PKN Orlen-petrochemical production Jan-Aug 2022

PKN Orlen Production (unit-kilo tons)
Product	Jan-Aug 22	Jan-Aug 21
Ethylene	317.7	175.4
Propylene	294.8	185.5
Butadiene	42.8	21.6
Toluene	5.2	7.8
Phenol	29.7	33.0
Polyethylene	215.1	118.5
PVC	203.0	120.7
Polypropylene	233.9	175.0

PKN Orlen increased ethylene production in the first eight months to 317,700 tons against 175,400 tons in the same period in 2021, whilst propylene rose from 185,500 tons to 294,800 tons.  The increase in olefin production enabled an increased in polymer production at Plock, including a rise of 118,500 tons in January to August 2021 to 215,100 tons and for polypropylene from 175,000 tons to 233,900 tons.  PVC production at Wloclawek increased from 120,700 tons to 233,000 tons.

PKN Orlen-PGNiG agreement

PKN Orlen signed an agreement on 27 September with the State Treasury regarding the planned merger with PGNiG.  The agreement will enter into force in principle on the date of the merger which paves the way for unlocking synergies in the potential of the two companies. After the completion of the merger with the Lotos Group and the pending merger of the company with PGNiG, Orlen announces further development of the petrochemical complex in Gdansk.  Work on the feasibility study is expected to start soon.

Its merger with Grupa Lotos, and eventually with PGNiG, will strengthen PKN Orlen's position as the leader in energy transition through investments in low- and zero-carbon energy sources.   PKN Orlen and PGNIG signed the merger plan on 29 July where the transfer of all assets and liabilities of PGNiG will be exchanged for shares issued to the shareholders of PGNiG.  The company will be made a public offer of the Merger Shares addressed to the shareholders of PGNiG on the base of the prospectus approved by the Polish Financial Supervision Authority. 

Opening of Baltic Pipe & impact on gas supplies

The new gas pipeline Baltic Pipe was officially launched on 27 September connecting Norway and Poland, providing a substitute for supply from Gazprom.  In 2023, PGNiG aims to be able to import at least 6.5 billion cubic metres from Norway to Poland via the Baltic Pipe from the 10 million tpa capacity which could rise to 8 billion in 2024.   Supplies from Norway are designed to replace gas supplies from Russia, which amounted to an average of 8.3 billion cubic metres per annum.  In addition, PGNiG has also booked the capacity of the Lithuanian LNG terminal at Klaipeda, which has the ability to buy gas on the German stock exchange.

The Swinoujscie gas terminal in Poland has been in operation since 2015 which allows Poland to purchase LNG mainly from the US, Qatar and Norway.   At the same time, Gaz-System is working on another project the construction of an LNG floating terminal near Gdansk.  Originally, the investment was to be ready by the end of 2027, but it has been accelerated by two years due to the crisis in Ukraine.

Plans to diversify gas supplies in Poland and Central Europe were underway prior to the Russian aggression this year but are now moving much quicker due to these events.  From May 2022 the GIPL gas pipeline was launched via a new gas pipeline connecting Poland with Lithuania.  The GiPL will reach its full capacity in October 2022 which will amount to 2 billion cubic metres towards Poland and 2.5 billion cubic metres towards Lithuania.  Another pipeline connection to Slovakia was completed at the end of August with the launch planned in October.  This will allow transmission of 4.7 billion cubic metres of gas per annum to Slovakia.  Due to this connection, Poland will gain access to gas sources in Southern Europe, North Africa and the Caucasus, while Slovakia will have the opportunity to obtain gas from the Baltic Pipe and from the LNG terminals in Swinoujscie and Klaipeda.  Poland consumes about 20 billion cubic metres annually of which Grupa Azoty is the largest consumer, taking more than 10%.  Domestic gas production amounts to approximately 4 billion cubic metres annually.

Central European propylene trade

MOL's Propylene Exports Jan-Jul 2022
Country	Kilo tons	€ million
Germany	3.184	2.863
Poland	3.918	5.098
Slovakia	36.351	50.009
Total	43.453	57.969

In the first seven months this year MOL’s propylene export price rose to €1334 per ton against €931 per ton in the same period in 2021.  By volume exports fell in the first seven months to 43,453 tons versus 64,495 tons in January to July 2021, whilst due to the higher sales price meant revenues only dropped slightly to €57.969 million from €60.028 million.   Spot prices of propylene rose 29% in the first quarter and then rose again in the second quarter before starting to soften in the third quarter.

Polish Imports of Propylene (unit-kilo tons)
Country	Jan-Aug 22	Jan-Aug
Lithuania	0.000	6.415
Bulgaria	3.983	0.000
Croatia	2.851	0.000
Germany	42.506	71.385
Russia	23.132	36.285
Ukraine	19.020	48.043
Hungary	3.918	0.000
Others	5.396	0.012
Total	100.806	162.141

Imports of propylene into Poland dropped in the first eight months to 100,806 tons against 162,141tons in the same period last year, which was due mostly to the higher production undertaken at Plock.  A similar trend followed for butadiene, dropping from 90,076 tons to 70,509 tons. Although propylene monomer has not been sanctioned by the EU, Russia has exported only small volumes to Poland in the past few months. 

