Russian chemical industry, overview and realities
by Andrew Sparshott of Cirec

  • The trade surplus in Russian organic chemicals and chemical products is relatively well balanced in terms of values. In 2018 an equal value $4.1 billion was recorded for products going into and out of the country.
  • In order to record revenues of $4.1 billion for organic chemical exports in 2018, Russia exported 6.177 million tons. For the same import costs of $4.1 billion inward shipments totalled only 1.410 million tons.
  • As a result, export prices on average amounted to $673.5 per ton in 2018 whilst imports averaged $2,900.7 per ton.
  • The significant difference in export and import prices for the organic chemical sector helps to indicate the current status of the Russian chemical industry and the overriding dominance of low value commodities.

Russian Organic Chemical Trade
2013-2018

 

$ billion

2013

2014

2015

2016

2017

2018

Exports

4.6

4.5

3

2.4

3.2

4.1

Imports

3.3

3.1

2.7

2.7

3.5

4.1

             

Ktons

           

Exports

5355

5606

5850

5890

5645

6117

Imports

1282

1199

1138

1281

1394

1410

             

Average price $ per ton

           

Exports

859

802.7

507.7

400.7

574

673.5

Imports

2597.5

2577.1

2328.6

2115.5

2525.1

2900.7

Methanol is a key export commodity for Russia where shipments totalled 1,826 tons in 2018 for a total cost of $601 million. This can be compared with imports of TDI which totalled 49,600 tons in 2018 for costs of $168 million or methyl chlorosilane imports which totalled 37,700 tons for costs of $123 million. Oleochemicals, fine and speciality chemicals are all products where Russia either imports due to quality or availability issues, whilst in the commodity sector imports are largely due to exceptional such factors as plant modernisation or geographical advantage where it is easier to import than buy from domestic sources.

Russian chemical production 2018

The Russian chemical industry showed positive signs of progress in 2018 in terms of both production and profitability. The overall in chemical product balance, including inorganics, organics, polymers, rubber, etc, narrowed slightly in 2018 although the country maintains a large deficit in chemical trade.

Ammonia production in Russia increased significantly in 2018 due to the introduction of new capacity several locations whilst in the petrochemical sector marginal rises were recorded by a number of producers. Ethylene production totalled 2.976 million tons in 2018 against 2.860 million tons in 2017, whilst propylene increased from 1.994 million tons to 2.168 million tons.

It is possible that SIBUR’s flagship project ZapSibNeftekhim at Tobolsk will start production by the fourth quarter in 2019, representing a key project for Russia. Nizhnekamskneftekhim is also undertaking the construction of a new cracker to meet the deficit of ethylene in Tatarstan, whilst gas chemical projects are under consideration in East Siberia, the Russian Far East and the Baltic coast.

Main Chemical Commodities Produced in Russia
(unit-kilo tons) 

 

Product

Jan-Dec 18

Jan-Dec 17

Caustic Soda

1,279.50

1,239.00

Soda Ash

3,433.00

3,489.00

Ethylene

2,976.00

2,860.00

Propylene

2,168.20

1993.6

Benzene

1,394.40

1,359.00

Xylenes

584.8

549.2

Styrene

694.5

690.9

Phenol

204

222.5

Ammonia

17,800.00

17,100.00

Methanol

4270.7

3981

Normal butanol

155.8

141.8

Isobutanol

109.8

84.9

Plastics in Bulk

8,192.00

7,759.00

Polyethylene

2,189.00

1,980.00

Polystyrene

549.6

541

PVC

1,015.60

945

Polypropylene

1,480.40

1,451.00

Polyamide

168.5

159

Synthetic Rubber

1,640.00

1,572.00

Synthetic Fibres

172

171

Methanol production in Russia increased by around 10% in 2018 to 4.271 million tons and a similar increase is anticipated for 2019 taking into account the impact of the new 450,000 tpa plant at Shchekinoazot which started last year. Shchekinoazot is also working on its third methanol project, of 500,000 tpa, which is scheduled for completion in 2021 at the same time Nizhnekamskneftekhim plans to complete its own 500,000 tpa project. Five larger methanol projects are under consideration for North West Russia and the Russian Far East which would have a major effect on Russian export capability by around 2023-2024.

