Russian Petrochemical Production

Higher Russian crude deliveries to Central Europe in the first quarter

Russia's pipeline supply of Urals crude to the EU region via the southern spur of the Druzhba pipeline appears to have risen 6% on a daily basis in the first quarter from the preceding fourth quarter in 2022.  Supply via the Druzhba pipeline remains exempt from sanctions, though flows via its northern spur, which supplies Poland and Germany, dried up last month.

The southern branch of the Druzhba pipeline runs via Ukraine to the Czech Republic, Slovakia and Hungary, and has been the primary source of supply for their refineries for years.

Flows via Druzhba to those three countries are estimated to have amounted to 3.1 million tons in the first quarter from 3.0 million in the quarter October to December.  Alternative oil supply routes to their plants include the Adria pipeline connecting Croatia's Omisalj port to Hungary and the Transalpine pipeline (TAL) that connects Italy's Trieste to Czech refineries.

The main buyer of Urals crude in Slovakia and Hungary is MOL.  Rosneft, Lukoil and Tatneft were the main Russian exporters via the route.   The Czech Republic has a negotiated exemption for oil from the Druzhba pipeline, which is valid until the implementation of an alternative solution is completed.

Urals supplies via the northern spur of the Druzhba pipeline were fully suspended in February after Russia halted supplies of oil to PKN Orlen.  Germany voluntarily stopped importing Russian Urals via Druzhba from 1 January 2023, with Germany and Poland hoping to make up for the shortage of Russian crude by importing Kazakh oil via the same pipeline.  Transneft has received requests from Germany and Poland for oil from Kazakhstan via Druzhba in April-June 2023.

Poland purchased 1.020 million tons of crude oil from Saudi Arabia in January this year at €604 per ton, whilst due to the EU price cap imports from Russia amounting to 649,902 tons were priced at €326.7 per ton.  Russia stopped deliveries to Poland in late February but continues to supply other Central European countries.  The additional price cap on petroleum products from 5 February 2023 includes a 55-day wind-down period for seaborne Russian petroleum products purchased above the price cap.  The price caps themselves will be reviewed and adjusted as appropriate in terms of capacity, which could reduce them further. 

Prices advantages of Russian crude into Central Europe

Czech imports of crude oil in January were divided roughly between one third for Azerbaijan and two thirds from Russia.  Imports from Russia actually increased in January over December and the fourth quarter, amounting to 430,574 tons.  The increase was driven by the attractiveness of Russian pricing after the introduction of the price cap by the EU together with the international G7+ Price Cap Coalition.  It meant that Russian prices amounted to €339.1 per ton against €614 per ton for imports from Azerbaijan. 

MOL was buying Russia’s Urals blend at a discount of almost $35 per barrel to Brent in the second quarter, $27 per barrel in the third quarter and $26 per barrel in the fourth quarter.  The Urals discount widened to $30 per barrel in January this year, according to MOL, as the European embargo on Russian oil imports came into force in December.  MOL aims to increase the share of non-Russian oil supplies to its refineries to between 45% and 50% by December this year against 30% and 35% in February and is targeting 100% replacement of Urals after 2025.

Orlen Unipetrol-TAL pipeline

The Czech government has concluded an agreement to increase the capacity of the TAL oil pipeline, giving the Czech Republic an opportunity to cut off Russian supplies in the next two years.   The TAL oil pipeline extends 753 km and runs from the port of Trieste in Italy through the Alps to Austria and Germany.  The pipeline capacity will be increased to 7-8 million tpa which would make the Czech Republic completely independent of supplies via the Druzhba by 2025.  

Of the 6.8 million tons of crude oil imported into the Czech Republic in 2022 more than half of all imports (exactly 51.2%) were delivered via the Ingolstadt-Kralupy-Litvinov (IKL), which is part of the Transalpine oil pipeline.  This is mainly oil transported by tankers to the port of Trieste from Azerbaijan, Kazakhstan and the US.

The Kralupy refinery processes only crude oil from outside Russia, while the Litvinov refinery currently uses some of the non-Russian crude oil for processing.  Orlen Unipetrol has offered the Czech state to participate in the necessary strategic investments worth over Kc 20 billion, especially in refineries in Litvinov and Kralupy nad Vltavou.

Schwedt refinery

The Schwedt PCK refinery is trying to resolve medium-term and long-term feedstock questions after only being 60% utilised in January due to the embargo against Russia.  The German government put Rosneft's ownership of the Schwedt refinery under a trusteeship of the industry regulator in September last year, effectively taking a controlling stake in the refinery.  PCK Schwedt, which is co-owned by Shell and Eni and supplies 90% of Berlin's fuel.   Shell is trying to sell its stake in the refinery.

Deliveries by ship have already been scheduled; whilst the refinery had also received a first quantity of Kazakh crude oil.  Corresponding amounts of oil would come by tanker via Rostock and the Polish port of Gdansk to the plant in Brandenburg.  Deliveries from Rostock, Gdansk and Kazakhstan could increase the throughput at Schwedt to 75-80%, with around 1.2 million tpa from Kazakh sources.

Polish petrochemical production Jan-2023

Ethylene production in Poland dropped from 41,100 tons in January 2022 to 31,100 tons this January whilst propylene fell from 42,000 tons to 37,800 tons.  Butadiene production at Plock was unchanged at 5,700 tons.  In the plastics sector polyethylene production dropped to 25,200 tons in January versus 26,600 tons in corresponding month last year and polypropylene dropped from 31,500 tons to 24,900 tons.

PKN Orlen’s petrochemical margin amounted to €980 per ton in February, down from €1018 in January and €1062 in February 2022.  The peak in the past two years was achieved in May 2021 when petrochemical margins attained €1492 per ton. 

Orlen petrochemical investments

A main feature of the Orlen Group’s strategy up to 2030 is focused on a transformation from oil processing group into becoming a more important producer of petrochemicals in Central Europe.  From Orlen’s updated strategy, announced in the first quarter this year, emphasises that strengthening petrochemicals will increase the Group's resistance to unfavourable trends on the market in traditional hydrocarbon-based fuels. 

The capacity of the current steam cracker at Plock is 640,000 tpa which is intended to rise after investment to 1,040 tpa.  The expansion of production is aimed at meeting some of the deficit in petrochemicals and polymers in the Polish economy.  The company is also analysing the possibility of building a second LDPE plant to add to the 100,000 tpa plant acquired from Basell Orlen Polyolefins at the end of 2022.

Cooperation with Saudi Aramco is being examined at present and could significantly help Orlen Group to strengthen its position in Europe as a petrochemical producer.  Gdansk has been cited as the location for a potential petrochemical project.

Polish propylene & butadiene imports, Jan-2023

Poland imported 8,194 tons of propylene in January against 19,384 tons in January 2022.  Market sources of propylene imports into Poland changed significantly in 2022 due to the economic consequences of the Russian invasion in Ukraine.  Imports from Ukraine dropped from 8,058 tons in January last year versus zero this year due to idle production at Kalush, whilst also imports from Russia have also disappeared from the market due to sanctions.  Average prices for propylene imports into Poland declined from €1130.903 per ton in January 2022 to €997.381 in the January 2023.  Prices started falling in the latter part of the third quarter and into the fourth quarter following feedstock trends.   Butadiene import prices dropped from €955.219 per ton in January 2022 to €925.384 in January this year, with volumes declining from 8,742 tons to 6,759 tons.  

Hungarian propylene exports Jan-Dec 2022

Exports of propylene from Hungary dropped in 2022 from 107,823 tons to 70,190 tons.  Exports to Slovakia from MOL to Slovnaft dropped from 95,966 tons to 61,988 tons which was due to lower production at Tiszaujvaros.

Although MOL currently produces more propylene than it consumes it is currently building a new propylene plant with a capacity of 100,000 tpa. This is part of the programme to create sufficient propylene feedstock for the new polyol project at Tiszaujvaros.  The propylene plant is being constructed by the engineering company Merkbau on an area of about three hectares at the site of MOL Petrochemicals at Tiszaújváros.  The new plant will fit into the existing production infrastructure, providing raw materials for the polyol plant, thus expanding the company's chemical production capacity.

Hungarian butadiene exports amounted to 45,517 tons in 2022 against 78,399 tons in 2021.  Shipments into Poland totalled 31,263 tons in 2022 against 41,986 tons in 2021.  Exports to Germany dropped from 24,075 tons to 6,049 tons and to the Czech Republic dropped from 9,572 tons to 8,205 tons.  Average prices for Hungarian butadiene exports increased to €1110.6 per ton versus €866.4 in 2021.  The market picture came under pressure in the fourth quarter due to a mixture of weak demand and lower crude prices.  

Central European styrene trade Jan-2023

Poland imported 7,165 tons of styrene in January against 8,713 tons in January last year.  Due to increased production at Kralupy this year imports of styrene from the Czech Republic into Poland increased to 4,995 tons.

