MRC: Russian & CEE PVC Markets, Prague, 2nd Chlor Vinyl CEE 2006 - 2006

Russian & CEE PVC Markets 2 nd Chlor Vinyl CEE 2006 25-26 May, Prague Sergey Yaremenko, Market Report Company (MRC)

Agenda
PVC market in Eastern Europe
Balance of PVC production in Eastern Europe
Trends in C&SEE production till 2010
Russian PVC market

Slovakia Bulgaria Bosnia and Herzegovina Hungary Latvia Lithuania Poland Romania Ukraine Slovenia Belarus’ Croatia Czech Rep. Estonia Serbia and Montenegro Russia Turkey Macedonia Population 143,5 mln . people Population 72,1 mln . people 16 countries Population 1 78 mln . people Eastern Europe: which countries ?

Eastern Europe: macroeconomics Source: World Bank, MRC * According to the direct method

Eastern Europe: 2004 GDP , bln . USD Source: World Bank

Eastern Europe: 2004 GDP , bln . USD (PPP) Source: World Bank

Eastern Europe: 2004 Construction market, mln. m 2 Source: World Bank

World PVC consumption + 1 ,5% per year +5% per year +0,5% per year +3% per year +8% per year +5% per year Source: CMAI 0 2 4 6 8 10 12 14 North America South America Western Europe Eastern E urope + CIS + Turkey Asia Africa and the Middle East Market in 2004, mln . MT Market in 20 10 , mln . MT

in the world 5, 6 kg 2004 World PVC consumption , КТ Source: Harriman Chemsult Source: Harriman Chemsult

World PVC consumption , КТ 2010 in the world 7,0 kg Source: Harriman Chemsult 2010 in the world 7,0 kg

Eastern Europe: PVC consumption, КТ 2004: consumption per capita made up 4, 5 kg in the world 5, 6 kg in China 4 , 4 kg in Russia 3,2 kg Source: Harriman Chemsult, MRC

2010: PVC consumption per capita made up 6, 6 kg in the world 7 , 0 kg in China 6 , 7 kg in Western Europe 14,5 kg in Russia 5,9 kg Source: Harriman Chemsult, MRC Eastern Europe: PVC consumption, КТ

Eastern Europe: PVC consumption Source: Harriman Chemsult, MRC

Eastern Europe: PVC trade Source: Harriman Chemsult, MRC

CEE : balance of PVC production Source: Harriman Chemsult, MRC

CEE : balance without Kalush Source: MRC

Poland : PVC consumption Source: Harriman Chemsult, MRC

Poland : balance of PVC production Plock : ethylene capacities increase from 360 КТ up to 660 КТ HDPE capacities increase by 250 КТ 2004 Source: MRC

Hungary : PVC consumption Source: Harriman Chemsult, MRC

Hungary : balance of PVC production 2008 Kalush ? VCM : 285 КТ / PVC 285 КТ Tiszaújváros ? Ethylene : 620 КТ LDPE: 120 КТ / HDPE: 400 КТ Source: MRC

Czech Rep. and Slovakia : PVC consumption Source: Harriman Chemsult, MRC

Romania: balance of PVC market Source: Harriman Chemsult, MRC

Romania : ethylene shortage Source: Oltchim, Petrom, MRC 210 210 210 210 210 210 210 Caustic soda -10 59 65 65 10 10 10 VCM to buy 162 90 72 72 72 72 72 Ethylene to buy 350 250 225 225 170 170 170 PVC 360 200 160 160 160 160 160 VCM 186 186 186 186 186 186 186 Chlorine 2010 2005 2004 2003 2002 2001 20 00 Capacities , КТ a

Dioki : the VCM plan Source: Dioki

Petkim : without changes up to 2 008 Source: Petkim

Kalush : will PVC project be realized ? Source: MRC Export 2004, MT Product 23 602 Caustic 25 776 Ethylene 39 895 Benzene 94 963 PE 106 992 Propylene 222 958 VCM +80 +91

Russian market: Consumption and Prices * Russia: H2 Domestic prices free of VAT c ompared to H2 2005 WE prices (CMAI) Source: MRC ** Russian and WE prices for GPPS + USD 47* + USD 231* + USD 114* - USD 11**