Czech Imports of Propylene (unit-kilo tons)
Country	Jan-Aug 22	Jan-Aug 21
Germany	14.614	11.916
Poland	3.926	8.001
Romania	5.253	0
Russia	1.220	0
Slovakia	0.993	3.732
Ukraine	0.524	3.388
Others	0.157	2.321
Total	26.686	29.363

The supply of and demand for propylene was fairly stable in the first half of the year. Despite unscheduled shutdowns at some producers, the availability of propylene was good also due to higher imports to Europe as high prices of propylene in Europe supported its imports. The pandemic also sparked off certain logistics problems on the propylene market. Demand for polymer and chemical propylene remained relatively high. The launch of the invasion of Ukraine led to a significant increase in the prices of crude oil and naphtha, which translated into higher prices of propylene. That factor, as well as the sanctions, significantly reduced the possibility of purchasing the product from suppliers in the countries east of Poland. In the second half of the second quarter, demand for propylene fell gradually in all areas where it is processed. This resulted in a significant increase in the amount of propylene available on the European market and a decline in its prices on the spot market. 

Czech imports of propylene were reduced from 29,363 tons in the first eight months in 2021 to 26,685 tons in the same period this year.  Imports from Germany increased from 11,916 tons to 14,614 tons.  Overall average costs rose from €934 per ton last year to €1563 per ton, with total costs rising from €27.435 million to €41.706 million.

Orlen Unipetrol Jan-Aug 2022

Orlen Unipetrol Polyolefin Exports
HDPE	Jan-Aug 22	Jan-Aug 21
Vol (ktons)	237.2	208.8
Value (€ mil)	386.0	285.8
PP	Jan-Aug 22	Jan-Aug 21
Vol (ktons)	167.7	183.4
Value (€ mil)	292.6	248.7

Orlen Unipetrol increased HDPE exports from 208,800 tons in the first eight months in 2021 to 237,200 tons in the same period in 2022, with revenues rising from $285.8 million to $386.0 million.  Polypropylene exports from Orlen Unipetrol dropped from 183,438 tons in the first eight months in 2021 to 167,740 tons in January to August this year whilst values rose from $248.7 million to $292.618 million. 

Slovnaft restart of polymer production

Slovnaft restarted petrochemical production in the first half of October after a two month shutdown during which maintenance and modernisation was undertaken costing more than €60 million.   Breaking the total costs down, €36 million was spent on maintenance and €24 million on modernisation.  The investment measures are part of a larger modernisation programme with which Slovnaft wants to gradually bring its aging production facilities up to the current state of the art.

Slovnaft selected Linde Engineering in July 2022 to conduct a complex large-scale revamp of the polypropylene (PP3) plant at Bratislava.  The revamp will extend the plant’s capacity by 18% or by 33,000 tpa to 300,000 tpa of polypropylene, and the storage facility will be expanded from the current 45 silos to 61 silos.  Slovnaft is investing around €63 million in the expansion and modernisation of polypropylene production.  

Polish polyolefin trade Jan-Aug 2022

Polish PP Exports (unit-kilo tons)
Type	Jan-Aug 22	Jan-Aug 21
PP homo	137.577	122.007
Polyisobutylene	0.154	0.429
Propylene copolymers	58.455	43.807
Other	2.053	1.801
Total	198.238	168.043
Polish PP Imports (unit-kilo tons)
Type	Jan-Aug 22	Jan-Aug 21
PP homo	415.339	488.266
Polyisobutylene	2.789	2.958
Propylene copolymers	202.028	223.461
Other	13.701	16.830
Total	633.857	731.515

Poland imported 415,339 tons of polypropylene homo grade in the first eight months in 2022 for a total value of €733.989 million.  Russia provided 52,872 tons for €77.883 million, which was exceeded by Germany with 70,945 tons for €134,668.  Imports from Russia dropped in the second quarter stopped completely in August in line with sanctions.  In 2021 Poland imported 155,805 tons of polypropylene homo grade from Russia for a total grade €198.656 million.  Shipments from Russia accounted for 21% of total Polish imports. 

Exports of polypropylene homo grade from Poland amounted to 137,577 tons in the first eight months in 2022 for €233.331 million.  The largest destination for Polish exports was Germany, taking 37,359 tons for €61.544 million. 

Polish PE imports (unit-kilo tons)
Type	Jan-Aug 22	Jan-Aug 21
LDPE & LLDPE	411.351	422.075
HDPE	303.690	318.138
EVA	11.910	14.692
EAC	129.750	137.091
Others	40.508	34.076
Total	897.209	926.072

For propylene copolymers Poland imported 202,028 tons in the first eight months in 2022 for €403.599 million whilst exports amounted to 58.455 tons for €118.183 million.  Germany was the largest source of imported propylene copolymers, shipping 59,044 tons to Poland in January to August this year for €115.482 million.