Italy is the dominant source of styrene imports into Hungary, supplied by Versalis to its polystyrene plant at Szazhalombatta.  Imports of styrene into Hungary totalled 91,518 tons in January to December 2022, down from 101,541 tons in 2021, with supplies from Italy declining from 96,277 tons to 84,990 tons.

Czech petrochemical trade, Jan-2023

Ethylene exports from the Czech Republic amounted to 1,257 tons in January versus 1,209 tons last year.  Czech imports of ethylene amounted to 870 tons in January, down from 5,140 tons in January last year. 

Propylene imports into the Czech Republic rose from 2,850 tons in January 2022 to 4,690 tons this year, with main suppliers including Germany, Romania and Poland.  Czech imports of butadiene amounted to 6,800 tons in January 2023, all of which was supplied by Germany and Hungary.

Czech exports of ethylbenzene amounted to 10,439 tons against 10,423 tons in January 2022.  All the ethylbenzene was shipped from Kralupy to Oswiecim, all within the structures of the Synthos Group.  Imports of benzene into the Czech Republic dropped from 8,630 tons in January last year to 7,360 tons in January 2023. 

Chimcomplex investigating ideas for new complex

Chimcomplex is negotiating with several technology providers for the construction of a either a steam-cracker or new refinery in Romania involving an investment of around €3 billion.  Other ideas for investment include talks for a green pyrolysis plant, and it is possible that Chimcomplex could re-profile to convert the whole of the Oltchim platform at Ramnicu Valcea to produce green products.  In essence Chimcomplex aims to take advantage of the closure of a number of chemical plants in the EU.   Romania has four pyrolysis units, all of which have been closed for more than twenty years and technologically obsolete. 

One economic advantage from any proposed investment plan involves tackling the Romanian trade deficit which currently stands around €2 billion per annum.  Chimcomplex and Rompetrol have also been jointly considering the prospects for a large-scale investment. 

Polish polyethylene trade Jan-2023

Polish imports of polyethylene totalled 90,640 tons in January this year against 104,734 tons in January 2022, with average prices falling from €1730.9 per ton to €1503.6. Imports of polyolefins and all types of plastics from Russia into Poland saw a progressive decline in 2022, with other suppliers from Europe and the Middle East taking more market share.   

Total costs of polyethylene imports into Poland amounted to €136.287 million in January against €181.286 in January last year.  HDPE is the largest category of imported polyethylene into Poland, amounting to 31,167 tons in January versus 34,521 tons in January 2022.

Polish polyethylene exports amounted to 23,824 tons in the first month in 2023 against 28,394 tons in January 2022. Average prices for polyethylene exports from Poland declined to €1463.8 per ton against €1553.3.  Revenues from exports decreased from €42.873 million to €34.873 million in January 2023.  In January this year exports of HDPE from Poland amounted to 17,054 tons versus 19,434 tons in January 2022.

Price trends for polyethylene and plastics started to see declines in the fourth quarter in line with lower feedstock costs.  Although crude numbers are not expected to return to mid-2022 peaks this year, demand and recessionary factors are slowing down volume purchases.

Polish polpropylene trade Jan-2023

Polish polypropylene imports, including homo grade and copolymers, fell in January to a total of 60,993 tons versus 85,130 tons in January 2022.  Average prices per ton decreased from €1736.2 to €1578.2 per ton, after the gap between the upper and lower range narrowed in the fourth quarter.  Homo grade polypropylene imports dropped from 55,885 tons in January 2022 to 37,542 tons this January whilst copolymer imports dropped from 27,027 tons to 22,945 tons.  Regarding export activity, shipments amounted to 21,148 tons against 26,808 tons in January 2022.

In addition to the dependency on propylene monomer imports, Poland has in recent years been increasing its imports of polypropylene and propylene copolymers.  Imports of polypropylene from Russia were one of the main sources in 2021, amounting to 155,805 tons from a total of 727,232 tons.  In value terms this amounted to €198.656 million from a total value of €1100.731 million.  Last year the position has changed due to the economic impact resulting from Russia’s invasion of Ukraine. 

Czech polyethylene trade Jan-2023

Prices for both exports and imports of polyolefins were lower in January this year against January 2022.  Polyethylene exports amounted to 29,422 tons in January this year of which HDPE comprised 25,987 tons.  Germany was the largest destination for Czech HDPE supplied from Litvinov, amounting to 11,843 tons in January for €14.645 million.  Other important markets include Poland, Italy and Belgium. 

For imports of all forms of polyethylene, Czech inward shipments amounted to 22,703 tons in January against 22,722 tons in January 2022, with prices dropping from €1977.5 per ton to €1807.4. 

Germany was the largest source of polyethylene imports, amounting to 5,378 tons for €9.081 million, followed by Belgium with 3,218 tons for €6.346 million.

For imports of all forms of polypropylene, Czech inward shipments dropped from 42,389 tons in January 2022 to 40,491 tons in January this year, with prices dropping from €1842.3 per ton €1693.7. 

Propylene copolymer imports dropped from 16,328 tons to 15,975 tons, with costs dropping from €31.612 million to €28.263 million.   Copolymer imports were sourced not only from European suppliers but also South Korea which shipped 3,512 tons for €5.124 million in January this year. 

Exports of all forms of polypropylene from the Czech Republic amounted to 26,402 tons in January versus 25,143 tons in January 2022, with prices dropping from €1675.9 per ton from

€1530.7.  Homo-grade PP comprises the main category of Czech polypropylene exports, amounting to 21,875 tons in January this year, with 5,319 tons sent to Germany for €7.4 million.  

Hungarian polymer trade Jan-Dec 2022

MOL’s polyolefin sales declined in the fourth quarter last year due to lower production, totalling 236,000 tons against the same quarter in 2021.  This was the lowest fourth quarterly figure since 2019 when only 207,000 tons was sold in the period October to December.  Overall ,for last year Hungarian polyolefin trade in terms of volume differed only slightly by volume against 2021, but in terms of values the prices were much higher in 2022

For polypropylene imports into Hungary amounted to 212,448 tons in 2022 versus 216,844 tons in 2021, with values rising in 2022 to €399.054 million from €346.397 million.    

Imports comprised 124,790 tons of homo grade polypropylene in January to December 2022 against 121,804 tons in 2021 and 56,461 tons of copolymers against 69,026 tons. 

For propylene copolymer sources into Hungary, Austria, Germany and the Netherlands were the largest sources of imports.  Costs for copolymer imports dropped slightly in 2022 to €103.921 million against €111.597 million in 2021.

Regarding exports MOL shipped 121,977 tons of homo grade polypropylene in the period January to December 2022 from 111,454 tons in the same period in 2021, whilst copolymer exports dropped from 111,597 tons to 103,921 tons.  

Export revenues dropped for all grades of polypropylene slightly from €388.692 million to €384.606 million, although average prices increased from €1618.721 per ton to €1662.294 in 2022. 

Copolymer exports are distributed mostly to European destinations, of which the largest include Italy, Germany and Romania.  Hungary exported a total of 40,039 tons of polypropylene in 2022 for revenues of €63.786 million. 

Regarding export activity due to lower production by MOL at Tiszaujvaros last year, HDPE shipments from Hungary dropped from 289,393 tons in January to December 2021 to 226,303 tons in the same twelve months in 2022 whilst exports of LDPE dropped from 108,699 tons to 85,083 tons.    From HDPE exports, shipments to Italy totalled 57,786 tons in January to December 2022 for €89.972 million and to Germany 38,366 tons for €65.111 million.   

In total polyethylene exports dropped from 414,562 tons to 337,119 tons whilst revenues fell from €595.662 tons in 2021 to €525.558 tons in 2022.  Average prices jumped from €1436.847 per ton in 2021 to €1558.965 per ton in 2022.

Polyethylene imports into Hungary amounted to 218,789 tons in 2022 against 219,289 tons in 2021.  HDPE imports dropped from 102,487 tons to 99,715 tons in January to December 2022, whilst LLDPE imports decreased from 57,167 tons to 55,691 tons.  Imports of LDPE rose from 19,753 tons to 23,547 tons.  Imports costs for polyethylene increased in 2022 to €406.958 million against €344.331 million in 2021.  Prices per ton increased from €1570.216 in 2021 to €1860.235 in 2022.

Rompetrol Rafinare-petrochemicals division Jan-Dec 2022

Rompetrol Rafinare’s petrochemical segment increased its gross turnover to $202 million in 2022 compared to $186 million in 2021. The petrochemical division processed 170,000 tons of raw materials in 2022, increasing by about 15% compared to 2021.

Rompetrol Rafinare’s total polymer production amounted to 129,000 tons in 2022, up 21% from 2021.  In terms of polyethylene production, the company’s petrochemicals segment works 100% with of imported ethylene, and the PP unit is supplied with feedstock entirely by the Petromidia refinery.

In Q4 2022, the total polymers production for Rompetrol Rafinare was 35,400 tons higher than the same period of last year when the total polymers production was 32,800 tons, mainly due to PP and LDPE units’ operation.  In 2022, the total polymers production for Petrochemicals area was 129 thousand tons higher by 21.47%.