Russia: PVC consumption Source: MRC 100 200 300 400 500 600 0 KT 2000 2001 2002 2003 2004 2005 2006 2007 2008 7 00 1998 1999 1999-2004 , AAGR - 24% 2005-2008, AAGR - 12%

* by import Russia: Consumption of PVC, KT Source: MRC 1 0 % 9 % 1 3 % 23 % 27% 5 2 % 2% 8% - Growth, % 815,4 7 39,0 6 78,2 599,5 486 ,1 38 3,7 251 ,7 246 ,5 227 ,6 Total 7 ,4 6 , 5 5 ,7 4 ,3 4 ,1 2 ,6 2 ,9 1 ,1 0,4 Pastes * 2 ,4 2 ,8 3 ,1 2,1 3 ,6 2 ,9 3 ,7 4 , 9 5 , 6 Others 14,1 1 5,4 1 2,7 1 0,4 11 ,2 7 ,4 4 ,1 1 ,7 1 ,3 Soft compounds * 41,1 37,4 30,1 27,3 26 ,9 23 ,7 14 ,4 4 ,7 2 ,1 Rigid compounds * 8 5,4 78,5 7 2,4 70,3 64 , 9 53 ,4 45 ,7 49 , 3 53 ,1 Emulsion 6 65,0 5 98,4 554,2 4 85,1 375 ,4 293 ,7 180 ,9 184 ,8 165 ,1 Suspension 2008 2007 2006 2005 2004 2003 2002 2001 2000 Type

Russia: drivers of PVC market growth Source: MRC

Investments into processing of PVC November 2005 14 KT /EUR 30 mln. 15 KT /EUR 10 mln. 14 KT /EUR 13 mln. 12 KT/ EUR 11 mln. 10 KT /EUR 10 mln. Total: 65 KT/ EUR 74 mln. Source: MRC

Russia: PVC market till 2012 200 КТ Bashim ? Lukoil ? Sayansk ? Sibur ? Nikos? + 280 КТа 78 КТ Postponed demand КТ * PVC capacities loading in 2005 - 98% * Current additional margin of PVC producer - 150 USD Source: MRC Capacities 200 КТ

Source: MRC D eclared production growth up to 2008 : 855 KT Market will demand : 280 KT CIS: Capacities growth up to 2008 Investments into PVC, VCM, Ethylene? Key limitations of producers: HDPE, MEG or PVC? Investments into PVC? Investments into PVC, VCM? Investments into PVC, VCM, Ethylene? ? ? Moscow Budennovsk Ufa Salavat Omsk Tomsk Berezniki Kstovo Kazan Nizhnekamsk Dzerzhinsk Volgograd Novomoscowsk Chapaevsk Sterlitamack Angarsk Bratsk Usole Sayansk Aliaga Shurtan Sumgait Navoi Vozlavsk Kalush +285 +160 +150 +180 +80

Caustic and ethylene – key limitations for Russian PVC producers Production chain of PVC Chlorine Caustic Ethylene EDC VCM PVC Oxychloride Hydrochloric acid Oxygen 1 MT 1,0 2 MT 0,5 8 MT 0,4 5 MT 0,6 8 MT

PVC production balance, 2004, KT * without Kalush Source: MRC supplied stable 104 104 150 370 - Lukor own variable 9 - 15 27 27 Khimprom Volgograd Salt Ethylene deliveries Ethylene needs Chlorine production Chlorine needs VCM capacity PVC capacity Producers 674 56 70 77 175 193 103 own variable 103 150 270 250 Sayanskkhimplast - - 242 349 629 6 08 Total* own variable 8 14 26 24 Usolekhimprom supplied acetylene - 25 45 47 Azot supplied stable 15 20 36 42 Sibur-Neftechim own variable 35 36 64 6 8 Nikos own variable 72 89 160 1 5 0 Kaustik Sterlitamack

Current Russian price for PVC-S Source: MRC Source: MRC + USD 200 !!!

Sergey Yaremenko, Managing Director, Market Report Company syaremenko@market-cis.com; www.market-cis.com Moscow +7 4 95 543 91 94 ; Kiev +38 044 240 82 35 Thank you !

MRC: Russian & CEE PVC Markets, Prague, 2nd Chlor Vinyl CEE 2006 - 2006

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