In the polyethylene sector imports into Poland totalled 897,209 tons in the first eight months in 2022 against exports of 234,814 tons.  Import costs amounted to €1.661 billion million in January to August 2022 against export revenues of €396.580 million.

LDPE and LLDPE comprised the largest category of imports, totalling 411,351 tons of which LLDPE amounted to 170,730 tons for €301.285 million.  Imports of LLDPE were sourced mostly from West Europe, including France, the Netherlands and Germany.  LDPE imports totalled 240,622 tons in the first eight months in 2022 for €451.586 million.

Polish PE Exports (unit-kilo tons)
Type	Jan-Aug 22	Jan-Aug 21
LDPE	41.117	11.534
LLDPE	14.065	44.643
HDPE	160.016	87.629
EVA	2.277	1.359
EAC	14.202	13.110
Other	3.138	3.302
Total	234.814	161.577

HDPE is the largest export category from Poland, shipping 160,016 tons in the first eight months in 2022 for €257.197 million.  Imports still outstripped exports though, amounting to 301,680 tons in the first eight months for €408.555 million. 

Orlen Unipetrol-recycling Orlen Unipetrol has signed an agreement for the purchase of the Italian-Czech company Remaq, a leader in the field of recycling in Central Europe.  This transaction will allow the Orlen Group to achieve nearly 10% of its recycling capacity, as part of the strategic goal adopted by 2030.  Plastic waste will be used to produce new petrochemical products that can be used in the construction, automotive or packaging industries.  In accordance with the Orlen Group's Strategy, the aim is to have a recycling capacity of up to 400,000 tpa of plastics and natural waste by 2030.

Germany has been the largest origin source of imports of HDPE into Poland this year and also the largest destination for exports, with inward shipments totalling 64,347 tons against outward shipments of 54,689 tons.  Poland imported 14,071 tons of HDPE from Russia in the first eight months.

Central European rubber trade & sanctions

Polish Imports of Halogenated Butyl Rubber 2022
	Ktons	€ million
Total Jan-Aug 22	10.917	27.265
Imports from Russia Jan-Jul 22	10.424	25.591
August Imports from Russia	0.198	0.509
August imports total	0.275	0.787

Czech Imports of Halogenated Butyl Rubber 2022
	Ktons	€ million
Total Jan-Aug 22	4.753	12.050
Imports from Russia Jan-Jul 22	3.571	8.610
August Imports from Russia	0.000	0.000
August imports total	0.0862	0.279

EU sanctions on numerous grades of Russian synthetic rubber exports and imports took effect from 10 July which meant that August was the first full month where Central European consumers had to find alternative suppliers.  Some import numbers from Russia into Central European countries were shown in the August statistics, but these are most likely post-dated and refer to volumes already delivered. 

One of the main imported types of synthetic rubber from Russia is isoprene, which has to date escaped sanctions.  Those products affected mostly include butadiene rubber and particularly halogenated butyl rubber (HBR) where Russia has dominated most of the market share in Central Europe over the past decade.  Poland had previously depended almost exclusively on Nizhnekamskneftekhim for supplies of HBR, purchasing 10,424 tons in the first eight months from a total 10,917 tons. 

The Czech Republic has been slightly more diverse in suppliers of halogenated butyl rubber, but still imported 3,571 tons from Russia of the total 4,753 tons imported in January to August this year.  In August specifically the Czech Republic imported only 86 tons of HBRs, none of which came from Russia, whilst 198 tons of the total 275 tons imported by Poland came from Russia.

Other sanctioned grades of synthetic rubber include polybutadiene or butadiene rubber.  Butadiene rubber exports from Russia to the EU amounted to $165.4 million in 2021, with the largest recipient countries including Poland, Hungary, Romania and Slovakia.  Already consumers are negotiating with alternative suppliers.  In response to the lack of Russian butadiene rubber Synthos has decided to expand its butadiene rubber capacity by 50% which will help to address ongoing market shortages.  The programme involves projects at the group’s facilities at Schkopau and Kralupy.  

Imports of butadiene rubber from Russia into Poland in the first eight months totalled 17,083 tons for €30.268 million, from a total of 39,018 tons for a total of €81.189 million.   Imports from Russia for August amounted to 938 tons from a total of 3,868 tons, although the Russian sources could refer to post-dated shipments.  Butadiene rubber sources are thus far more diverse than halogenated butyl rubber.  The Czech Republic imported a total of 8,908 tons in August 2022 for a total of €17.211 million, of which 1,488 tons were shipped in August, but once again these volumes may be post-dated.  The Czech Republic is also a major exporter of butadiene rubber, shipping 74,426 tons in the first eight months for €157.155 million, up from 70,910 tons in January to August 2021 for €103.064 million. 

MOL's Butadiene Exports (unit-kilo tons)
Country	Jan-Jul 22	Jan-Jul 21
Czech Republic	4.088	5.472
Germany	5.035	15.281
Poland	20.215	27.656
Russia	0.0	1.752
Total	29.338	50.163

Hungary imported a total of 26,576 tons of butadiene rubber in the first seven months in 2022 for a total value of €53.690 million, of which Russia supplied 10,901 tons for €20.398 million.  Imports of halogenated rubber totalled 10,446 tons in the period January to July 2022 for a total value of €28.869 million, of which Russia supplied 9,137 tons for €25.087 million. 