HIP-Petrohemija polymer exports 2022 and PP project

HIP-Petrohemija exported 119,566 tons of polyethylene in 2022 against 115,000 tons in 2021, with average prices rising from €1608.8 per ton in 2021 to €1729.8 per ton.  

NIS is planning the construction of a polypropylene production plant at Petrohemija with a capacity of at least 140,000 tpa, to be constructed within six years. The transition period is ongoing until the closing of transaction when all preconditions are expected to be met. The deadline for closing the transaction has been extended until 30 June 2023.

Synthetic rubber prices Jan-2023

Rubber prices in Europe started dipping in October-November last year and the outlook for at least the first half of 2023 is fairly depressed.  European markets for synthetic rubber were in retreat amid weakness in demand as 2022 ended.  Towards the end of the first quarter Asian synthetic rubber prices dropped to levels not seen since 2021. 

Extension of EU sanctions on Russian rubber until June 2024

The extension until the end of June 2024 for sanctions on all types of rubber from Russia, including export and import, provides time for supply chains in Central Europe to realign with other suppliers.   This extension allows tyre manufacturers to continue buying some grades of synthetic rubber from Russia and carbon black, whilst seeking alternatives.  It means in effect that rubber supply should be sufficient to avoid market tightness and thus price rises.    

Hungarian synthetic rubber imports Jan-Dec 2022

Hungarian imports of butadiene rubber increased in 2022 to 48,207 tons of which Russia supplied 13,142 tons against a total of 37,824 tons in 2021 from which Russia supplied 13,340 tons.  Indonesia started supplying the Central European markets in 2022 shipping 8,288 tons in November and December to Hungary for €21.989 million.

Imports of halogenated butyl rubber have been most affected by EU sanctions, but still continue to find their way into European markets.  Russia sent 11,574 tons of halogenated butyl rubber to Hungary in 2022 against 17,074 tons in 2021. 

Polish rubber trade Jan-2023

Poland imported 18,735 tons of synthetic rubber in January against 23,307 tons in January last year.  Due to EU sanctions imports of synthetic rubber from Russia into Poland slowed sharply in the second half of 2022 but have been given a lifeline with the extended date for sanctions.  Isoprene rubber has thus far been excluded from sanctions and this now comprises the main share of rubber export shipments from Russia to Poland.  

Products such as butadiene rubber and halogenated butyl rubber had seen imports drop to very small amounts after sanctions took effect from July. 

It seems now that these earlier sanctions have been redacted as Poland imported 2,444 tons of halogenated butyl rubber from Russia in January.  This amounted to nearly 100% of that product’s imports whilst for butadiene imports from Russia amounted to 1,356 tons from the total of 3,297 tons.

Synthetic rubber exports from Poland also witnessed a steady decline in the second half of 2022 due mainly to lower production at Oswiecim.  Export volumes are expected to revive again in 2023 depending on demand, although January volumes were down to 19,048 tons from 29,576 tons in January 2022.    Exports of butadiene rubber from Poland amounted to 3,888 tons in January versus 3,741 tons in January last year. 

Synthos restarts butadiene rubber plant at Schkopau

Synthos at Schkopau has started the process of restarting the butadiene rubber plant.  The recommissioning was undertaken by Synthos in reaction to increased demand due partly to sanctioning of Russian imports of butadiene rubber into the EU.  The plant capacity is 30,000 tpa.

Synthos-production Jan-2023

Synthetic rubber production at Oswiecim for Synthos amounted to 20,900 tons in January this year from 26,500 tons in the same month in 2022.  Synthos produced 6,300 tons of general polystyrene at Oswiecim in January versus 6,200 tons in January last year whilst expandible polystyrene fell from 9,200 to 8,400 tons. 

Czech synthetic rubber trade Jan 2023

Czech exports of synthetic rubber amounted to 12,661 tons in January versus 18,073 tons in the same month in 2022.  Imports declined slightly from 11,234 tons to 9,807 tons in January-2023.  Natural rubber imports rose from 4,167 tons to 6,862 tons.    

Synthos-closure of ESBR plant at Kralupy

Synthos has decided to close the emulsion styrene butadiene rubber (ESBR) line at its Kralupy nad Vltavou site in the Czech Republic.  Synthos has explained the closure through the unsustainable rise in utility costs in Europe.  The Kralupy plant includes capacities of 110,000 tpa of ESBR and its permanent closure will reduce Synthos’ total ESBR capacity to 320,000 tpa. 

Despite the closure of the Kralupy plant, Synthos said it remained the largest producer of ESBR in Europe, with 190,000 tpa of ESBR manufacturing capacity at its site in Oswiecim, Poland and 130,000 tpa at Schkopau, Germany.

Polish benzene exports Jan-2023

Polish exports of benzene totalled 16,348 tons in January against 17,103 tons in the same month last year.  Average prices dropped in January to €789.240 per ton against €1016.631 per ton last January. 

Germany purchased 9,999 tons from Poland in January and the Czech Republic 5,307 tons.  Benzene exports from Poland could be lower in 2023 due to the problems for Petrochemia Blachownia in receiving coal based raw materials from Ukraine.  Petrochemia Blachownia is part of the Czech Agrofert group and announced a reduced operating load in January this year due to the war.

Hungarian toluene imports Jan-Dec 2022

Hungary imported a total of 35,068 tons of toluene in 2022 against 46,222 tons in 2021.  Prices increased from €650.496 per ton in 2021 to €1088.489 per ton in 2022.  

Export sources last year were led by Germany accounting for 16,427 tons against 30,043 tons in 2021.  Slovakia increased deliveries from 4,531 tons in 2021 to 8,688 tons in 2022, whilst shipments from Poland fell from 8,019 tons to 5,913 tons.  

Polish phenol imports Jan-2023

Phenol imports into Poland amounted to 7,078 tons in January against 10,042 tons in January 2022.  Russia had been one of the main suppliers of phenol to Poland in the first half of 2022 although volumes in May started to show signs of softening even before EU sanctions were introduced.  In January this year Germany was the dominant supplier of phenol to Poland, shipping 5,131 tons for €6.738 million.

Central European caprolactam market

Grupa Azoty Zaklady Azotowe Pulawy decided to suspend caprolactam production from 10 March and the operation of the Melamine III unit.  High costs were cited as the main factor behind the stoppage which will stay in place until further notice.  In January Poland produced 10,100 tons of caprolactam against 14,600 tons in January last year. 

The Czech Republic exported 2,407 tons of caprolactam in January for €4.969 million.  All of the exports were shipped to European countries.  Italy was the largest destination for Spolana’s exports in 2022. 

Polish PTA exports Jan-2023

PTA exports from Poland amounted to 20,247 tons in January this year against 35,376 tons in January 2022, with average prices rising from €776.000 per ton to €992.937.  The key factor behind the lower purchases was that Germany reduced purchases from 32,301 tons to 17,812 tons whilst Switzerland was the second largest destination for PTA export shipments, taking 1,278 tons.

Hungarian TDI-MDI exports 2022

Hungarian TDI exports amounted to 230,728 tons in 2022 against 273,000 tons in 2021, whilst revenues from TDI shipments rose slightly from €654.554 million to €551.532 million.  Average prices per ton rose to €2865.9 from €2390.4 in 2021.  Price rises were driven largely by feedstock costs, particularly for toluene where prices rose from €650.5 per ton in 2021 to €1088.5 in 2022.

Exports of TDI from Hungary are delivered to throughout Europe, with the largest destinations in Central Europe led by Poland and Romania.  In West Europe Italy and Belgium are major markets whilst in Asia minor Turkey is a major recipient.  Exports to Poland amounted to 31,663 tons in 2022 for €97.492 million, whilst volumes to Turkey amounted to 32,917 tons for €92.494 million.   

MDI exports from Hungary dropped slightly in 2022 to 185,785 tons versus 192,148 tons in 2021, with average prices rising from €2388.943 per ton to €2558.277 per ton.  Poland was the largest destination for Hungarian MDI exports, shipping 32,575 tons versus 37,814 tons in 2021.   Deliveries to the US increased from 17,007 tons to 23,562 tons whilst declining to Germany from 23,514 tons to 22,042 tons. Romania is the second largest market in Central and South East Europe, taking 20,311 tons in 2022 versus 22,540 tons in 2021.

MDI imports into the Czech Republic totalled 2,487 tons in January against 1,855 tons in January 2022.  Average prices rose from €2,272 per ton to €2.766. TDI imports into the Czech Republic amounted to 525 tons in January this year versus 621 tons in January 2022, with costs dropping from €2.345 million to €2.273 million.

MDI imports into Poland totalled 9,875 tons in January against 12,257 tons in January last year.  Overall costs for MDI imports into Poland dropped from €30.097 million to €23.287 million, with average prices declining from €2456 per ton to €2358 in January 2023.  Germany reduced shipments to €7.323 million by value down from €10.101 million last year, whilst imports from Hungary dropped from €9.386 million to €7.448 million.

