Distributor Polychimcomplect-M plans Uzbek expansion – exec

BARCELONA (ICIS)–Russian distributor Polychimcomplect-M plans to expand operations into neighbouring Uzbekistan and expects more demand for imported raw materials in Russia despite the country’s drive for self-sufficiency.

The company, with nearly $15m in sales last year, may make the move to Uzbekistan in 2021 as conditions for doing business have improved in the central Asian country, according to business development director Yuri Ivanov.

“We consider geographic coverage to give a competitive advantage. Uzbekistan’s economy is developing rapidly – in the past it was not easy to start a business because they had very tough regulations but now things are improving,” he said.

Some of the distributor’s suppliers are also eyeing Uzbekistan as a potential new market, he added.

FROM COATINGS TO POLYMERS
Polychimcomplect-M has traditionally sold imported ingredients to Russian manufacturers of water-based coatings mainly for the home decoration market.

Now the company plans to expand into the solvent-based coatings sector which serves industrial customers.

Industrial coatings markets are growing, pushed by the government’s push to stimulate its industrial base, according to Ivanov.

“We are also looking at the polymer processing industry. We have emulsion PVC [polyvinyl chloride] in our portfolio but no other polymers such as polypropylene [PP], polyethylene [PE], or acrylonitrile butadiene styrene [ABS],” he said.

The firm aims to find suppliers of some grades of basic polymers such as ABS or specialty PP or PE as well as a portfolio of additives for polymers would be added such as for 3D printing.

The company currently focusses on latexes, pigments, biocides and special additives for water-based paint manufacturers.

On the industrial side marine coatings are an important market, especially around St Petersburg which is a big ship-building city.

The firm distributes latex and water dispersants from Dow, biocides for coatings from Germany’s Thor, BASF’s pigments and pigment pastes for coatings and emulsion PVC from Germany’s Vinnolit.

While Polychimcomplect-M is a small player in the $2-2.5bn/year Russian distribution market, Ivanov said the firm has a strong position in water-based coatings ingredients such as biocides, as well as latexes and water dispersants, pigments and additives.

RUSSIAN RELIANCE ON IMPORTS
Local chemical production is expanding, with producers such as SIBUR building world scale cracker projects with downstream production which, in some cases, is substituting imports. For example, SIBUR now produces the plasticiser dioctyl terephthalate (DOTP), which will reduce imports of plasticisers.

On the other hand, three years ago Russia’s last citric acid producer closed, leaving the country 100% reliant on imports.

But the range on offer from domestic producers is limited, leaving most chemical distributors focused on imported materials.

“Russia is still far from offering the total range of chemicals on the market. Coatings formulations have at least 20 substances in a recipe and probably up to three can be sourced locally,” said Ivanov.

He added local quality is often not good enough; Russia has 80,000 tonnes/year of titanium dioxide (TiO2) capacity and, while consumption is close to that figure, the product range does not satisfy all needs, leaving 50% of demand being satisfied by imports.

Also, local producers prefer to sell direct rather than use the distribution channel, and they sell to consumers at the same price as to distributors, making it difficult to establish as a distributor of local material, adds Ivanov.

DISTRIBUTORS IN A VAST COUNTRY
Russia is a vast country where transport of goods taking a long time; the distance between Moscow and the eastern port of Vladivostok is 6,400 km (New York to Los Angeles is 4,500km).

Because of transport time, customers prefer to buy from distributors with local warehouses, said Ivanov.

End users also prefer not to deal with all the customs procedures, duties and other payments involved with cross-border trade.

Large currency fluctuations and volatility with the rouble is another headache customers prefer to avoid; Ivanov said Polychimcomplect-M charges in roubles and then converts to foreign currencies to pay suppliers.

“The rouble is a big challenge for all distributors. As long as the rouble is stable it is the best time for a distributor – it’s a paradise when we have years of rouble stability because you can budget and calculate costs easily. Volatility is very disruptive,” he said.

DISTRIBUTION TRENDS
The sustainability agenda is growing in importance, driven by consumer demand, said Ivanov, and demand for imported polylactic acid (PLA), a biodegradable polymer feedstock, jumped in 2019.

The 3D printing materials market is also growing.

With per capita consumption still well behind western levels, Ivanov predicts continued growth in most big end use markets once economic growth stabilises.

BOUNCING BACK
Coronavirus led to some Polychimcomplect-M customers closing or reducing production from the end of March, and this continued until mid-June but then rapidly resumed.

In rouble terms, the company increased sales by 4-6% in the first half of 2020, year on year.

“June was better than June 2019 thanks to delayed demand from April and May. We are optimistic for H2 and have some orders delayed from April/May. If there is no second wave [and subsequent] lockdown this year, we expect positive development in H2,” said Ivanov.

Overall, he forecast Russian GDP would fall by at least 5-6% in 2020, compared to 2019.

Polychimcomplect-M is headquartered in Moscow; it has sales representatives and warehouses in St Petersburg, the Urals, central Russia, south Russia, and Siberia.

The company is also active in Belarus through a subsidiary called CentroChem.

Interview article by Will Beacham