Prospects for investment and expansion

Investment in the Russian chemical industry is predominantly driven by supply side economics and raw material availability. Methanol, for example, is already a surplus product and yet currently there are nine projects under review where capacity each of which exceed 1 million tpa. Russian oil companies are examining downstream chemical markets as an alternative to the fuel sector, but almost inevitably need to find chemical industry partners either domestic or foreign if projects are to materialise and succeed. Attracting investors into Russia is increasingly difficult due to a range of key factors, and thus implementing projects face multiple challenges.

Despite the weakness in production of high margin chemical products in Russia, investors mostly favour projects in low margin commodity chemical plants.

  • Around 30% of all Russian investments in the chemical industry in 2018 were directed to fertilisers.
  • Finance is not easily available and for many speciality or fine chemicals, whilst Russia is heavily dependent on technology imports
  • The domestic market size for some products such as isocyanates, amino acids, etc may be interesting for traders and imports, but they are invariably not large enough to justify serious investment.

Investment reorientation for Russian oil companies towards petrochemicals

  • The declining prospects for profitability in the fuel and energy sector provides a major stimulant for Russian hydrocarbon companies such as Rosneft, Lukoil and Gazprom to examine and develop opportunities in the chemical and petrochemical industries.
  • Until now the chemical industry for such companies has represented an appendage of limited significance, but such is the changing dynamic in the fuel sector that major Russian players are being pulled towards downstream investments.

Gaps in Russian product chains

Over the past decade efforts have been made by some Russian producers to create product links between feedstocks and intermediates in order to reduce the gaps in product chains. In general, these gaps tend to become wider the higher the product value. The focus at present for investors is concentrating on standard commodities.

The country’s largest petrochemical and chemical company SIBUR is seeking to develop projects in organic chemicals, including non-phthalate-based plasticizers and maleic anhydride. Other companies include Omsk Kaucuk which is developing a chain from cumene through to epoxy resins, and Kuibyshevazot has done well to form links between caprolactam to polyamide and fibre production.

New petrochemical projects close to completion

The pending start-up of SIBUR’s ZapSibNeftekhim complex at Tobolsk in the fourth quarter in 2019 (have completed commissioning), represents the first major grassroots petrochemical investment in Russia since 1984 and the start of the Tomsk petrochemical complex.

The ZapSibNeftekhim complex at Tobolsk consists of capacities of:

  • 1.5 million tpa of ethylene
  • 500,000 tpa of propylene
  • 100,000 tpa of C4s
  • Polyolefin plants with an aggregate capacity of 2 million tpa.

The effects of this complex when fully operational should be noticeable on the trade flows of polyolefins into and out of Russia. Other new polyolefin plants are under construction at Nizhnekamsk, and possibly other locations although changing attitudes towards plastics could affect future projects in Russian polymer production.

First half 2019-Russian chemical production
(unit-kilo tons)

 

Product

Jan-Jun 19

Jan-Jun 18

Caustic Soda

645

630.5

Soda Ash

1,695.00

1,754.00

Ethylene

1,577.80

1,522.00

Propylene

1,241.40

1,133.10

Benzene

738.4

725.8

Xylenes

292.3

313.5

Styrene

389.3

371.6

Phenol

110.3

100.9

Ammonia

9,200.00

9,200.00

Methanol

2270.7

2115.2

Normal butanol

70.3

61.8

Isobutanol

54.9

52

Plastics in Bulk

4,244.00

4,102.00

Polyethylene

1,144.00

1,126.00

Polystyrene

275.2

270.6

PVC

531.8

509.5

Polypropylene

783.1

753

Polyamide

79.2

87.7

Synthetic Rubber

777

846

Synthetic Fibres

83

83.3

Regarding trade, imports of chemical products into Russia dropped from $19.7 billion in the first half year to $19.1 billion in the same period in 2019. Most segments recorded slight falls in values, although organic and inorganic chemicals rose from $2.982 billion to $3.110 billion in first half this year.