TDI imports into Poland amounted to 4,900 tons in January against 5,204 tons in the same period in January 2022.  Values in January amounted to €16.876 million, equating to €3444 per ton, against €16.333 million in total last year at a price of €3138 per ton.  The cost of toluene was one of the factors behind the rise in TDI prices, rising from €671 per ton in January 2022 to €945 in January this year. 

Chimcomplex Jan-Dec 2022

Chimcomplex reported total revenues of €489.901 million in 2022 against €469.066 million in 2021 whilst overall costs rose from €377.973 million to €427.460 million.   The increase in utility purchase prices, well above those of direct competitors in the European Union, has had a significant impact on production costs, which has led to a lower profitability margin by 35% compared to 2021.  Costs outweighed sales revenues as a result of the increase in electricity and natural gas prices, resulting in a temporary closure on the Borzesti industrial platform in August followed by some redundancies. 

Exports accounted for 71% of revenues earned by Chimcomplex in 2022.  Last year Chimcomplex increased chloralkali production from 19.8% of total sales to 44.1%, in contrast to polyols where the share dropped from 66.4% to 48.5% and oxo alcohols from 11.7% to 3.0%.  Essentially the rise in the cost of propylene being lower than the increase in the selling price of polyols represented a key problem for the company.  This resulted in reduced production of both polyols and oxo alcohols.   

Chimcomplex launched its new polyol plant at Ramnicu Valcea on 21 July 2022.  The investment of €40 million, which is part of a wider investment project of €101 million, increased the company’s production capacity to over 187,000 tpa.   

Chimcomplex is 85.2% controlled by CRC Alchemy Holding, a vehicle owned by businessman Stefan Vuza, while the Romanian state, through the Authority for State Assets Management, holds almost 9% of the share capital.  Chimcomplex is the only producer of polyurethane polyols in Romania.   The fixed assets of the company increased by 18.4% as a result of the acquisition by public auction of the assets of CET Govora from the industrial platform from Ramnicu Valcea, of the investments made mainly at the Polyol Special plant.

Chimcomplex paid approximately 140 million lei in 2022 in Romanian state taxes, fees and contributions, which was up by 3% compared to 2021.   Chimcomplex diversified its portfolio of services in 2022 through the acquisition of Sistemplast S.A. Ramnicu Valcea, located on the Oltchim platform, specialized in providing integrated solutions for mechanics, design, construction, verification and monitoring of industrial works.

PCC Rokita Jan-Dec 2022

Higher energy and raw material costs affected PCC Rokita’s margins in 2022, particularly in the polyurethane division where propylene and TDI affected profitability.   

Costs of materials and energy accounted for 60.7% of all PCC Rokita’s costs in January to December.  Higher costs for propylene oxide, ethylene oxide and benzene all contributed to the decline in profits.  On 2 January 2023, PCC PU merged with PCC Rokita, the purpose of which was to optimize the Group's operations in the Polyurethanes segment.

Although polyols and polyurethanes represent the largest division for PCC Rokita’s production and sales, it was the chloralkali division which was the main driver of profitability in 2022.  The polyurethane segment by contrast recorded a fall of 54.7% in EBITDA in January to December last year to zl 162.847 million (€34.7 million).  From the second quarter on, polyol prices began to drop significantly and only stopped falling in September.  Overall PCC Rokita’s polyurethane margins dropped from 28.1% in 2021 to 12.2% in 2022.   Net profits from the polyurethane sector dropped to zl 134.772 million (€28.7 million) in 2022 from zl 325.064 million (€69.2 million) in 2021. 

Raw materials costs for the production of polyether polyols presented a significant challenge in 2022.  Propylene oxide and ethylene oxide, increased in the first half of 2022, but then slowed in the second half. 

TDI prices averaged €2870.4 million in 2022 against €2390.4 million in 2021.  TDI prices were kept higher due to a force majeure of one of the major European producers which lasted for several months and impacted on supply. 

Despite high raw material costs PCC Rokita was unable to pass on most of the increases in polyol prices due to suppressed demand.   As a result, the profitability of polyols dropped significantly.  Shutdowns of some polyol producers in Europe last year were unnoticed by the market due to lower demand.

In the last quarter of the year, the competition on the market intensified, and the profitability of the segment, falling throughout the year, was the lowest in this period.  With such limited demand and simultaneous oversupply of polyols on the market, the prospects for 2023 are not optimistic. European producers cannot compete on cost with raw materials or finished polyols from Asia, which could lead to further reductions in production in Europe. From a strategic perspective, this seems to be a significant challenge for the chemical industry in Europe.

MOLs polyol project in Hungary

The polyol project at Tiszaujvaros was originally scheduled to start in mid-2021 but the pandemic slowed the progress down sharply which has been followed by the impact of the war in Ukraine.  As matters stand, MOL aims to complete the 200,000 tpa polyol project in the first half of 2023.  The completion will take place simultaneously as the propylene glycol and propylene oxide plants are finished.  The project schedule overall is around 97% completed, and frequently the last part of such a large project can be the hardest.

PCC Exol Jan-Dec 2022

Overall, for 2022 sales revenues for PCC Exol increased to zl 1.050 billion against zl 714.8 million in 2021 with costs rising from zl 647 million to zl 904.8 million.  After adjustments the company’s operating profit increased from zl 124.160 million to zl 222.257 million.  Last year was noticeable for a price correction in ethylene oxide which is the main raw material for PCC Exol. 

PCC Exol is currently working on the construction of a new unit ethoxylate 2 (ETE-2) plant at Plock which includes the production of non-ionic surfactants (ethoxylates). The project is expected to be completed estimated approximate time of completion of the investment is mid-2024.  After the completion of the investment, capacity at Plock will rise to 80,000 tpa.  

Strategic raw materials purchased by PCC Exol include petrochemicals (ethylene oxide) and oleochemicals (fatty alcohols and oils).  Raw material costs are forecast to be lower in 2023 than in 2022.  Consumption seems to present the major challenge to the market at present. 

PCC Exol-ethylene oxide and fatty alcohol supply

Ethylene oxide supplies are based on long-term purchasing contract with the main supplier PKN Orlen.    Deliveries of ethylene oxide under a newly concluded contract are to start from 1 January 2024, that is, directly after the expiry of the agreement currently binding on the Company and PKN Orlen.  The delivery period will be 25 years (2024-2048).  Some of the purchases of ethylene oxide are made on demand from PCC Rokita.  Purchases of fatty alcohols in 2022 were made at base of short-term contracts. Suppliers for the Company's needs are mainly producers from West Europe, but also from South-east Asia.

Hungarian maleic anhydride exports Jan-Dec 2022

Hungary exported a total of 20,863 tons in the whole of 2022 for €42.110 million, equating to 2.156 per ton.   Exports are distributed mostly in Europe with Poland taking the largest share in 2022 of 4,849 tons.  Austria accounted for 4,359 tons of exports from MOL’s plant at Szazhalombatta and Italy took 2,982 tons. 

MOL’s maleic anhydride plant possesses a capacity of 22,000 tpa, and the company is considering expansion.  Due to the technical complications of transporting liquid maleic over large distances product sales are mostly limited to destinations no more than two days from the plant.

Hungarian acrylonitrile imports Jan-Dec 2022

Hungary imported 39,501 tons of acrylonitrile in 2022 against 34,948 tons in 2021.  The Netherlands was the main source of imports in both years, shipping 24,157 tons in January to December 2022.  Acrylonitrile prices increased from €1690 per ton in 2021 to €2260 per ton in 2022.   

Hungarian aniline imports Jan-Dec 2022

Aniline imports into Hungary dropped from 184,285 tons in 2021 to 112,013 tons in 2022, with inward shipments from China dropped from 73,510 tons to only 101 tons.  BorsodChem-MCHZ supplied 89,694 tons from the Ostrava plant against 102,364 tons in 2021.  Cost prices of aniline imports increased from €980.630 per ton to €1617.432 in 2022. 

Polish organic chemical trade Jan-2023

The main feature of Polish organic chemical trade in January was the lower volumes compared to January 2022.  Exports fell from 148,300 tons in January last year to 108,600 tons, whilst imports into Poland dropped from 246,200 tons to 198,600 tons.  High energy prices played a key role in driving up values last year which although have since come off the peak are still impacting on production and trade. 

Ethylene oxide imports into Poland totalled 2,364 tons in January versus 1,359 tons in January 2022.    Poland stopped importing ethylene oxide from Russia in May last year.  Regarding traditional trading partners imports of propylene and phenol from Russia have been sanctioned out of the Polish market and are not expected to restart in 2023 and for the foreseeable future.   

Methanol imports into Poland totalled 48,253 tons in January this year against 68,443 tons in the same month in 2022.  Although Russia reduced supplies from 53,517 tons to 33,690 tons it still remained the largest source of imports.   Already in December Poland had started to reduce shipments from Russia ahead of EU sanctions on Russian methanol which took effect from 8 January 2023.  Contracts signed prior to 7 October have been allocated grace of up to 18 June for completion, but no new business is permitted.

