New Market Report Now Available: Russia Petrochemicals Report Q2 2010

PRLog (Press Release) - Mar 02, 2010 -
Total petrochemicals sector production levels in Russ ia are still at about 75% of 1990 levels, although these have recovered from the 1995 low of about 42%. When compared with total industrial output, petrochemicals have clearly lagged behind, but this is expected to change over the next decade. In 2009, the Russian petrochemicals industry had olefins production capacities of 3.1mn tpa ethylene, 1.63mn tpa propylene and 710,000 tonnes per annum (tpa) butadiene. In the aromatics segment, Russia has plants with combined capacities of 870,000tpa benzene, 390,000tpa toluene, 435,000tpa cumene and 360,000tpa xylenes. These aromatic compounds are used to manufacture intermediate petrochemicals products, with Russia hosting 570,000tpa ethylben zene (EB), 650,000tpa styrene monomer (SM) and 230,000tpa terephthalic acid.     These feed polymer plants with combined capacities that include 210,000tpa polystyrene (PS), 280,000tpa polyethylene terephthalate (PET) and 65,000tpa polycarbonate. In the styrenics chain, Russia also has capacities of 335,000tpa styrene-butadiene rubber and 20,000tpa acrylonitrile-butadiene-styrene copolymer. In the polyethylene segment, Russia has capacities totaling 650,000tpa HDPE, 600,000tpa LDPE and 230,000tpa LLDPE. In the vinyl chloride chain, the country also hosts 490,000tpa vinyl chloride monomer (VCM) and 740,000tpa polyvinyl chloride (PVC) capacities. In the fertilizer sector, Russia possesses 8.62mn tpa ammonia and 3.60mn tpa urea. In 2014, we forecast ethylene capacities totalling 4.22mn tpa, representing a compound annual growth rate in capacity of 6.4%.     We previously envisaged ca pacity growth lagging behind domestic needs, based on petrochemicals demand exceeding GDP growth rates of 6-8%. The impact of 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/E G and ethylbenzene. Based on current plans, PE and PP capacities are set to rise by 77% and 150% respectively, while ethylene and propylene capacities will grow by 36% and 50% respectively. This should help alleviate the problem of olefins over-capacity, although there is a risk that by 2014 Russia may require ethylene imports to serve surging PE capacity. BMI 's core scenario for Russia is one of recovery in 2010. Private consumption is likely to remain weak until the latter half of 2010.     We forecast real GDP to grow 2.0% in 2010, following a contraction of 7.8% in 2009. This will be a domestic demand-driven recessi on, but within the context of a wider global capital shortage. As Russia continues to experience net capit al outflows, domestic credit conditions will remain highly constricted through to at least 2010, ensuri ng a prolonged contraction in gross fixed capital formation and private consumption. Even more worrying is the stability of the banking system, which is likely to deteriorate further as deposit outflows and a steady increase in non-performing loans combine to hammer credit growth and further deteriorate liquidity conditions.

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