Polymers have found the bottom

The Russian petrochemical market, which has suffered from problems with transportation and direct EU sanctions, has not yet shown a sharp drop in production volumes. In January-August, the production of only certain types of polymers significantly decreased, and some segments even showed growth due to import substitution. The results of the year, however, will depend, among other things, on the content of the eighth package of EU sanctions.

Logistical difficulties and direct restrictions on purchases by the EU caused a decline in the production of many types of petrochemical products in Russia in January-August. So, according to Rosstat, the most significant (by 25.7%) production of xylenes (used as solvents and plasticizers), isopropyl alcohol (by 12.4%), polyamides (by 12.3%), polypropylene (by 7% ), as well as polyvinyl chlorides (by 4.6%) and phenol (by 4.9%).

According to Gazprombank’s CEP, although the reasons for the decline in production are largely similar, there are differences. In particular, in the case of liquefied propane, the main factor was the difficulties with the export logistics of liquefied hydrocarbon gases. At the same time, the decline in the output of phenol, polypropylene, isopropyl alcohol is due to restrictions on the supply of these products to the European market from July 1, the bank’s experts say. According to their estimates, the share of exports to the EU in the volume of production of listed substances in the Russian Federation is up to 84%. At the same time, the decrease in the production of polyvinyl chloride and polystyrene, according to the CEP, can be explained by a decline in demand in the automotive industry and a slowdown in the Russian construction sector. The production of polyamide fell, probably due to the collapse of demand from the automotive industry, experts say.

At the same time, positive dynamics was observed in some segments of the petrochemical industry. Thus, the production of polyacrylates (used for the production of plexiglass, paints and varnishes) grew by 20.5%, which analysts attribute to the need to replace imported acrylic polymers. In their opinion, the 3.6% increase in methanol production is explained by the effect of last year’s low base. According to Kommersant’s data, at the moment many large producers are facing difficulties in exporting methanol, which forced them to significantly reduce production volumes (see Kommersant dated September 26).

Kommersant’s sources on the market do not expect deterioration in the dynamics of petrochemical production in the fourth quarter. In their opinion, by the end of 2022, the indicators will remain at the same level or even improve. Kommersant’s interlocutors explain this by the fact that the sales problem has already been largely resolved. According to them, the companies manage to gradually reorient supplies to Asia, as well as establish alternative supplies of necessary components.

The companies in the sector did not officially comment on the situation, but in September the head of SIBUR, Mikhail Karisalov, said that the company managed to find a solution to most of the issues related to the sanctions of European suppliers, thanks to supplies from friendly countries, as well as using its own developments. He also reported that SIBUR was able to redirect about 30% of its product portfolio from Europe to Asia. At the same time, according to the top manager, in the field of special chemicals and catalysts, Russia will need two to three years to replace European supplies.

Petr Bazunov, General Director of the Union of Plastic Processors, confirms the relative stabilization of the situation on the petrochemical market. He notes that much will depend on the ability of Russian petrochemical companies to export to Asia, given that the largest market – China – is rapidly reducing imports of polymers, as the country’s government has embarked on full technological independence and import substitution. According to Mr. Bazunov, the content of the eighth package of EU sanctions is also significant, which may include additional restrictions on the export of polymers from the Russian Federation, which will create an additional surplus in the domestic market.

Olga Mordyushenko