For other organic chemical imports Poland imported 3,387 tons of acetic acid in January against 4,699 tons in January 2022.  The US was the leading supplier in January, shipping 1,955 tons followed by the UK with 638 tons.  Ethyl acetate imports into Poland amounted to 2,226 tons in January this year against 1,183 tons in January 2022.  Belgium provided the largest share of imports.

Central European methanol trade Jan-2023

Czech imports of methanol amounted to 6,543 tons in January against 6,719 tons in January 2022.  Russia accounted for 598 tons in against 2,728 tons in January last year whilst imports from Poland increased from 2,728 tons to 4,851 tons.  Prices per ton for methanol imports into the Czech Republic dropped from €427.551 in January 2022 to €387.022 in January 2023.

Imports of methanol into Poland totalled 48,253 tons in January versus 68,443 tons in January 2022 with Russia providing 33,690 tons.   Average prices amounted to €320.355 per ton against €363.805 per ton last year.  Exports of methanol from Poland amounted to 28,569 tons in January against 24,932 tons in January 2022.  Revenues from Polish exports of methanol rose from €10.004 million in January 2022 to €11.569 million in January 2022, with export prices rising from €401.251 per ton to €403.522 per ton in 2021. 

The extension of EU sanctions on Russian methanol contracts until 18 June this year may help Polish consumers and traders whilst they seek out other sources.  In addition to Romania and Slovakia, Polish exports to Ukraine started to increase in the third and fourth quarters last year.  In January Ukraine imported 3,863 tons of methanol from Poland.

Methanol imports into Hungary dropped from 110,721 tons in 2021 to 69,715 tons in 2022.  Imports from Russia dropped from 48,575 tons to 10,763 tons and from Slovakia from 33,766 tons to 15,070 tons.  Methanol deliveries in December were revived from Slovakia after several months of inactivity.

Despite the regional interdependence on imported methanol previous project assessments have shown that it would be difficult to operate a profitable methanol project in Central Europe. 

The only project concept which seemed to make progress included the Larkwater Group which was assessing the construction options for a 1.650 million tpa plant at Paldiski in Estonia on the Baltic coast.   This project was based on taking cheap gas from Russia which is an unavailable option at present.  Although Paldiski is being developed into an LNG hub, connecting Finland and Estonia, there are no signs at this stage that the project is being revisited.

Ukrainian methanol deliveries March 2023

The warehouses of Ukrgazvydobuvannya received the second batch of methanol in March with a volume of almost 1,000 tons as part of donor assistance from the United States Agency for International Development (USAID).  USAID previously provided the company with 6,000 tons of methanol, used mainly for the extraction, treatment and transportation of natural gas. The first batch arrived at the company's warehouses in February.

Since the beginning of the full-scale war, Ukrgazvydobuvannya has completely switched to the purchase of methanol from European suppliers. Assistance from USAID will create an additional reserve of strategic reserves and ensure an uninterrupted production process until the end of the heating season.

Azoty Police-ilmenite

Grupa Azoty Zaklady Chemiczne Police has concluded a contract estimated at approximately zl 255 million with the Norwegian company Titania for the purchase of ilmenite, which it uses in the production of titanium dioxide.

Azoty Pulawy-caprolactam & melamine shutdowns

Grupa Azoty Zaklady Azotowe Pulawy decided in March to suspend caprolactam production and the operation of the Melamine III unit, from 10 March 2023 until further notice.  The company's announcement states that the current "suspension of caprolactam and melamine production is related to the supply-demand situation on the European market".

Last year, the decision to shut down installations was explained by "an extraordinary and unprecedented increase in natural gas prices", as well as the inability to translate this increase into product prices, due to falling demand.  In February, Grupa Azoty reduced production of nitrogen fertilisers this year to 196,000 tons from 297,000 tons in February 2022 and compound fertilisers from 37,000 tons to 25,000 tons.  The company also reduced its urea production from 127,70 tons to 2023 tons.  In February the volumes of production of specialty fertilisers and other chemicals such as Oxoplast, polyamide, pigments also decreased compared to the same period last year.

Duslo-plastics recycling

Slovak chemical producer Duslo is planning investment into a new line for the refining of pyrolysis oil from the processing of waste plastics.  The total cost of the investment project is estimated by Duslo at €22.6 million.  The starting material in the new technology will be pyrolysis oil which will be supplied to the plant by external entities. The product of its processing will be the diesel and gasoline fraction.  The proposed facility is designed to process 45,000 tpa of pyrolysis oil.  The production of the final product is estimated at 8,000 tpa of gasoline fraction and 32,000 tpa of diesel fraction.

Due to high energy costs last year Duslo has devised plans to build its own wind farm in which has earmarked €60 million in investment.  In addition to the wind farm Duslo is also considering s project the construction of a solar collector park to it in the future. 

Russian chemical industry performance January 2023

Chemical production in Russia showed an overall decline of 9.2% in January this year against January 2022.  This decline follows the trend that started in 2022, which is not inconsistent with some European markets where production has also fallen.  Nitrogen and potassium fertiliser production rose in January, but potash was lower than in January 2022.  Fertiliser production showed a big drop in 2022 (primarily due to potash products), but the financial results of the producers such as Akron and Fosagro were quite reasonable. The volume of production of mineral fertilisers in Russia amounted to 23.5 million tons in 2022, which is 11.3% less than in 2021. 

Overall the share of the chemical industry in industrial production in Russia currently is estimated at 6% and comprises about 1.8% of the country’s GDP.  The chemical industry provides around 8% of the value of Russian industrial exports and around 7% of total tax revenues.  The numbers do not fully reflect the significance of the chemical industry as a constituent part of the Russian economy.

Investment and technologies present the major challenge for the Russian chemical industry in the near term for completing existing projects and starting the construction of new plants.  Replacing Western technologies after the exit of Western companies such as Linde, Technip, etc, could be achieved in some cases through Chinese sources but at the very least project schedules have been pushed back by one or more years. 

Starting new large-scale projects from scratch has become very difficult, the main focus of the industry is to try and fill the gaps left by Western suppliers.  Large companies intensified their own research on the same catalysts, and also, together with processors, began to develop and produce new, previously not produced brands and combinations of polymers. However, this is a long-term process and for some products it could take many years to replace. 

Russian petrochemical production Jan-2023

Russian ethylene production dropped slightly in January to 391,000 tons from 399,800 tons in January 2022.  Propylene production dropped from 267,600 tons to 251,000 tons and benzene fell from 131,000 tons to 113,000 tons.  Some Russian chemical producers have reported good results for 2022 despite the challenges presented by sanctions and economic hurdles. 

Russian normal butanol production rose from 11,241 tons in January last year to 15,887 tons in January 2023. Butanols was one of the few product areas which saw growth in 2022.  Demand for benzene and its derivatives such as phenol, caprolactam, and phthalic anhydride all came under pricing pressure last year.  Russia produced 314,609 tons of methanol in the first month in 2023 against 454,175 tons in January 2022.   All producers reported declines whilst Azot at Novomoskovsk remained idle for the third month in a row. 

Russian rubber & polymer production Jan-2023

The production of synthetic rubbers in primary forms in Russia in January 2023 dropped to 121,000 tons compared to 154,000 tons in January 2022. The production of tyres for passenger cars amounted to 1.7 million units in January, which is 13.5% less than in December, and 52.4% lower than in January 2022.  The decline in tyre manufacturing of 21.4% in 2022 provided the main factor behind the reduction in synthetic rubber production, although other areas of consumption helped to offset the decline.    

The production of synthetic fibres decreased in January 2023 to 14,100 tons by 8.8% compared to January and by 10% by December last year.  The production of polymers in Russia in January amounted to 885,000 tons, which is 1.8% more than in December last year.  In annual terms, production decreased by 6.5%.  The production of paint and varnish materials based on polymers in January increased by 9.8% to 88,400 tons. Production of PVC in January amounted to 76,300 tons versus 92,400 tons in January 2022.  Of the bulk polymers PVC showed the largest decline in 2022 of 11.5% versus 2021, amounting to 970,000 tons.  Overall the total production of plastics in primary forms in Russia last year decreased by 7.3% to 10.3 million tons.  

The production of polyethylene showed an increase of 2.2% compared to December 2022 and 1.5% compared to January 2022.  Production of polyethylene amounted to 316,000 tons versus 311,000 tons.  Polystyrene production amounted to 48,100 tons in January which was 2.1% higher than in December, but 4.9% lower than in January last year.

Russian base chemical and fertiliser production

Russian ammonia production totalled 1.5 million tons in January against 1.8 million tons in January 2022 whilst caustic soda dropped from 112,000 tons to 101,000 tons. 

Fertiliser production in Russia dropped by 10.7% against the same month last year and 3.4% versus December.  The major drop was seen in the production of potash fertilisers which amounted to 578,000 tons in January 2023 versus 891,000 tons in the same month last year.  In the area of plant protection agents, the production of insecticides amounted to 2,200 tons which was 36% up in January last year, fungicide production increased by 31.4% to 4,100 tons and herbicides increased by 31,200 tons to 11,200 tons. 

