Market and product
Russia Petrochemicals Report Q4 2010
One key factor holding back the petrochemicals sector is lagging domestic demand, with the feed-through effects from the bounce in the oil export sector to domestic demand taking time to have an effect. Latest growth data for retail sales and industrial production highlight the dichotomy between the performance of sectors directly linked to oil and those reliant upon domestic demand. The Russian automotive sector, a key consumer of plastics, has been particularly affected is still suffering from the effects of the country's deep recession, though there are signs that recovery is within grasp. The construction industry as a whole will not recover as robustly as the car industry, because the steep decline in residential and commercial construction will weigh on the sector for longer. Moreover, problems of lacklustre Asian demand and weakening competitiveness due to the expected appreciation of the rouble will be compounded by the increase of substantial new low-cost capacity currently coming onstream in Asia and the Middle East.
In a sign that confidence is returning to the sector, Russian petrochemicals producers are pressing ahead with investments that were delayed by the recession. In Q210, Gazprom, Sibur and Dow Chemical signed an agreement reviving plans for a joint petrochemical complex. The complex would use mixed feedstock and produce both ethylene and propylene in a world scale cracker with capacity for about 1mn tpa ethylene. In previous plans announced by the three partners in December 2007, the complex would come onstream by around 2015. Other revived projects are beginning construction. In July 2010, RusVinyl, in which Sibur has a stake, began construction of a PVC complex at Kstovo, Nizhnii Novgorod region. Costing EUR800mn (US$983mn), it will be Russia's largest fully integrated PVC plant and is set to be operational in 2013, delayed by up to two years due to the late revival of the Russian construction sector.
In 2014, we envisage ethylene capacities totalling 4.22mn tpa, representing a compound annual growth rate (CAGR) in capacity of 6.4%. We previously envisaged capacity growth lagging behind domestic needs, based on petrochemicals demand exceeding GDP growth rates of 6-8%. The impact of the recession, which led to a 10% decline in plastics production to around 4mn tonnes in 2009, combined with average GDP growth rates of around 4% over the next five years, means that overall capacity should rise broadly in line with demand trends. However, some segments will see little or no movement, notably styrenics and some intermediates such as EO/EG and ethylbenzene. Based on current plans, PE and PP capacities are set to rise by 77% and 150% respectively, while ethylene and propylene capacities should grow by 36% and 50% respectively.
(Source: www.officialwire.com)
