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Jun 30, 2021
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Russia deals with polymers and takes over the world

© Photo: SIBUR

Over the past few years in our country, considerable attention has been paid to the development of the oil and gas chemical industry, including increasing the export of chemical products. The reasons are well known. Firstly, these are products with high added value. Second, it is believed that the demand for polymers and other petrochemical products will continue to grow for a long time, while the consumption of energy directly is under pressure amid the energy transition.

The plans here are really ambitious, but at the same time we are covering our own deficit. Only by the end of 2020, against the background of Zapsibneftekhim reaching full capacity, Russia became a net exporter of polyethylene. Our country was a net exporter of polypropylene before.

Here, however, an important clarification should be made. The brand assortment of even the two most “simple” polymers is very diverse. Therefore, even against the background of net export of polypropylene, imports were also observed in a number of items. And in the polyethylene segment until 2020 there was a shortage of linear low-density polyethylene and low-pressure polyethylene.

These examples, which are already predominantly in the past, nevertheless highlight the following. Even in basic polymer products, there are both simpler and more complex brands in production. If you look at the entire industry from this angle, the overall picture looks mixed. On the one hand, Russia really has big plans for the export of large-scale polymers, and the projects under construction (we discussed them in detail earlier) practically guarantee that these plans are being implemented.

At the same time, in the segment of more complex products of medium and low-tonnage chemistry, our country is heavily dependent on imports. It is no coincidence that following a meeting on the strategic development of the petrochemical industry, which took place on December 1 with the participation of Vladimir Putin, the government was instructed to work out measures to increase the production of small and medium-sized chemical products by 30% by 2025 and by 70% by 2030 year.

It is important that in most cases, chemical products of smaller tonnage production are much more expensive than products of large-scale production. And, of course, own production of such products is another puzzle in the overall picture of import substitution.

Something in this area is being done right now. There are several examples. First, a new production of sevilen, the construction of which was announced by Kazanorgsintez at the beginning of this year. Now Kazanorgsintez produces only 13 thousand tons per year, and it is the only manufacturer in our country. Russian demand is about 50 thousand tons per year. This polymer is used in various fields: footwear, cables, production of adhesives. The capacity of the new production line will be 100 thousand tons per year, which means that imports will be completely closed, and there will still be volume for export.

A second example is maleic anhydride. The situation is almost the same – all the required volumes are imported to Russia. But already at the end of this year, Sibur will launch its installation with a capacity of 45 thousand tons, and Tatneft is planning to build its own plant with a capacity of 50 thousand tons. Maleic anhydride is primarily an intermediate for the production of a wide range of other substances.

The third example is plasticizers, substances that are added to polymers to make them more plastic. The story is a little more complicated here. Russian demand for these products is about 150 thousand tons per year, but more stringent environmental requirements in a number of countries have led to a ban on products manufactured using phthalate plasticizers. Already in 2020, the production of a phthalate-free plasticizer DOTF of the Sibur company with a capacity of 100 thousand tons was launched, most of the products are shipped to the domestic market. Thus, more than half of the Russian market was provided with products of both Russian production and meeting the strictest environmental standards.

As can be seen from the above, medium-scale chemical production has a capacity of 50-100 thousand tons, while, for comparison, a typical unit line for the production of large-scale polymers is about 400 thousand tons, although for economies of scale, mainly factories with a population of one million are being built. As we have already noted, the average cost of medium-tonnage chemistry products is several times higher than that of large-tonnage chemistry. But there are more difficulties in this market.

For example, for a plant for the production of large-scale products, you can easily buy both technology and a production license. But if we are shifting to medium-tonnage, and especially – to low-tonnage products, then here the technology owners are often, in principle, not ready to share.

An example on the Russian market is the production of fire retardants – substances that protect materials, primarily polymeric ones, from fire. The volume of the Russian market is only about a thousand tons per year. That is, it is no longer about medium, but rather about low-tonnage chemistry. Here, too, new regulations are forcing companies to use more environmentally friendly flame retardants in their products. But you won’t be able to build your own plant just like that – you can’t buy the technology. As a result, Sibur, which is now launching such production, had to independently carry out the entire development cycle. The capacity is 4.5 thousand tons, that is, the export of this unique product is also expected.

Another challenge is market size and economies of scale. To create cost-effective production facilities, an acceptable unit capacity is needed.

But domestic demand for products often turns out to be less, therefore, when planning new plants, one should take into account that part of the product will be exported, and, most importantly, here you need to be confident in the markets for these products.

This problem is largely due to the fact that we do not have our own production of isocyanates, substances that are further used in the production of polyurethane. There are risks that there will not be sufficient demand for a payback production with a unit capacity of 200-300 thousand tons.

At the same time, it should be understood that the creation of our own production facilities for medium-tonnage chemicals will allow launching new technological chains in the country, and thereby increase this domestic demand for primary products. But the efficiency of new industries will also be determined by how well they fit into existing or potential technological chains. Finally, one should not forget that there is also a hidden import of chemical products, already in the form of consumer goods, which could be produced in our country in the event of greater availability of raw materials. Here, too, there is a potential for increasing domestic demand for medium-scale chemical products.

Let’s summarize. The task of import substitution (here, in the chemical sector, we need to develop mainly complex products – with “simple” polymers, everything is already fine) is no less important than the creation of new export chemical industries.

Moreover, there are known risks of competition with other manufacturers in the export market. For example, although the growth of imports of basic polymers in the Asia-Pacific region will continue for many years to come, many Asian countries increasingly prefer to import raw materials and produce polymers on their own. On the contrary, with import substitution, the risks of competition are minimal: both due to the transport leverage and due to import duties that can be applied if necessary.

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