Butadiene trade Central Europe

In the Central European region Hungary is the only net exporter with most countries dependent on imports.  MOL’s butadiene exports dropped from 50,163 tons in the first seven months in 2021 to 29,338 tons in the same period this year.  Exports were down mostly due to lower production at Tiszaujvaros and internal processing. 

Polish Butadiene Imports (unit-kilo tons)
Country	Jan-Aug 22	Jan-Aug 21
Austria	25.362	29.313
Czech Republic	1.746	4.057
France	3.248	0.000
Germany	17.569	23.874
Hungary	22.579	32.832
Others	0.005	0.000
Total	70.509	90.076

Both Poland the Czech Republic are net importers of butadiene, with Synthos acting as the main buyer in both countries.   Czech imports of butadiene dropped from 52,814 tons in the first eight months in 2021 to 48,329 tons in the same period in 2022.  Germany shipped 44,377 tons in January to August 2021, dropping to 41,613 tons in the same period in 2022.

Butadiene imports into Poland dropped from 90,076 tons in the first eight months in 2021 to 70,509 tons, the fall largely due to increased production at Plock.  Demand for butadiene at Oswiecim was expected to fall in September and October due reduced production by Synthos to higher production costs.  Synthos stated that it could no longer operate its ESBR production at full capacity due to unsustainable and unpredictable utility costs and was therefore reducing utilisation by around 30%.

In order to develop greater integration Synthos is working on its contract concluded with Air Liquide Engineering and Construction in 2021 in order to construct a new butadiene extraction unit at Plock with a capacity of 120,000 tpa.  Furthermore, for 2026 Synthos is building project to build a 40,000 tpa bio-butadiene plant at Oswiecim.  The project is aligned with Synthos goals to transition from the current 100% fossil-based to 100% bio-based synthetic rubber, in line with market requirements. 

Synthos Production Oswiecim (unit-kilo tons)
Product	Jan-Aug 22	Jan-Aug 21
Polystyrene	46.5	48.1
EPS	67.6	68.3
Synthetic Rubber	186.4	185.2

Synthos Jan-Jun 2022

In the first half of 2022 production costs for Synthos increased from €569.1 million to €1.025 billion.  Revenues in the first half of 2022 increased to €1.447 billion against €822.3 million in the same period in 2021, whilst net profits rose slightly from €141.2 million to €151.1 million. 

Synthos is expanding its butadiene rubber capacity by 50% to in order to help address ongoing market shortages after the blocking of Russian imports under EU sanctions.  By the end of 2022, Synthos will add 20,000 tpa of new capacity for butadiene rubber production at Kralupy after debottlenecking.  At the start of 2023, Synthos plans to restart a 30,000 tpa plant at Schkopau which was formerly operated under Trinseo.   With the addition of plants purchased from Trinseo, Synthos’ overall synthetic rubber capacity increased to around 820,000 tpa rising to 870,000 tpa when two butadiene rubber expansions come on stream. 

NIS to purchase Petrohemija’s rubber division

Sanctions could delay Petrohemija’s integration into NIS The United Branch Trade Unions Independence representing the workforce of Petrohemija has recommended that the takeover of Petrohemija to NIS should be postponed until the end of the Ukrainian war.  Completion of the privatisation process and its acquisition by NIS could jeopardise production and jobs at the Pancevo plant, due to sanctions imposed by the European Union against Russia.  NIS is owned by Gazprom Neft and it is pointed out there is already a problem with the placement of HIP’s products.  The Union fears that the full takeover by NIS could disrupt the placement of Petrohemija’s products in its most important EU markets.  It could also make it difficult to repair existing equipment, purchase new parts and assist experts from abroad, which would certainly result in reduced business volumes and the layoff of workers.  Union representatives are ready to explain their request in more detail to the Serbian PM.

Naftna Industrija Srbije at Novi Sad (NIS) has received the greenlight to acquire the synthetic rubber plant (HIPP) at Elemir which is owned by HIP-Petrohemija at Pancevo.  At the end of September, the European Commission said it had approved, under the EU Merger Regulation, the acquisition by NIS which is majority owned by Gazprom Neft. 

Although Serbia is not a current member of the European Union it is a potential candidate which means it has to adhere to EU rules.  The Commission concluded that the proposed acquisition would raise no competition concerns given the companies' moderate combined market positions resulting from the proposed transaction.

Serbian Chemical Exports (unit-kilo tons)
Product	Jan-Jun 22	Jan-Jun 21
Polyethylene	63.7	49.5
Polypropylene	8.3	12.8
Styrene Butadiene Rubber	9.9	9.2

NIS announced plans to increase its ownership in HIP Petrohemija from 20.86% to 90% of shares in December last year.  At the time, the company said the deal came with the obligation of a €150-million monetary recapitalisation and the construction of a polypropylene production plant with a capacity of at least 140,000 tpa.  The strategy, it said, was to further develop HIP Petrohemija by modernising basic production capacities and building new plants as well as increasing energy efficiency and business efficiency.