PTA imports have risen sharply in 2019 as modernisation and limited production activity has taken place at the Polief plant at Blagoveshchensk. Costs of imports of TDI and MDI isocyanates have dropped this year, although volumes have not changed much. Russia continues to import ethylene and propylene glycol, but amino acid imports is the product sector which accounts for the largest share of organic chemical import values.

Russia exported 26.257 million tons of chemical and polymer products in the first half of 2019 against imports of 7.719 million tons of imports. By contrast, imports of chemical industry and polymer products amounted to $21.3 billion in value against export values of $12.2 billion leaving Russia with a net deficit of $9.1 billion in the first half of 2019. Whilst pharmaceuticals represent the weakest area for Russian trade in chemicals and polymers aside fertilisers Russia suffers from a trade imbalance across the board including inorganic, organic chemicals, plastics and rubber. Bulk plastics production from the new Tobolsk plant could affect the trade deficit in that sector in the next year or two, but other sectors are not expected to see much overall change.

Russian Chemical Trade Jan-Jun 2019
(unit-kilo tons)

 

Category Group

Exports
ktons

Exports
$ mil

Imports
ktons

Imports
$ mil

Inorganic

4,025

1,810

2,891

1,880

Organic

3,239

1,840

816

2,170

Pharmaceuticals

18.1

357

76.6

5,270

Fertilisers

15,709

4,050

154

82.4

Cosmetics

68.7

351

163

1,540

Soap and detergents

219

218

272

705

Paints & lacquers

145

166

285

890

Protein substances, enzymes

12

22.4

119

321

Explosives

44.6

35.6

2.9

11.6

Photo chemicals

0.4

5.7

8.8

136

Other Chemicals

409

487

623

1,790

Plastics

1,660

1,380

1,809

4,504

Synthetic & Natural Rubber

707

1,490

499

2,000

Total

26,256.70

12,212.70

7,719.20

21,300.00

Polystyrene

275.2

275.2

275.2

270.6

PVC

531.8

531.8

531.8

509.5

A few examples of Russian product trade in the first half of 2019 are shown below:

Russian methanol exports totalled 1,095,900 tons in the first six months in 2019 against 923,000 tons in the same period in 2018. Finland accounted for 317,000 tons in the period January to June 2018, followed by Poland with 136,000 tons. Shchekinoazot recorded the largest rise in export activity in the first half of 2019, shipping 386,000 tons against 170,000 tons in the same period in 2018. Azot at Novomoskovsk reduced exports from 81,000 tons to 33,900 tons in the same period in 2018. Metafrax exported 254,600 tons in the first half of 2019 versus 271,000 tons in January to June 2018.

Russian exports of synthetic rubber amounted to 513,900 tons in the first six months in 2019 versus 511,100 tons in the same period in 2018. Revenues from synthetic rubber exports amounted to $825 million against $847 million in January to June 2018.

PTA imports into Russia totalled 220,561 tons in the first six months in 2019 against 117,653 tons in the same period in 2018. China increased shipments to Russia to 164,700 tons in January to June 2019 against 61,401 tons in the same period last year whilst South Korea reduced deliveries from 39,870 tons to 36,950 tons.

Russian TDI imports amounted to 23,100 tons in the first six months in 2019 against 24,800 tons in the same period last year. Germany remained the largest supplier, despite reducing shipments from 9,300 tons to 4,900 tons whilst Hungary shipped 4,700 tons against 5,100 tons. Despite the slight fall in volume imports of TDI in the first half of 2019 import costs dropped sharply from $97.2 million to $47.1 million due to the sharp drop in prices. In the first half of 2019 TDI prices averaged $1838 per ton against $3464 per ton for the whole of 2018.

Our thanks to Andrew Sparshott of CIREC for writing this article.

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