Despite the overall drop in fertiliser production some of the major producers reported increases both in volume and value.  Fosagro increased production by 4.6% in 2022 to 11.1 million tons, whilst total fertiliser sales increased by 6.4% to more than 11 million tons.   

Increased fertiliser production and sales drove Fosagro’s revenue growth in 2023 of more than 35%.  The advantage of relatively low gas prices on the domestic Russian market combined with higher global prices for fertilisers.  Average global prices for urea rose to $573 per ton (FOB Baltic) in 2022, versus $475 per ton (FOB Baltic) in 2021.  Prices for phosphate and potash feedstocks also remained high: the average price for potassium chloride in 2022 was $621 per ton (FOB Baltic); the average price for phosphate feedstocks was $277 per ton (FOB Morocco) (for feedstocks with P2O5 content of 31%-33%).

Sanctions can disrupt business at any point

A Russian ship carrying a cargo of fertilisers was detained in the Finnish port of Kotka in late March as the shipment is owned by a company associated with a Russian businessman who is included in the sanctions list.  This is the first time a cargo ship has been detained in Finnish ports on suspicion of violating EU sanctions.  The vessel is presently outside the port and is waiting for permission from the Finnish government to continue its voyage.  There may be up to 20,000 tons of fertilisers on board.  The value of cargo in the world market could range from €10-12 million.

Amur Gas Chemical Complex-higher costs

The Amur Gas Chemical Complex is now estimated by SIBUR to cost more than the original plan after the exit of Western partners, particularly Linde, although specific details have not been given.  The target start-up of 2026 is provisional and may need delaying further depending on the reconfiguration of technologies.  SIBUR’s jv partner Sinopec has indicated that most of the finished products from the plant will be able to be placed in the Chinese market. 

The launch of the Amur Gas Chemical Complex was scheduled for 2024-25 but sanctions have meant that technology suppliers such as Linde and Tecnimont have had to be replaced.  Construction began in 2020 and its original cost was estimated at $10 billion.  

The Amur Gas Chemical Complex and the Amur Gas Processing Plant (GPP) are the two largest projects within the framework of a single gas chemical cluster for gas processing, being built near Svobodny in the Amur Region. At the Amur Gas Processing Plant, the gas going through the Power of Siberia will be divided into fractions. After that, part of the fractions will be directly exported to China, and the other part will be processed at the Amur GPP.  Methane is used as a fuel for the boilers of the pyrolysis plant.

Measures to develop Russian petrochemical industry under the backdrop of sanctions

Rosneft has asked the Russian government to extend for two years to 2028 the reverse excise tax on the processing of ethane and liquefied petroleum gases (LPG).  This is essentially to cover the petrochemical project of Ufaorgsintez (part of Bashneft) which is not expected to be completed by 2030. The project involves the production of 300,000 tpa of ethylene, 250,000 tpa of polyethylene and 150,000 tpa of polypropylene.

After the modernisation of Ufaorgsintez, the consumption of liquefied gases will increase from 100,000 tpa to about 250,000 tpa.   The rest of the volume of raw materials, according to the original plans of the company, falls on naphtha.  A large number of petrochemical projects are under construction which started under the conditions of favourable excise duty conditions but due to sanctions and difficulties in securing technologies and advanced equipment are likely not to be completed after 2028.  Other companies may be interested in extending this date include SIBUR's Amur Gas Chemical Complex and the Irkutsk Polymer Plant of the Irkutsk Oil Company.

Nizhnekamskneftekhim EP-600 olefin complex to be completed in 2024

Completion of the construction of Nizhnekamskneftekhim’s EP-600 olefin complex is now expected in the second half of 2024. The complex will produce ethylene, propylene, butadiene and benzene.  In February 2023, builders from 18 Russian organisations (including ten from Tatarstan) completed construction and installation work by 42.8%, and the overall readiness of the project reached 72.3%.

The capacity for the production of ethylbenzene and styrene 400,000 tpa is under design to produce 350,000 tpa.  SIBUR has also decided to build a hexene production unit with a capacity of 50,000 tpa at Nizhnekamskneftekhim.  The capacity of the plant will be 50,000 tpa with production set to start by 2025.  SIBUR’s own technology developed at Tomsk will be used for hexene which is required for HDPE and LDPE production.

Russian ethylene production, Jan-2023

Russian ethylene production totalled 391,300 tons in the first month in 2023 against 399,800 tons in January 2021. 

Regarding individual producers ZapSibNeftekhim at Tobolsk produced 124,100 tons, down from 126,700 tons from January 2022.  Nizhnekamskneftekhim produced 55,800 tons of ethylene in January against 54,600 tons, whilst Kazanorgsintez increased from 58,700 tons to 59,800 tons. 

Other important ethylene producers included SIBUR-Kstovo in the Nizhniy Novgorod region which produced 36,300 tons versus 33,900 tons.  SIBUR-Kstovo does not consume ethylene internally but sells to RusVinyl for PVC production and SIBUR-Neftekhim for PVC production.  For RusVinyl Solvay has reached agreement to sell its stake to SIBUR.

In Bashkortostan Gazprom neftekhim Salavat produced 25,600 against 31,800 tons, whilst Ufaorgsintez reduced production from 11,000 tons to 9,300 tons.  Stavrolen at Budyennovsk produced 28,300 tons of ethylene which was unchanged from last January.      

Russian propylene production, Jan 2023

Russian propylene production amounted to 251,000 tons in January against 267,600 tons in the same month last year. 

ZapSibNeftekhim produced 95,400 tons in January this year up from 93,100 tons. In Tatarstan Nizhnekamskneftekhim produced 29,200 tons of propylene against 28,800 tons whilst Kazanorgsintez produced 5,000 tons. 

In Bashkortostan Gazprom neftekhim Salavat produced 11,000 tons of propylene in January 2023 versus 14,200 tons, whilst Ufaorgsintez reduced production from 14,200 tons to 12,100 tons.  In the Nizhny Novgorod region SIBUR-Kstovo reduced production of propylene from 16,000 tons to 14,800 tons.  Lukoil-NNOS at Kstovo reduced production from 27,200 tons to 18,800 tons which was lower due to some maintenance undertaken.

Russian propylene exports & sales Jan-2023

Propylene exports from Russia amounted to 18,200 tons in January 2022 to 6,500 tons in January 2023.  Lukoil-NNOS reduced export shipments from 11,800 tons to 3,000 tons in January whilst SIBUR-Kstovo reduced shipments from 6,400 tons in January 2022 to zero. 

European markets have been gradually closed for Russian exporters and China has become the main market for Russian exports.   

Russian sales of propylene on the domestic merchant market amounted to 37,757 tons in January against 38,662 tons in the same month last year.  The largest propylene supplier to the domestic market was Lukoil-NNOS, shipping 18,800 tons against 15,400 tons in January 2022 followed by SIBUR-Kstovo which reduced from 14,400 tons to 12,200 tons. 

ZapSibNeftekhim purchased 4,828 tons in January this year versus 14,901 tons in January 2022, mostly from other SIBUR plants.  Saratovorgsintez increased purchases of merchant propylene for acrylonitrile production from 16,035 tons to 17,348 tons in January 2023, mostly supplied by Lukoil from its Kstovo refinery and the remainder from Stavrolen.

Russian plastics production Jan 2023

Russian plastics production amounted to 885,000 tons in January against 946,000 tons in January last year and 916,000 tons in 2021.  Start-up of the ZapSibNeftekhim complex at Tobolsk in 2019 increased production volumes significantly after 2020 until slowing down in the second half of 2022 due to sanctions and economic isolation.

Non-import substituted: what polymers are lacking in Russian processors

Imports of polymers into Russia fell by an estimated 17.2% in 2022.  After the introduction of sanctions, Russian companies began to experience a shortage of individual polymers which were previously supplied from the EU.  For some of those products technologies are undergoing research into for their production in Russia whilst imports are being sourced from other regions. 

In the packaging sector (currently estimated at 1.1 million tpa of plastics), there is a shortage of several types of materials including EVOH copolymer PA66, and metallocene linear polyethylene.  Other products where shortages have emerged include film adhesives for coextrusion, compounds of polymers are all products.  These materials are needed to give the films special properties, such as good welding seam, oxygen barrier, production of multilayer films, etc.  Previously, materials came from Europe and America through direct contacts with manufacturers. These goods fell under sanctions so now only parallel imports, or inward shipments from other sources, are possible.

Manufacturers of rigid packaging also faced a shortage of polybutene which is now being replaced with supplies from Southeast Asia.  Manufacturers of polymer pipes (the market is estimated at 1.1 million tpa) experienced a shortage of specific compositions of polyethylene and polypropylene.  Cross-linked polyethylene is not produced in Russia at all and has been difficult to replace.  Currently, POE (rubbers for modification of the basic grades PP), PA66 (polyamide 66), POM (polyoxymethylene), PBT (polybutylene terephthalate), PFS (polyphenylene sulphide) are not produced in Russia; all of them until 2022 mainly came from the EU.  In total, the need for these materials for the year is 15-18,000 tpa and will only grow. These materials are needed to create products in the automotive industry, electronics and electrical engineering.

