Growth points of Russian chemical industry Fares Kilzie Chairman of the Board of Directors of CREON Group Russia and CIS: joint projects with Chinese partners 19 September 2017, Beijing, China
Helium Consumption of helium in Russia, mmcm mmcm 4,0 3,5 3,0 2,5 2,0 Consumption of liquid helium in Russia, 1,5 thousand liters thousand liters 1,0 1200 0,5 1000 0,0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 800 600 Consumption is given inclusive of liquid helium in gaseous equivalent. 400 200 0 From 2000s through 2010, the helium market in Russia was developing due to the consumption of liquid helium in medicine and research and development centers. From 2011, growth and decline in demand for helium are regulated by the consumption of gaseous helium in the entertainment industry. From 2011 through 2016, demand in this segment grew from 0,5 mmcm to 1,9 mmcm. 2
Commercial gases Dynamics of market supplies of technical gases Share of on-site market companies bcm 4 Cryogenmash (Russia) 25% 3 Praxair Air Liquide 28% 29% 2 Air Prodacts Linde 6% 12% 1 0 2010 2011 2012 2013 2014 2015 2016 oxygen nitrogen argon Almost double increase of the market of commercial technical gases (oxygen, nitrogen, argon) in 2011-2016 due to the on-site facilities put into operation by the leading global gas companies. 26 on-site projects were implemented from 2002 to 2016. 6 other projects are at the implementation stage. 3
Fertilizers Increase in the consumption on foreign markets is the main driver of the fertilizers production growth. Dynamics of mineral fertilizers production in Russia Agriculture continues expanding against the background of the Russian economic contraction in general. At the end of 2016, growth in the volume of production of mmt the Russian agriculture was +3%. 21 Investments in the “efficiency” of the agricultural 18 production is the main factor of the development of the 15 domestic mineral fertilizers market: improvement in the 12 rotation of crops in favor of high-value crops (corn, soya, 9 vegetables), work on the quality of products (sugar beet, sunflower) drive up the demand for fertilizers. 6 3 Main players in the fertilizers segment: 0 MCC EuroChem, Uralchem, Phosgaro and Acron. 1998 1999 2013 2014 2015 2016 More than double increase in fertilizers production from 1998 4
Polypropylene processing Dynamics of PP consumption in Russia, 2000- thousand 2016 tonnes 1200 1000 800 600 400 200 Change in PP consumption structure in Russia, 0 2014-2016 thousand tonnes 1200 other 1000 tape yarn Volume of PP processing in Russia grew sixfold from 180 800 compounds thou tonnes 1,145 thousand tonnes in 2000-2016. 600 nonwoven fabrics consumer goods 400 PP does not have a main application, on which the tubes condition of the entire market depends. This versatile 200 films consumption structure allows polypropylene to better 0 resist the demand crises: decline in some segments is 2014 2015 2016 compensated by growth in others. 5
PE tubes Dynamics of PE tubes production in Russia, 2000-2016 thousand tonnes 400 350 300 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Market of PE tubes strongly depends on the condition of the Russian economy. In total, production of tubes grew fourfold from 2000 through 2016. Maximum volume of production was seen in 2013 – 386 thou tonnes. Major manufacturers: Polyplastic Group – 80% of the market, Kazanorgsintez – 5% Problem of the markets: - Deficit in certified raw materials for tubes; - “Metallurgical” lobby (competition with steel tubes) 6
PE film Dynamics of production of PE film and packaging in Russia, 2000-2016 thousand tonnes 1200 1000 800 600 400 200 0 2000 2001 2002 2003 2004 2014 2015 2016 Threefold growth in the PE film and packaging production from 2000 through 2016. Major film manufacturers: Kamskie polyany (Tatarstan ); Polymer (Desnogorsk); Regent Stretch (Moscow). Deficit in the raw material - linear polyethylene is the problem of further increase in PE film production in Russia. In spite of the growth in the domestic production, Russia imports up to 200 thousand tonnes of linear low density polyethylene. 7
Polycarbonate Dynamics of PC consumption in Russia, 2000-2016 thousand tonnes 100 90 80 70 60 50 40 30 20 10 0 2000 2008 2009 2010 2011 2012 2013 2014 2015 2016 Beginning of 2000s – PC processing market (casting) is in its infancy. 2003 – Start-up of the Polyalt plant – first manufacturer of PC sheets in Russia; the polycarbonate market in Russia is based exclusively on the imported raw materials. 2008 – Start-up of a PC plant at Kazanorgsintez with the capacity of 65 thousand tonnes per year boosted the market development. 2017 – Capacities for PC sheets production (cellular and solid) are 150 thousand tonnes. Major manufacturers: Ug-Oil-Plast, KinPlast, SafPlast, CarboGlass. 8
Plastic Windows Dynamics of window profile production in Russia, 2000-2016 thousand tonnes 600 500 400 300 200 100 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Production of PVC window profile is the main segment of PVC processing in Russia. Major window profile manufacturers: profine RUS, REHAU, VEKA Rus. Main market driver until 2008 – reconstruction. Window profile production // consumption is cyclic: market saturation, decline, growth of consumption due to the reconstruction of old windows. Restoration and further development of the market due to an increase in the primary construction. 9
PET packaging Dynamics of PET consumption in Russia, 2000- 2016 гг. tou tonnes 600 500 400 300 200 100 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Beginning of 2000 – Domestic production of PET is at the level of 3-4 thousand tonnes per year. Russian manufacturers use imported raw materials. Consumption volume – 240 thousand tonnes per year. 2003 – Start-up of the Sibur PET plant (Tver) with the capacity of 50 thousand tonnes per year. 2017 – Four manufacturers of PET; total capacity - 606 thousand tonnes. All plants manufacture bottle PET. Processing volume at the end of 2016 was 590 thousand tonnes. Main driver of the processing market – production of PET packaging Growth in processing in 2000-2016 by 2.5 times 10
Polyurethanes Growth points of PU market - – PU foams PirroGroup PU production in Russia in 2000 and 2016 Start-up of the plant for production of insulation PIR boards with soft lining at the end of 2014. thousand tonnes Capacity - 10 mm sqm/a 300 TechnoNIKOL 250 + 142% Start-up of the plant for production of insulation 200 275 materials from rigid polyisocyanurate foam (PIR) in 150 September of 2015. Capacity - 30 mm sqm/a 100 113,5 GRUPPO MANNI 50 Start-up of the ISOPAN RUS plant for production of 0 wall and roof sandwich panels filled with mineral 2000 г. 2016 г. wool, PIR and PUR in September of 2015. Capacity - 3 mm sqm/a Contradictions in PU market development: Absence of domestic production of raw materials – isocyanates - is braking further market expansion. Major Russian companies consider the underdeveloped domestic market as obstacle for the in-house production of isocyantes. To build a profitable production of isocynates in Russia, the level of their consumption must be not lower than 300 thousand tonnes per year (now it is not more than 150 thousand tonnes). 11
Equipment for oil refining Share of import for main groups of oil refining equipment 90 80 80 80 80 70 70 60 50 40 40 % 40 30 20 20 20 20 10 10 10 10 0 critical standard critical standard standard high pressure centrifugal piston heating reaction standard range high pressure// aggressive range centrifugal media Vessels Heat exchangers Pumps Compressors Furnaces Valves Share of the imported equipment in the domestic oil refining is very big. Despite the government import substitution program, the equipment market will be import-dependent a long time. Introduction of sanctions against Russia closed the door of the Russian market for European and American suppliers of the equipment. Vector of supplies must change towards Asian - including Chinese – manufacturers of the equipment. 12
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