Operational since 1983, the company's Elemir site produces 45,000 tpa of 1.3-butadiene and 40,000 tpa of styrene-butadiene rubber (SBR).  The company markets its emulsion SBR (E-SBR) products under the Hipren brand, which includes two types of series 1500 and one type of series 1700.

HIP-Petrohemija Jan-Jun 2022

Czech Petrochemical Exports (unit-kilo tons)
Product	Jan-Aug 22	Jan-Aug 21
Ethylene	9.515	17.635
Propylene	0.027	4.012
Butadiene	1.100	1.434
Benzene	29.186	30.022
Toluene	5.009	5.660
Ethylbenzene	68.536	83.929

In the first half of 2022 HIP-Petrohemija accounted for 23.8 billion dinars ($202.8 million) of NIS’s turnover which totalled 156.2 billion dinars ($1.331 billion).  In the first five months this year Petrohemija’s polyethylene export revenues totalled $90.6 million against $64.3 million in the same period in 2021.

Czech petrochemical trade, Jan-Aug 2022

Czech Petrochemical Imports (unit-kilo tons)
Product	Jan-Aug 22	Jan-Aug 21
Ethylene	16.011	3.180
Propylene	26.686	29.463
Butadiene	48.328	52.844
Benzene	52.999	54.387
Toluene	4.841	4.719
Styrene	13.374	51.006

Czech exports of ethylbenzene declined in the first eight months in 2022 to 68,536 tons from 83,929 tons in the same period in 2021.  All the ethylbenzene was shipped from Kralupy to Oswiecim in Poland, all within the structures of the Synthos Group. 

Ethylene exports from the Czech Republic amounted to 9,515 tons in the first eight months against 17,635 tons in the same period 2021 whilst ethylene imports rose from 3,180 tons to 16,011 tons.  Germany supplied 15,898 tons to the Czech Republic in January to August 2022, supplied from the Boehlen plant to Litvinov. 

Propylene imports into the Czech Republic dropped from 29,463 tons in January to August 2021 to 26,686 tons in the same period this year.  Costs of propylene imports rose to €41.706 million against €27.435, with average prices rising from €934 per ton last year to €1562 this year. 

Spolana Caprolactam Exports Jan-Aug 2022
Country	Volume	€ million
Belgium	4.735	12.196
Germany	5.630	14.655
Italy	9.961	25.679
Slovenia	3.043	6.873
Switzerland	1.754	4.592
Others	0.069	0.183
Total	25.334	64.616

Germany has been the leading supplier of propylene to the Czech market in 2022, supplying 14,614 tons in the first eight months for €22.534 million.  Other suppliers included Romania which shipped 5,251 tons from the Petromidia refinery for €7.528 million, followed by Poland shipping 3,925 tons for €5.452 million. 

Czech imports of butadiene dropped from 52,844 tons in the first eight months in 2021 to 48,328 tons in the same period in 2022.  Germany shipped 41,377 tons in January to August 2021, dropping to 41,611 tons in the same period in 2022.

Spolana caprolactam exports Jan-Aug 2022

Spolana exported 25,334 tons of caprolactam in the first eight months this year against 29,954 tons in the same period in 2021.  Revenues from caprolactam exports increased from €52.716 million to €64.616 million, after average prices rose from €1760 per ton to €2551 per ton.  Italy was the largest destination for Spolana’s exports this year, with volumes to Germany reduced from 11,167 tons in January to August 2021 to 5,630 tons.

Hungarian imports of styrene Jan-Jul 2022
Country	Ktons	Value (€ million)
Germany	2.260	4.004
Italy	52.398	92.088
Netherlands	2.062	3.556
Others	0.036	0.060
Total	56.755	99.708

Hungarian organic chemical trade 2022

Hungarian imports of acrylonitrile Jan-Jul 2022
Country	Ktons	Value (€ million)
Germany	1.661	4.165
France	3.869	9.585
Netherlands	15.883	38.481
Russia	1.985	3.668
Total	23.399	55.899

Hungary exports a range of organic chemicals including propylene, isocyanates, maleic anhydride, etc, whilst imports include styrene, methanol, acrylonitrile, etc.  In the first seven months in 2022 imports of styrene totalled 56,755 tons against 75,555 tons in the same period in 2021.  Italy supplied 52,398 tons this year which is directed by Versalis to its polystyrene plant in Hungary, down from 71,937 tons in January to July 2021.     

Acrylonitrile imports into Hungary increased in the first seven months to 23,399 tons against 19,083 tons in the same period last year, whilst costs increased from €31.738 million to €55.899 million.  The largest supplier of acrylonitrile to Hungary this year has been the Netherlands, accounting for 15,883 tons for €38.481 million.     

