Price and market trends: SIBUR aims high in Russia polymers

04 October 2013 09:35  [Source: ICB]

The company is on the verge of bringing its fully integrated polypropylene facility on line, cutting the need for imports

SIBUR can capture Russia’s growing demand for polymers with its landmark propane dehydrogenation (PDH) and polypropylene (PP) production complex in Tobolsk, Western Siberia, according to the Russia-based producer’s CEO Dmitry Konov.

The Russian market is the priority for SIBUR’s basic polymers division, which in addition to PP also includes the production of polyethylene (PE) and polyvinyl chloride (PVC).

 

 SIBUR's PDH and PP production complex in Tobolsk should be at full production next year

The physical construction of Tobolsk-Polymer began in October 2010 and the whole project cost around Russian roubles (Rb) 60bn ($2bn) to build. It is on course to be at full production levels in the first half of 2014.

The plant has the capacity to produce 500,000 tonnes/year of PP and will be the largest in Russia, consisting of two 250,000 tonne/year lines.

The PDH plant, based on UOP technology, is capable of producing 510,000 tonnes/year of feedstock propylene, Konov said.

The PP plant is now onstream and The PDH unit is expected to start up within weeks. The PP plant is currently being fed by one of SIBUR’s other sites in Russia, north of Tobolsk, by rail.

Konov said the complex is advantageously located at a hub of oil and gas fields and the main routes connecting Siberia with the western part of the country.

He added that the launch of Tobolsk-Polymer will make PP product available for the Russian market, and the country will be able to substitute imports of homopolymer PP grades with domestic product and become an exporter.

NGL FEEDSTOCK
He also said, because the complex is fed by propane made from raw natural gas liquids (NGL) which come from the group’s own gas processing plants, SIBUR is more competitive with feedstock prices than shale-based ethane values in the US.

“Russia imports several hundred thousand tonnes of manufactured goods made from polymers including PP. One of the major reasons for this is because PP does not come from local sources. There is a lack of product for converters,” Konov said.

EXPORT STRATEGY

“The priority market is Russia. At the start of the project the Russian market will not be big enough to consume all this product so we will start exporting part of it,” he added.

In view of this increased production of PP and the opportunity to export to target markets, SIBUR in February registered new subsidiary companies in Turkey and Ukraine to specialise in trading basic polymers.

SIBUR International trading Istanbul and SIBUR International Trading Kiev will target manufacturers of PP bags and rugs, biaxially-orientated PP (BOPP) films, non-woven materials and compounds. SIBUR also operates in other countries via trade offices in Austria and China.

PP IMPORTS TO CEASE
In July, Russian energy minister Aleksandr Novak in a speech at a government meeting said PP imports into Russia will cease at some point between 2014 and 2017. He added that the most effective way of stimulating demand for petrochemical products in Russia was to cut down the imports of finished polymer goods.

In 2012, PP consumption in Russia stood at 6kg per capita, which is much lower when compared with countries with established manufacturing bases. It is half of China’s consumption of 12kg per capita in 2012, and way under the 17kg per capita recorded in the US, 18kg per capita in western Europe and 14kg per capita in eastern Europe.

However, Konov said it is possible there will be double-digit growth for PP consumption in Russia over the next few years, following a pattern already witnessed over previous years.

Certain market trends are helping to lift Russian demand for PP, including a rise in the usage of polymers in automotive products. Konov said Russia not only now produces more cars than it did 10-15 years ago, aided by a movement of international companies into the country, cars also now contain around 200kg of polymers, whereas 10 years ago this figure was closer to around 20kg.

“There are more cars being produced in Russia and more polymers being used to manufacture them,” Konov said. “The second trend is that 10 years ago, there were few supermarkets and more street markets where Russians bought their food.”

The replacement of steel water pipes with plastic alternatives has also helped push up PP demand, Konov said.

The CEO added that the intention of Tobolsk-Polymer is to be able to turn the costly procedure of transporting feedstocks by rail for thousands of kilometres into the more advantageous production of polymers, which have significantly lower transportation costs on a price/tonne basis than those of light hydrocarbons.

JV STRATEGY
Although SIBUR has expanded its global footprint and steered some of its businesses into foreign growing markets through joint ventures and using its own technology – the group’s synthetic rubber division has agreed joint ventures with Reliance to produce in India, and with Sinopec to produce in China – Konov said the company has no intention for a similar strategy for PP production.

“As of today we see no major incentive to joint venture or to acquire new production outside of Russia,” Konov said.

He also added that joint ventures were necessary for SIBUR’s synthetic rubber division because the company saw no real volume growth in Russia’s domestic market.

Speaking about RusVinyl, SIBUR’s 50:50 joint venture with Belgium-based SolVin (itself a 75:25 joint venture between Solvay and BASF), Konov said everything is on track for mechanical completion by the end of the year. It will involve the construction of a 330,000 tonne/year PVC plant and a 225,000 tonne/year caustic soda facility in the Nizhny Novgorod region of Russia. Konov added that around 88% of construction is now completed.

POLYOLEFINS PROJECT
Meanwhile, a decision on SIBUR’s ZapSibNeftekhim project, also known as ZapSib-2, an integrated PE and PP production complex which could also be based in Tobolsk, is still awaiting approval. Konov said an agreement to proceed will be discussed at the end of 2013 with the company’s board.

ZapSibNeftekhim, located just over 3km north of Tobolsk-Polymer’s site, is currently in the front-end engineering design (FEED) phase. It would be the largest integrated facility for the production of polymers in Russia.

The project, first unveiled in June 2012, will include a 1.5m tonne/year ethylene cracker, the capacity to produce 500,000 tonnes of PP and 1.5m tonnes/year of PE, including an 800,000 tonne/year swing linear low density PE (LDPE) and high density (HDPE) plant and a 700,000 tonne/year HDPE plant. ZapSibNeftekhim will be fed by ethane and LPG.

Konov conceded that this project was unlikely to come onstream before 2018.


By: Franco Capaldo
+44 (0)20 8652 3214



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