PVC Market Potential in Russia/Ukraine & Central Asia
CMT’s 5th Global Chlor-Vinyl Market
Istanbul, June 10-11, 2010




S...
I’m not an analyst in PVC market
Data for presentation




                 I used our regular reports for this speech

    Price reports – for pricing dat...
Agenda




    Is market recovering?

    Current market data

    Market before crisis

    Our projections




4
Agenda




    Is market recovering?

    Current market data

    Market before crisis

    Our projections




5
Russian market, September 2008
Russian market in 2009
 Russian market, September 2009
Russian market, June 2010
2010: pretty good start




                                                                           Source: MRC

    Th...
The same for Ukraine




                                                                   Source: MRC



     Import inc...
Why Russia?




     Ukraine
     Kazakhstan


     Azerbaijan


     Belarus’




11
Other PVC markets of CIS



                                                                                              ...
Russian market follows 2006’ model




     Import again takes 15-20% like in 2006



13
Agenda




     Is market recovering?

     Current market data

     Market before crisis

     Our projections




14
Agenda




     Is market recovering?

     Current market data

     Market before crisis

     Our projections




15
Russia: production doesn’t change




                                                              Source: MRC

     Azot...
Russian import: USD’ sales were leaders




                                                                      Source: ...
Russian import: USD’ sales were leaders




                                                Source: MRC




     We were b...
BUT!




                                                     Source: MRC



     The EUR/USD rate can change everything

...
Price correlation




                                                                      Source: MRC




     In 2010 R...
Price correlation




                  Source: MRC

21
Price correlation




                                                                              Source: MRC



     We...
Agenda




     Is market recovering?

     Current market data

     Market before crisis

     Our projections




23
Agenda




     Is market recovering?

     Current market data

     Market before crisis

     Our projections




24
Good time…
Successful decade


                 Dynam ics of Russian GDP and Urals prices grow th rates, %
     60%


     40%


    ...
Crisis 1998 was useful for market



     USD exchange rate, retail turnover and polymers consumption
                    ...
The current crisis changed the situation



             Consumer credits and retail turnover, USD bln.




              ...
Our opinion: investments will start to increase in 2011




                                   Инвестиции into polymers pr...
Agenda




     Is market recovering?

     Current market data

     Market before crisis

     Our projections




30
Agenda




     Is market recovering?

     Current market data

     Market before crisis

     Our projections




31
What’s next?
New PVC production will change market balance




                                                                        ...
Kalush will start probably in Q4, 2010




                                                                               ...
Complicated logistics in Russia




     Structure of polymers consumption in Russia by regions, %




              Somet...
Logistics shield


                                       Local price PP-homo, CPT, Moscow, VAT incl, April 2008

        ...
But Customs Union disorients the market




The duty on PVC decreased by 5%. The foreign producers will have more opportun...
New Duties in Custom Union




38
The situation may become worse soon



     Growth rates of prices for natural monopoly products
     (% to the previous y...
Outlook for 2015




     Chemical Industry Development Strategy 2015
      Ministry of Fuel and Energy of Russia

     In...
With best wishes from MRC
Thank you!




               Svetlana Kivirenko,
                 Sales Director,
             Market Report Company

sve...
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MRC: PVC Market Potential in Russia/Ukraine & Central Asia, Istanbul, CMT’s 5th Global Chlor-Vinyl Market - 2010

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MRC: PVC Market Potential in Russia/Ukraine & Central Asia, Istanbul, CMT’s 5th Global Chlor-Vinyl Market - 2010