Hungarian maleic anhydride exports

MOL's Maleic Anhydride Exports (unit-kilo tons)
Country	Jan-Jul 22	Jan-Jul 21
Austria	1.818	1.791
Czech Republic	0.252	0.280
France	0.712	0.573
Germany	0.937	1.217
Italy	1.973	1.813
Poland	3.722	3.657
Slovenia	1.359	1.176
Others	1.862	1.874
Total	12.636	12.381

Maleic export prices from Hungary averaged €2.281 per ton in the first seven months in 2022 against €1.565 for the same period last year.  Revenues from sales of 12,636 tons in January to July 2022 totalled €28.829 million versus 12,381 tons in the same period last year for €19.375 million.  Poland was the largest consumer of Hungarian maleic anhydride which is produced at Szazhalombatta.  

Grupa Azoty 2-EH & plasticizer prices

Grupa Azoty reported that the prices of 2-ethylhexanol (2-EH) rose by 18% in the first eight months this year chiefly on the back of much higher prices of production inputs such as propylene and energy. The prices of 2-EH rose by 8% in the second quarter compared with the first quarter of 2022 but still not enough to cover costs. DOTP plasticizer prices rose 9% in the first eight months this year in spite of lower demand. 

Polish imports of chemicals & polymers from Russia (unit-tons)
Product	Jan-Dec 21	Jan-Jul 22	Aug 22
Methanol	467.624	551.932	64.468
PP-homo	155.805	52.623	0.049
Propylene	48.512	22.433	0.000
Paraxylene	40.085	6.905	0.000
Isoprene rubber	37.821	21.446	1.455
HDPE	32.442	13.670	0.348
Butadiene rubber	18.254	16.022	0.939
Halogenated butyl rubber	14.474	10.226	0.198
LDPE	13.746	6.013	0.000
Phthalic anhydride	12.280	4.576	0.160
Phenol	9.746	14.105	0.000

Continuing high costs of freight and overall logistics problems gave rise to both import and export constraints. The European market continued to experience logistics problems caused by the pandemic.

Orlen Unipetrol launches new DCPD plant

Orlen Unipetrol has launched its new installation for the production of dicyclopentadiene (DCPD), with a capacity of up to 26,000 tpa.  This will make Orlen Unipetrol one of the four largest DCPD producers in Europe.  DCPD has a wide application in automotive, construction, electrical engineering, medicine and pharmacy. 

Polish organic chemical imports Jan-Aug 2022 In the first eight months in 2022 Polish trade in organic chemicals comprised €1.593 billion for exports and €3.530 billion in imports. The largest increase in imports of organic chemicals this year has been for methanol where volumes rose to 620,237 tons in the first eight months in 2022 from 458,095 tons in the same period in 2021.  This significant rise was attributed directly to the war in Ukraine which has meant that Poland has been used as a transit route for Russian origin methanol for delivery to South East Europe.

In particular Orlen Unipetrol will produce DCPDs with a distillation purity of 80 to 94% which can be used for the further production of polymeric materials, resins or other chemicals used in the production of wind turbine propellers, automotive and marine components.

Polish Imports of Aromatics (unit-kilo tons)
Product	Jan-Aug 22	Jan-Aug 21
Ethylbenzene	74.323	89.818
Paraxylene	34.150	58.012
Phenol	75.738	25.700
Phthalic Anhydride	22.688	25.742
PTA	1.298	37.975
Styrene	69.364	73.592
TDI	50.251	54.384
Toluene	16.119	14.516

DCPD is to be produced in technology developed by Orlen Unipetrol in cooperation with scientists from the University of Chemistry and Technology in Prague.  The cost of building a new production unit at the Plant at Litvinov amounted to Kc 831 million (€33 million).  DPCD demand is expected to increase further by 26% in Europe, by 40% in the US markets, and in Asian markets by up to 60%.

Polish aromatic chemical trade Jan-Aug 2022

In the aromatics sector phenol imports into Poland recorded a large increase in the first eight months to 75,738 tons, of which 14,106 tons came from Russia.  Supplies from Russia have however now been sanctioned by the EU and in August no deliveries were made to Poland.   

In other product areas, styrene imports amounted to 69,364 tons in the period January to August 2022 versus 73,592 tons in 2021 whilst ethylbenzene imports dropped from 64,851 tons to 52,602 tons.  Paraxylene imports into Poland amounted to 34,150 tons in January to August 2022 against 58,012 tons in 2021.  Imports were divided between France and Russia for supply. 

Polish PTA sales  Jan-Aug 2022

Polish PTA Exports (unit-kilo tons)
Country	Jan-Aug 22	Jan-Aug 21
Belarus	5.762	11.901
Germany	233.875	273.316
Lithuania	28.658	22.909
Switzerland	6.250	3.291
Turkey	5.060	0.000
Others	15.429	5.775
Total	295.034	317.191

PTA exports from Poland amounted to 295,034 tons in the first eight months in 2022 against 317,1917 tons in the same period in 2021.  PTA imports into Poland dropped in the first eight months to 1,298 tons versus 37,975 tons in the same period last year. 

Average prices for Polish PTA exports amounted to €990 per ton in the first wight months against €763 in the same period in 2021.   Germany remained the main customer for Polish PTA, taking 233,875 tons in January to August 2022 against 273,316 tons in the same period in 2021.  Lithuania was the second largest destination for PTA export shipments, taking 28,658 tons versus 22,909 tons.