Russian polyethylene imports Jan 23

Regarding copolymer imports Russia sharply reduced inward shipments from Europe in 2022 as sanctions took effect.  South Korea is another source of imports of copolymers.  Imports of higher grades of HDPE from South Korea dropped in the third quarter after rising in the first half of 2022.  Imports in January were higher this year than last year, but not significantly. 

Logistics for Russian polymer exporters

 One of the most difficult challenges facing Russian polymer exports in reorientating business towards China and other markets involves the question of logistics.  Exports to Europe comprised transportation costs at favourable rates that allowed the businesses to grow relatively quickly. 

As producers are now reorienting themselves to Turkey, the Middle East and Asia, transportation costs are several times higher.  In some cases, transport costs do not allow Russian producers to compete in these markets without state support or some form of subsidisation.  This may become more difficult in time as the state budget’s priority of supporting the military in Ukraine takes its toll.   Russian Railways has already raised prices this year, and thus costs of selling into China can erode much of the product profit margin. 

Russian polymer prices being kept down by SIBUR

Russian polymer prices have been steadily growing over the past decade along with the combination of the weakening rouble rate (particularly after 2014) and European markets and thus the general direction has been upwards.  At the beginning of 2022, when the rates soared 1.5 times, SIBUR made an unprecedented decision to restrain prices. In fact, this had a huge impact on the further containment of all products along the chain.

Russian PVC market 2022

Russian PVC production fell 11.5% in 2022 against 2021 to 970,000 tons, and also in January this year against January 2022.  For suspension PVC Russian production fell from 6.5% from 960,000 tons in 2021 to 902,000 tons in 2022.  The fall in Russian PVC production was due partly to EU sanctions on imported additives combined with lower domestic demand from the PVC processing sector. 

The shortage of European products was compensated to an extent by supplies from China.  The import of PVC-S to Russia increased by 61%, to 97,000 tons compared to the results of 2021. Over the year, it grew by 52% and reached 104,000 tons, primarily due to an increase in supplies from China which rose from 49,000 tons to 89,000 tons in 2022.

Russian paraxylene production 2022

Russian paraxylene production decreased in 2022 to 218,000 tons against 229,000 tons in 2021.  Volumes slowed down in the second half of the year as sanctions took effect.  Gazprom Neft reduced production from 88,300 tons in 2021 to 61,100 tons in 2022 whilst Ufaneftekhim increased production from 99,000 tons to 112,300 tons.

Russian production could be boosted this year by additional capacity in Tatarstan and Bashkortostan.  However, it remains unclear to which markets paraxylene could be sold apart from Polief which is the sole producer of PTA in Russia. 

Paraxylene capacity last year was raised at Ufa from 165,000 tpa to 260,000 tpa.  In 2016, Bashneft and SIBUR signed an agreement which entails that the Ufaneftekhim refinery supplies at least 120,000 tpa of paraxylene until 2036.  In Tatarstan the Taneko refinery started its new aromatics unit at the end of last year, including capacities for 60,000 tpa of benzene and 150,000 tpa of paraxylene.  The production of paraxylene will enable the production of PTA although this idea remains in the concept stage.  The PTA plant is intended to supply the Ekopet plant for PET at Kaliningrad although the logistics involves a distance of around 2,200 km from Nizhnekamsk.   Tatneft may wish to see the outcome of the war before proceeding too far with this project idea due to uncertainty over transport routes such as through Belarus for example. 

Russian PET production 2022

Russian PET production totalled 594,000 tons in 2022, 2.9% down against 2021.  Ekopet reduced production by 11%, SIBUR-PETF by 1%, whilst Polief increased production by 4%.  The reduction was attributed to primarily to the disruption of logistics chains, particularly for Ekopet.  The supply of raw materials in March-April, which were became very difficult after 24 February. 

Consumption of PET increased by 0.7% in 2022 and amounted to 823,000 tons.  As a result, Russia’s net deficit amounts to around 180,000 tpa.  Market forecasts for 2023 suggest a similar volume as 2022, with the possibility of growth limited by economic challenges.  An important trend in the consumer market is the fall in incomes of the population which may affect consumption this year. 

An important trend in the consumer market is the fall in incomes of the population which may affect consumption this year.  The Russian PET market in 2022 experienced a trend where domestic companies were forced to develop than expected in order to replace international brands. 

Russian PET trade 2022

Due to the low price of Chinese PET, imports into Russia grew by 13% in 2022 over 2021 to 233,000 tons.  In January this year import values amounted to $23.5 million against $3.7 million in January 2022. 

Russian synthetic rubber production Jan-2023

Synthetic rubber production in Russia amounted to 121,000 tons in January against 154,000 tons in January 2022 and 106,000 tons in December.  Regarding the domestic rubber market in Russia,  tyre output started 2023 as it finished 2022 with plants running at lower than full capacity.  The positive news for the Russian synthetic producers involves the reprieve in that the full EU sanctions on synthetic rubber do not take full effect until 30 June 2024.  

Overall, for 2022 production is expected to total around the same level in the pandemic year 2020, although much lower than in 2021.  Due to an accident and serious fire on 12 December Nizhnekamskneftekhim was forced to launch the production of isoprene rubber on the reserve line.    Nizhnekamskneftekhim is the most integrated of the synthetic rubber producers in Russia.

Russian rubber trade 2022

Russia reduced exports of rubbers, rubber and products by 32.4% in 2022 over 2021 in value terms to $2.4 billion, whilst imports of all rubbers dropped by 11.4% to $4.29 billion.  Synthetic rubber production dropped 12% in 2022 to 1.5 million tons. 

Russian synthetic rubber exports to the EU and sanctions

As part of the tenth package of EU sanctions, synthetic rubber and carbon black imports from Russia have been banned in full but only from June 2024.  Some synthetic rubber grades were already placed under sanctions in 2022, including butadiene and butyl rubbers, but others such as SBR and isoprene rubber are not subject to the embargo. 

Poland had advocated for a complete ban to take immediate effect from the date of issue of the tenth package, but this was opposed by European tyre manufacturers in Germany and Italy which stated that they needed time to adapt to new suppliers.

Sterlitamak Petrochemical Complex-isoprene rubber contract with Belarus

SNHZ Group won the tender for the supply of synthetic rubber to Belshina and sent the first batch of products.  With the Belarusian tyre giant, the company signed a contract for the supply of 23,000 tons of synthetic rubber SKI-3.  The first delivery of 1.300 tons has already been made.  SNHZ/Sintez-Kaucuk Group specializes in the production of butadiene-styrene rubbers, isoprene rubbers for general and special purposes, which are used in the manufacture of various rubber, medical and food products, aviation gasoline, multidisciplinary products of low-tonnage chemistry.  

Russian methanol production Jan-2023

Russia produced 314,609 tons of methanol in the first month in 2023 against 454,175 tons in January 2022.   All producers reported declines whilst Azot at Novomoskovsk remained idle for the third month in a row. 

Shchekinoazot reduced production from 134,504 tons to 108,079 tons whilst Metafrax reduced production from 113,000 tons to 80,500 tons, and Gazprom Methanol reduced production to 74,820 tons from 81,530 tons.   

Tomet produced 26,368 tons of methanol in January 2023 versus 69,863 tons last year whilst Ammoni in Tatarstan reduced methanol production from 10,287 tons to 7,983 tons. 

Russian methanol market balance Jan-2023

All market indicators for Russian methanol were down in January this year against January 2022.   Production was reduced in response to lower exports, domestic merchant sales and internal processing.

Russian methanol exports & market overview Jan-2023

Russian methanol exports amounted to 137,900 tons in January versus 214,900 tons in the same month in 2021.  Shchekinoazot exported only 57,700 tons of methanol in January this year versus 100,000 tons in January 2022 whilst Metafrax Chemicals reduced shipments from 38,300 tons in January 2022 to 30,600 tons this year.  In the fourth quarter Metafrax Chemicals started to supply the Chinese market through the Nakhodka-Vostochny terminal to compensate the loss of European business. 

Tomet exported only 4,300 tons this January versus 32,000 tons in the same month last year.  The restart of the second line was planned for mid-September but that was delayed and now unlikely to restart in 2023.  In addition to the external sanctions which affect methanol exports, Tomet is also under legal investigation inside Russia over alleged embezzlement by the former owners.  The total amount of embezzlement is estimated at almost 2 billion roubles, but the former owners now live abroad and are thus inaccessible.  The seizure of the property was imposed during the investigation of the ToAZ case.  Tomet has since been auctioned but with no successful outcomes.   

Gazprom Methanol increased exports in January from 37,600 tons in to 42,200 tons most of which was this year has been sent to China.

