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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. I’m not an analyst in PVC market

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
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4. Agenda
Is market recovering?
Current market data
Market before crisis
Our projections
4

5. Agenda
Is market recovering?
Current market data
Market before crisis
Our projections
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6. Russian market, September 2008

7. Russian market in 2009
Russian market, September 2009

8. Russian market, June 2010

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. The same for Ukraine
Source: MRC
Import increased by 83% compared to the same period in 2009
10

11. Why Russia?
Ukraine
Kazakhstan
Azerbaijan
Belarus’
11

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)
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13. Russian market follows 2006’ model
Import again takes 15-20% like in 2006
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14. Agenda
Is market recovering?
Current market data
Market before crisis
Our projections
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15. Agenda
Is market recovering?
Current market data
Market before crisis
Our projections
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16. Russia: production doesn’t change
Source: MRC
Azot stopped PVC production (acetylene) in April, 2007
Usoliekhimprom stopped PVC-E production in Q3, 2009
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17. Russian import: USD’ sales were leaders
Source: MRC
Chinese acetylene PVC is still a market maker for imported PVC
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18. Russian import: USD’ sales were leaders
Source: MRC
We were backing to scenario of 2008-2009
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19. BUT!
Source: MRC
The EUR/USD rate can change everything
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20. Price correlation
Source: MRC
In 2010 Russian prices correlate with Asian and European again
20

21. Price correlation
Source: MRC
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22. Price correlation
Source: MRC
We expect the tight market balance and slight increasing of the prices
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23. Agenda
Is market recovering?
Current market data
Market before crisis
Our projections
23

24. Agenda
Is market recovering?
Current market data
Market before crisis
Our projections
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25. Good time…

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
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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
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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
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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
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30. Agenda
Is market recovering?
Current market data
Market before crisis
Our projections
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31. Agenda
Is market recovering?
Current market data
Market before crisis
Our projections
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32. What’s next?

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. 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
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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
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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.
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37. But Customs Union disorients the market
The duty on PVC decreased by 5%. The foreign producers will have more opportunities in Russia.

38. New Duties in Custom Union
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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%.
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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.
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41. With best wishes from MRC

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