  1. 1. PVC Market Potential in Russia/Ukraine & Central Asia CMT’s 5th Global Chlor-Vinyl Market Istanbul, June 10-11, 2010 Svetlana Kivirenko, Sales Director, MRC
  2. 2. I’m not an analyst in PVC market
  3. 3. Data for presentation I used our regular reports for this speech Price reports – for pricing data Monthly reports – for balance of supply & demand ScanPlast – stocks analysis DataScope – prompt Export-Import data Forecast – price forecasting Annual reports – everything 3
  4. 4. Agenda Is market recovering? Current market data Market before crisis Our projections 4
  5. 5. Agenda Is market recovering? Current market data Market before crisis Our projections 5
  6. 6. Russian market, September 2008
  7. 7. Russian market in 2009 Russian market, September 2009
  8. 8. Russian market, June 2010
  9. 9. 2010: pretty good start Source: MRC The market growth rate is 45% comparing with the same period of 2009 Import increased 2.7 times 9
  10. 10. The same for Ukraine Source: MRC Import increased by 83% compared to the same period in 2009 10
  11. 11. Why Russia? Ukraine Kazakhstan Azerbaijan Belarus’ 11
  12. 12. Other PVC markets of CIS Azerbaijan, KT Ukraine, KT 15 6 10 4 5 2 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Kazahstan, KT Belarus' KT 3 0,5 0,4 2 0,3 1 0,2 0,1 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Source: MRC Ukrainian market is 3 times bigger than Azeri, Kazakh and Belarusian market together (data of 2008) 12
  13. 13. Russian market follows 2006’ model Import again takes 15-20% like in 2006 13
  14. 14. Agenda Is market recovering? Current market data Market before crisis Our projections 14
  15. 15. Agenda Is market recovering? Current market data Market before crisis Our projections 15
  16. 16. Russia: production doesn’t change Source: MRC Azot stopped PVC production (acetylene) in April, 2007 Usoliekhimprom stopped PVC-E production in Q3, 2009 16
  17. 17. Russian import: USD’ sales were leaders Source: MRC Chinese acetylene PVC is still a market maker for imported PVC 17
  18. 18. Russian import: USD’ sales were leaders Source: MRC We were backing to scenario of 2008-2009 18
  19. 19. BUT! Source: MRC The EUR/USD rate can change everything 19
  20. 20. Price correlation Source: MRC In 2010 Russian prices correlate with Asian and European again 20
  21. 21. Price correlation Source: MRC 21
  22. 22. Price correlation Source: MRC We expect the tight market balance and slight increasing of the prices 22
  23. 23. Agenda Is market recovering? Current market data Market before crisis Our projections 23
  24. 24. Agenda Is market recovering? Current market data Market before crisis Our projections 24
  25. 25. Good time…
  26. 26. Successful decade Dynam ics of Russian GDP and Urals prices grow th rates, % 60% 40% 20% Golden times recurred 30 years later 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 f f f -20% The higher oil prices were - the bigger -40% GDP grow th, % Urals price grow th volumes of polymers were consumed in Source: MER, MRC Russia Historical peaks of feedstock prices Russian economy growth peaks have passed Weighted average oil prices, USD, 2007 Will mathematics comprehend market’s behavior? Source: BP Statistical Review of orld Energy 26
  27. 27. Crisis 1998 was useful for market USD exchange rate, retail turnover and polymers consumption growth indexes (1997=1) Oil only? Monetary lever Not only. Plus increase in consumer expenditures and successful substitution of imports Devaluation of 1998 stimulated the polymers Source: MER, MRC market Production of cars and refrigerators in Russia Example: during the last 9 years output of refrigerators increased 3 times; production of cars went up by 1.5 times Source: Rosstat 27
  28. 28. The current crisis changed the situation Consumer credits and retail turnover, USD bln. Even a year ago banks offered huge credit resources to business and consumers If the crisis of 1998 was the crisis of the balance of payments Source: Rosstat, Central Bank of Russia, MER Then the current one is the crisis of crediting Costs structure displacement vector Smooth devaluation just mitigates the Price downfall, but it does not changes the trend The new consumption and savings model Will the uprise begin in 2011? Service life Source: MRC Annual Market Reports 28