The largest destination for Russian methanol exports in January was China, taking 58,980 tons.  In addition to China deliveries to Turkey have increased in the past year as producers strive to reduce dependency on the European market.   A total of 19,870 tons was supplied to Turkey in January, all of which was transported through the ports of Kavkaz and Temyruk. 

Russian methanol exports to Belarus increased to 22,530 tons in January 2023 against 10,301 tons in January 2022.  Potentially exports to Belarus have risen to provide transit to other markets, but Belarus has not published trade data since April 2021.  Exports to Kazakhstan in January 2023 dropped to 3,040 tons from 4,217 tons last year whilst shipments to Poland dropped from 42,199 tons to 12,580 tons.  After the Russian invasion Poland became the conduit for Russian shipments to South-East Europe but has dropped since sanctions were announced in October.  Romania and Slovakia have not been able to receive methanol from Russia since the end of February and thus imports fell to zero in both cases from 19,588 tons and 34,855 tons respectively. 

Russian methanol domestic sales, Jan-2023

Merchant sales of methanol on the Russian domestic market amounted to 126,655 tons in January this year versus 147,755 tons in January 2022.   Domestic demand has held up on the surface, but consumption is showing signs of slowing and together with internal processing cannot provide a substitute for export activity.  Formaldehyde production amounted to 60,590 tons in January this year versus 71,579 tons in January 2022.  Domestic consumption dropped slightly in 2022 over 2021 due in part to the decline in formaldehyde production.  The Russian  furniture market has become more complicated since the introduction of sanctions as it is very difficult for Russian companies to develop a full chain, of production without Western raw materials or components. 

Tomet supplied 25,720 tons to the domestic merchant market in January against 39,591 tons in the same month in 2022.  The largest consumer for Tomet is Togliattiazot where methanol is used for the production of urea-formaldehyde concentrate.  Togliattiazot purchased 9,031 tons of methanol from Tomet in January against 10,800 tons in January last year.

Gazprom Methanol reduced domestic shipments of methanol from 35,292 tons in January last year to 31,366 tons in January 2023.  Previously formaldehyde was produced by Gazprom Methanol, but the assets were sold in 2021. 

Gazprom purchased 24,535 tons of methanol versus 27,300 tons last January.  Other consumers which increased methanol consumption in 2022 included Volzhsky Orgsintez which increased purchases from 3,641 tons in January 2022 to 4,207 tons.  Shchekinoazot increased domestic sales from 21,075 tons to 32,731 tons in January 2023.  Metafrax Chemicals increased merchant shipments from 32,800 tons to 33,712 tons.  Formaldehyde production in Russia has slowed in recent months due to weak demand, thus reducing purchases of methanol.  Production amounted to 126,655 tons in January versus 147,755 tons in the same month in 2022.  The slowdown in formaldehyde production reduced the amount of internal methanol processing at Metafrax Chemicals, Akron and Shchekinoazot. 

Russian butanol production Jan-2023

Russian normal butanol production rose from 11,241 tons in January last year to 15,887 tons in January 2023.  Gazprom neftekhim Salavat was the largest Russian producer, increasing production to 8,243 tons from 4,525 tons in January 2022.    

Isobutanol production in Russia increased from 8,578 tons to 10,973 tons in January 2023.  Gazprom neftekhim Salavat increased production from 2,198 tons to 3,773 tons, and SIBUR-Khimprom increased production from 3,917 tons to 5,302 tons. 

Russian oxygenated solvents Jan-2023

Russian acetone production dropped from 16,400 tons in January 2023 to 13,000 tons in the same period in 2022.  Omsk Kaucuk produced 2,200 tons of acetone in the first month this year against 2,200 tons whilst Kazanorgsintez produced 4,900 tons versus 4,600 tons.  Acetone has sanctioned by the EU, preventing Russian exports and new markets are being sought by producers. 

As a result of surplus availability ethyl acetate imports dropped sharply last year.  In January 105,880 tons were imported which was 40% lower than in December and 78% down against the same month in 2022.   The main batches of imported ethyl acetate were supplied from China where prices are 10-15% lower than that of domestic counterparts.  

In other areas of solvent production Russian producers have reduced the production of ethyl acetate and butyl acetate because these products have a shelf life (nine months from the date of production), and also in order not to overpack the warehouse and not freeze assets. 

Lummus-butadiene technology Kazakhstan

Lummus Technology has announced that the jv Butadiene LLP in Kazakhstan has selected its iC4 CATOFIN®, CATADIENE®, CDMtbe® technologies and BASF's butadiene extraction technology for units at the new petrochemical plant at Atyrau.

In November 2022 KazMunayGaz and Tatneft established a joint venture Butadien LLP to create a butadiene rubber production site with a completion date of 2026.

The capacities of the individual plants include 85,120 tpa of isobutylene, 120,000 tpa of butadiene and 40,000 tpa of MTBE. These products will be supplied to the new enterprise of Butadiene LLP for the production of synthetic rubber, as well as to the domestic fuel market in Kazakhstan.

The future plant will produce five different types of products.  These include styrene-butadiene-styrene-rubber, which is used in road surfaces, divinyl-styrene synthetic rubber, which is used in the tyre industry, isobutane-isobutylene fraction, which is designed to produce methyl tert-butyl ether, butyl rubber, isoprene and alkylate, as well as MTBE.  Finished products will be supplied to the KamaTyresKZ tyre plant in the Karaganda region, as well as for export to Europe, Russia, China, Turkey, etc. 

In addition to the licensed technologies, Butadiene LLP will have access to Lummus' portfolio of lifecycle services during the implementation and operation stages of this project, such as advanced operator training simulators, extended technical support and digitalisation services.

Kazakh aromatic prodcution & exports

The Atyrau Refinery plans to increase the production and export of aromatic hydrocarbons in 2023 to a target of 208,300 tons of paraxylene and 35,700 tons of benzene.  However, it is possible that the actual production will be less than the planned plans due to the possible transition of the plant to fuel mode against the background of the expected shortage of motor fuel in Kazakhstan.

Export of paraxylene from Atyrau in 2022 was carried out from January to August, after which production was suspended due to the transfer of the plant to fuel mode.  In 2022 76,000 tons of paraxylene was exported from Kazakhstan (mainly to China), which was 46% more than a year earlier.   Benzene was exported only in January-May amounting to 6,500 tons.  

Uzbek domestic polyethylene sales 2022

From January to December 2022, about 165,000 tons of polyethylene were sold to the domestic market through exchange trading, which is 6% more than in 2021.

The average monthly sales volume of pellets amounted to 13,752.8 tons.  The maximum sales volume was achieved in June with 18,318 tons.  In the structure of the market, film and injection moulded polyethylene accounted for 36% and 24% of sales respectively.

According to the structure of the acquisition of polyethylene, the combined share of Tashkent and Tashkent region amounted to 55%.  The share of Samarkand region decreased from 17% in 2021 to 14% in 2021. The share of Fergana region also decreased from 10% to 8%. 6% of sales accounted for buyers of Namangan region.  Sellers of polyethylene include the plants Shurtan Gas Chemical Complex and the Uz-Kor Gas Chemical.

Bukhara MTO project and derivative plans

The MTO project planned for the Bukhara region in Uzbekistan has received further approvals in the first quarter in 2023 for construction and has been identified as providing the basis for a chemical and high-tech industry cluster.  Rather than exporting natural gas as a raw material, Uzbekistan is investing into deep processing capacity to enable domestic production of fuels, plastics and other products.  The methanol to olefins (MTO) plant planned by Jizzakh Petroleum for the Bukhara region in Uzbekistan has been set a target for commissioning by the end of 2025.  The project is estimated to cost around $4 billion and will act as the focus for a new free economic zone in the Bukhara region entitled FEZ Karakul.

In 2021, Jizzakh Petroleum signed a memorandum of understanding with three Russian companies on the construction of the MTO complex in Karakul. However, these companies have now been sanctioned and thus Uzbekistan is looking for new contractors. 

The complex will produce up to 730,000 tpa of polymer products and will become the largest producer of polymers in the country and one of the few in the world producing such materials from methane.  More than 70% of the plants products will be sold in the domestic market, which will allow the industry of Uzbekistan to meet domestic demand, as well as export various finished products to China, Turkey, the CIS countries and Southeast Asia.

PET is intended to be produced based on the technology of Chemtex Global Corporation (USA), whilst monoethylene glycol (MEG) will be produced using technology from Scientific Design Company Inc. (USA).  The production of LDPE will also be established for the first time in the republic on the equipment and technology of Versalis.  This technology makes it possible to consistently produce two types of final products at one plant comprising LDPE and ethylene vinyl acetate.  The production of polypropylene will be carried out in cooperation with W. R. Grace using its UNIPOL PP technology.  This is expected to be launched by-2025 and will include one reactor line with the capacity to produce 257,000 tpa of polypropylene. 

The MTO gas chemical complex will become the largest plant of this type in Central Asia for the production of polymer products, which will meet local demand for raw materials for the production of goods with high added value.

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