Grupa Azoty restores production after fall in gas prices

Grupa Azoty restarted fertiliser production and other facilities on 12 October due to the fall in gas prices to more manageable levels.  This involved caprolactam and polyamide 6.  After the restoration of production at Tarnow and Pulawy, Grupa Azoty reduced the prices of nitrogen fertilisers to significantly below zl 4,000 per ton.  The communication states that this is in line with market expectations and at the same time allows for the continuation of profitable agricultural production.

In August, Grupa Azoty announced the temporary shutdown of installations for the production of nitrogen fertilisers, caprolactam and polyamide 6.  The plant at Pulawy limited the production of ammonia to about 10%. production capacity and stopped part of the production in the plastics and agro segments.

Grupa Azoty Jan-Jun 2022

Raw material costs, particularly gas, may have started to peak for Grupa Azoty after a difficult first half of 2022.  Grupa Azoty’s second-quarter 2022 results were strongly impacted by the turmoil caused by Russia’s invasion of Ukraine, which adversely affected the availability and prices of feedstocks.  This pushed up the prices of final products across all business segments. The average market price of natural gas in the second quarter of 2022 increased by around 290%.

Grupa Azoty capital expenditures In the first half of 2022 the Grupa Azoty Capital Group’s largest investment concentrate on the construction of Polimery Police with costs of zl 918.79 million (€190.850 million).    In addition to Polimery Police, other investments are taking place at Pulawy where besides construction of a coal power unit around €100 million was spent on the modernisation of nitric acid and fertiliser installations.  Grupa Azoty Kedzierzyn is focused on a combination of energy and products, particularly 2-EH.

Prices in the chemical sector increased in the second quarter driven largely by the increase in the costs of energy and raw materials which impacted on demand.  In the middle of the third quarter Grupa Azoty stopped the production of nitrogen fertilisers, caprolactam and polyamide 6, partly because of higher costs which Azoty finds it difficult to pass onto end-users.  

Grupa Azoty’s plastics division recorded price increases of key feedstocks in the second quarter, particularly benzene and phenol which rose 18% and 24% respectively.  Polyamide sales volumes were slightly down in the second quarter as demand from the automotive industry weakened.

Consumption of raw materials for Grupa Azoty (unit-tons)
Product	2021	2020
Liquid ammonia	297,747	363,845
Benzene	62,525	53,554
Phenol	87,656	84,179
Propylene	129,500	122,868
Liquid sulphur	365,451	363,209
Sulphuric acid	419,158	424,727
Methanol	8,813	9,969

Demand for oxo alcohols declined in the third quarter after an increase in sales was recorded in the second quarter.  The EBITDA margin for the oxo alcohol department located at Kedzierzyn-Kozle achieved 22% in the three months April to June. 

The plastics segment also experienced an increase in the prices of the main production raw materials which drove down the EBITDA in the second quarter to 8.6%.

Overall, for the second quarter Azoty’s results were bolstered by product prices prevailing in the European markets but were adversely affected by record prices of feedstocks used in production processes and lower sales volumes of most fertilisers, chemical and plastic product categories.  In the first half of 2022, the Grupa Azoty Group reported consolidated revenue of zl 13,237 million, EBITDA of zl 2,575 million, EBITDA margin of 19.5% and net profit of zl 1,682 million.

In the second quarter the fast-growing prices of feedstocks used in the production of chemicals strongly pushed up product prices, leading to weaker demand. The melamine market was affected by the impending expiry of anti-dumping duties on imports of melamine from China to the European Union. Higher sales volumes were reported mainly for technical-grade urea and oxo alcohols.

Central European methanol trade Jan-Aug 2022

Polish Methanol Imports (unit-kilo tons)
Country	Jan-Aug 22	Jan-Aug 21
Azerbaijan	1.138	0.000
Belarus	0.044	1.295
Finland	33.699	42.024
Lithuania	0.856	3.756
Germany	76.140	52.209
Netherlands	0.650	25.692
Norway	16.787	6.299
Russia	479.760	305.286
Others	2.857	9.801
Total	620.239	458.095

Exports of methanol from Poland totalled 290,915 tons in the first eight months in 2022 for €126.138 million, based on an average price of €434 per ton.  This compares against 192,469 tons in the same period in 2021 for $71.672 million at an average price of €372 per ton.

Imports of methanol into Poland totalled 620,237 tons in the first eight months in 2022 versus 458,095 tons in the same period in 2021.   Costs totalled €178.813 million in January to August.  The average price for Polish imports comprised €374 per ton in the first eight months this year, and for Russia in particular €372 per ton.  

Polish traders are now trying to diversify methanol sources prior to 8 January 2023 when EU sanctions preventing the purchase of methanol from Russia take effect.  Russia increased exports to Poland in the first eight months in 2022 to 479,960 tons whilst Norway increased shipments from 6,299 tons to 16,787 tons.  Germany increased exports to Poland in the first eight months in 2022 to 76,140 tons from 52,909 tons in the same period last year.