  29. 29. Our opinion: investments will start to increase in 2011 Инвестиции into polymers processing in Russia, USD mln. Investments в переработку полимеров в РФ, млн. USD 1 200 40% 800 0% 400 -40% 0 -80% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: MRC Annual Market Reports The last year’s record level of investments will be recovered only by 2015 29
  30. 30. Agenda Is market recovering? Current market data Market before crisis Our projections 30
  31. 31. Agenda Is market recovering? Current market data Market before crisis Our projections 31
  32. 32. What’s next?
  33. 33. New PVC production will change market balance Key factors: Investments into Uhde process PVC, VCM, (caustic, PVC) Ethylene? +300 +300 HDPE, MEG or Investments into Vozlavsk Berezniki PVC? PVC, VCM? Kalush Moscow Dzerzhinsk Nizhnekamsk +150 Kstovo Kazan Ufa +160 Investments into Novomoscowsk Tomsk Bratsk PVC, VCM, +120 Sterlitamack Volgograd Ethylene? +160 Chapaevsk Salavat Sayansk Usole Aliaga Budennovsk Omsk ? Sumgait Angarsk ? Navoi Declared production Shurtan capacities growth up to 2012: 1015 KTa
  34. 34. Kalush will start probably in Q4, 2010 Export before Product maintenance, MT VCM 222 958 Propylene 106 992 HDPE 94 963 PVC +300 KTa Benzene 39 895 Ethylene 25 776 Caustic 23 602 Source: MRC Ethylene, KT Caustic, KT +200 Chlorine, KT VCM, KT +180 300 150 150 300 234 236 118 104 227 208 195 94 91 200 173 82 73 200 70 62 150 120 75 75 100 0 0 0 2002 2003 2004 2005 2002 2003 2004 2005 2002 2003 2004 2005 2002 2003 2004 2005 34
  35. 35. Complicated logistics in Russia Structure of polymers consumption in Russia by regions, % Sometimes distance between producer and customer exceeds 5’000 km Source: MRC 35
  36. 36. Logistics shield Local price PP-homo, CPT, Moscow, VAT incl, April 2008 Sibur’s President D. Konov introduced a new term – Logistics Russia, Nizhnekamsk Logistics Shield - duties should help Shield industry. Poland, Plock Duties directly affect prices, indicatives and tariffs. S. Arabia, Al-Jubail 0 300 600 900 1200 1500 Russian producers are supported by the “logistics shield”. They will Costs Price, FCA, export Duty Logistics to S Pb port Logistics to Moscow VAT struggle for it very hard. Source: MRC Usually this logistics shield is 100-150 EUR/MT. Russian producers want to control high customs duties and high indicative prices. 36
  37. 37. But Customs Union disorients the market The duty on PVC decreased by 5%. The foreign producers will have more opportunities in Russia.
  38. 38. New Duties in Custom Union 38
  39. 39. The situation may become worse soon Growth rates of prices for natural monopoly products (% to the previous year) Wholesale prices for natural gas including excise Electrical energy for all Year Railway tariffs taxes and delivery costs (without VAT) customers 2007 15 12 – 13 8 2008 25 16 – 17 11 2009 27.7 15 – 16 9 2010 27.7 13 – 15 8 2011 44.3 14.9 10.2 2012 17.3 10.6 9.9 2013 21.9 9.8 9.4 2014 4.2 5.5 7.1 2015 5.9 5.5 6.3 Source: Mintopenergo Natural gas prices for all types of customers should reach 138.8 USD / thous. м3 by 2015 (taking into account real RUB exchange rate). Growth rates of gas prices will make up 533%, compared to 2006 Growth rates of electrical energy tariffs - 262-273%. Growth rates of tariffs for transit by rail freightage - 213%. 39
  40. 40. Outlook for 2015 Chemical Industry Development Strategy 2015 Ministry of Fuel and Energy of Russia In case of joining Russia to WTO and world prices on raw energy commodities, production costs of Russian polyethylene, polypropylene and polystyrene will be equal to production costs of imported analogues. Planned growth of tariffs for products of natural monopolies (on conditions that the customs duties will be reduced after joining the WTO) will result to the following. From 45 most important chemical products only fifteen will keep competitive ability at the domestic market till 2010, and only eight – till 2011. 40
  41. 41. With best wishes from MRC
  42. 42. Thank you! Svetlana Kivirenko, Sales Director, Market Report Company svetlana.kivirenko@mrcplast.com; www.mrcplast.com Moscow +7 495 543 91 94; Kiev +38 044 240 82 35

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