OUTLOOK ’12: Russia plans import-substitution projects

03 January 2012 11:29  [Source: ICIS news]

By Sergei Blagov

MOSCOW (ICIS)--Russian companies and regional governments are pursuing petrochemical import-substitution projects, despite the country’s upcoming World Trade Organization (WTO) accession.

Russian petrochemical major Sibur has pledged to prioritise increased production of polymers. Sibur’s ongoing projects to build new facilities to produce polypropylene (PP) and polyvinyl chloride (PVC) will serve to substitute imports, Sibur president Dmitry Konov told the Russian Polymers Summit, jointly held by ICIS and MRC in Moscow, on Wednesday 30 November.

In 2013, Sibur aims to begin production at its 500,000 tonne/year PP facility currently being built in Tobolsk. The construction of a 330,000 tonne/year PVC plant in Kstovo, in Nizhny Novgorod region, is due to be completed by mid-2013. The PVC plant in Kstovo was previously expected on stream in 2012.

The regional government of Omsk had pledged to finish construction of a 180,000 tonne/year PP plant, PolyOm, in late 2011. However, the launch of the new plant was delayed, and is now tentatively expected in 2012. The projects in Tobolsk and Omsk are aimed at completely substituting imports and turning Russia into a net PP exporter.

In November 2011, Russian authorities announced new measures to provide financial support to a new import-substitution project to produce polyethylene terephthalate (PET). The local government of the southern Kabardino-Balkaria region approved state guarantees of €43m ($55.8m) to support construction of a new 486,000 tonne/year bottle-grade PET plant to be built by 2015.

Additionally, Russia has further completed and planned PET projects. In early 2011, the country’s Alco-Nafta started production at its new 240,000 tonne/year bottle-grade PET plant in the western enclave of Kaliningrad. In September 2011, Sibur pledged to increase the PET capacity of the country’s major producer, Polyef, up to 200,000 tonnes/year by 2013 from the current 130,000 tonnes/year.

The continued pledges to pursue import-substitution projects came against a backdrop of Russia’s upcoming WTO entry. After the country’s accession, tentatively expected by mid-2012, Russian authorities will be required to revise import tariffs downwards. Russia’s import tariff levied on polymers would be cut from the current 10% down to 4.0–6.5%, and domestic producers would be less protected from foreign competition.

In the meantime, the country’s export-orientated fertilizer producers are expected to benefit from the approaching WTO entry. Domestic manufacturers are moving towards further consolidation in an apparent bid to improve their international competitiveness.

In June 2011, major Russian potash producers Uralkali and Silvinit finalised their merger. The transaction was aimed at creating the world’s leading potash producer. In 2010, Uralkali produced 5.1m tonnes of potash, and Silvinit’s production amounted to 5.2 million tonnes. Uralkali is based in Berezniki, in the Perm region of the Urals, and exports up to 80% of its potash output.

Russian authorities have pledged to support new export-orientated fertilizer projects. In July 2011, Omsk regional authorities indicated plans to build new urea and ammonia production facilities. The facilities are planned to have the capacity to produce 850,000 tonnes of urea and about 500,000 tonnes of ammonia a year.

The Tatarstan regional government pledged to finalise a major fertilizer and ammonia project by 2014. The new plant would cost $1.6bn, and have the capacity to produce 717,000 tonnes/year of ammonia; 720,000 tonnes/year of granulated urea; 450,000 tonnes/year of ammonium nitrate (AN), and 238,000 tonnes/year of methanol. It had been previously expected to be completed in 2012.

Yet another export-orientated project is planned. In November 2011, Russia’s UralMethanolGroup said it aimed to start building a 600,000 tonne/year methanol production facility in the second quarter of 2012. The €300m project is due to be completed in three years.

Russia’s announcements of its series of new import-substitution and export-orientated petrochemical projects look confidently towards 2012 and beyond. However, it remains to be seen how the country’s WTO membership might affect these projects.

($1 = €0.77)

For more on petrochemicals, PP, PVC and PET visit ICIS chemical intelligence
Please visit the complete ICIS plants and projects database

By: Sergei Blagov
+44 20 8652 3214

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