up to 10 complexes to produce ethylene, each with a 1m tonne capacity, by 2030. Annual per capita production of ethylene is currently three times lower in Russia than in Western Europe, despite Russia’s position as one of the world’s largest crude producers. Over the forecast period, the focus of investment will be Nizhnekamskneftekhim’s (NKNK) planned 1mn tpa ethylene complex by 2016, Sibur’s planned 1mn tpa cracker at its Tobolsk site which will also feature a new 500,000tpa PP plant, and Gazprom’s planned 80,000tpa increase in ethylene capacity at its Salavat complex to 380,000tpa by Q412, in tandem with a similar rise in its HDPE capacity at the site to 200,000tpa.
Russian PVC consumption is expected to rise by 30% in 2011 on the back of 3% growth in construction activity, which is fuelling imports and putting upward pressure on prices. Over the past two years, PVC has suffered alongside the poor performance of the construction industry. However, the lack of domestic production capacity and strengthening growth in construction over the medium term means that the country will be dependent on PVC imports over much of the forecast period; in 2010, PVC imports reached an all-time high of 486,000 tonnes. BMI sees recovery on the back of preparations for the 2018 World Cup, especially in commercial construction.
In response to the upturn, Sibur is pressing ahead with the RusVinyl 330,000tpa PVC plant at Kstovo in Nizhny Novgorod, a JV with SolVin; capacity will be increased to 500,000tpa at a later stage. Construction began in 2010 with completion slated for 2012, when it is envisaged the plant will remove Russia’s dependency on PVC imports. In December 2010, Lukoil said it could build a new PVC unit in southern Russia with a capacity of up to 500,000tpa, but it is not expected to begin operations before 2017. Lukoil is also planning a 600,000tpa PE plant at Budyennovsk, Stavropol with completion in 2016. The state-owned Gazprom also has plans for a complex in the Orenburg region with capacities of 650,000tpa PE and 450,000tpa PP, expected to come on-stream in 2015.
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