Czech Methanol Imports (unit-kilo tons)
Country	Jan-Aug 22	Jan-Aug 21
Germany	3.868	8.082
Russia	21.299	37.633
Poland	22.692	15.001
Others	1.586	1.108
Total	49.445	61.825

Czech imports of methanol amounted to 49,445 tons in the first eight months in 2022 against 61,825 tons in the same period in 2021.  Russia accounted for 22,692 tons in January-August 2022 against 15,001 tons in the same period last year, followed by Poland which increased from 15,001 tons to 22,692 tons.  Prices per ton for methanol imports into the Czech Republic increased from €349 in the first eight months in 2021 to €486 this year.  Prices rose sharply in August reaching €642 per ton, from €577 per ton in July and €472 in June.

Hungarian imports of methanol totalled 43,665 tons in the first seven months for a total cost of €22.069 million.  Prices averaged €505 per ton in the first seven months against €319per ton in the same period in 2021, when volumes were much higher at 75,551 tons for costs of €24.444 million.  Imports from Russia fell from 32,760 tons in the first seven months in 2021 to 10,762 tons in the same period this year.  The drop in exports from Russia was due to war in Ukraine and the difficulties in shipping product by rail.  

Central European isocyanates, Jan-Aug 2022

MDI imports into the Czech Republic totalled 23,767 tons in the first eight months in 2022 against 30,593 tons in the same period in 2021.  Total costs for MDI imports dropped from €70.545 million in January to August 2021 to €63.693 million in the same period in 2022, with average prices rising from €2306 per ton to €2680.

Czech MDI Imports (unit-kilo tons)
Country	Jan-Jun 22	Jan-Jun 21
China	1.604	1.451
Belgium	6.580	6.656
Germany	5.315	9.117
Italy	0.022	0.045
Hungary	3.303	4.097
Netherlands	1.666	1.229
Others	0.687	1.071
Total	19.177	23.666

Polish MDI Imports (€ million)
Country	Jan-Aug 22	Jan-Aug 21
Germany	74.426	84.354
Netherlands	37.973	32.224
Hungary	68.790	80.521
Belgium	53.567	45.621
Saudi Arabia	3.586	6.034
Others	19.040	19.555
Total	257.381	268.308
Ktons	96.765	130.370
Av Price	2.660	2.058

MDI imports into Poland totalled 96,765 tons in the first eight months in 2022 for a total value of €257.381 million.  Average prices amounted to €2660 per ton, with August numbers amounting to €2730.  TDI imports into Poland amounted to 51,040 tons in the first eight months in 2022 at an average price of €2755 per ton.  Polish polyurethane producers reported reasonable results for the first two quarters this year but demand has slowed over the third quarter and this trend is expected to continue into 2023.  Regarding safety issues for isocyanates REACH has introduced stipulations for mandatory training requirements for industrial and professional users of isocyanatos in the EU from 24 August 2023.

Chimcomplex-green hydrogen

Polish TDI Imports (€ million)
Country	Jan-Aug 22	Jan-Aug 21
Belgium	3.613	1.947
Germany	40.169	40.447
Hungary	66.022	65.436
Netherlands	10.961	13.507
Saudi Arabia	4.750	4.916
Others	15.124	10.932
Total	140.638	137.184
Ktons	51.040	52.734
Av Price	2755	2601

Chimcomplex together with OMV Petrom has received the approval to develop their capacity for the production of green hydrogen.  The commissioning of a capacity of at least 100 MW in electrolysis installations, with an estimated generated quantity of at least 10,000 tpa of renewable hydrogen, must be carried out by the fourth quarter of 2025.  Chimcomplex is one of the eleven companies accepted by the Ministry of Energy.

Duslo to invest in green energy

Duslo at Sala in Slovakia stopped production two months ago due to high gas prices and since then has undertaken a major shutdown and is waiting for the government's help to restart.  At the same time, due to the energy crisis, the company wants 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.  Duslo also wants to build its own storage facilities, in which they would also be able to store the overproduction of windier periods in batteries, which would be immersed in the windless periods. 

HIP Azotara-blue hydrogen

For the construction of a plant for obtaining blue hydrogen HIP Azotara has made agreements with Siemens Energy for the procurement of the Silyzer 300 plant.   Plans for expansion and construction of new plants in HIP Azotara are based on the maximum increase in ammonia consumption on a daily basis and thus the reduction in its storage, and on the other hand readiness to stop the use of granular fertilizers in the EU after 2025.

Synthos Green Energy

Canada’s Laurentis Energy Partners and Synthos Green Energy, have signed a Master Services Agreement (MSA) to support the development and deployment of small modular reactors (SMRs) in Poland.  The agreement enables international collaboration between Laurentis and Synthos Green Energy, beginning with early project planning.

Synthos Green Energy, together with its partner PKN Orlen S.A., the largest multi-energy company in Central Europe, has established the joint venture (JV) company ORLEN Synthos Green Energy or OSGE. Together, the JV plans to deploy a fleet of GE Hitachi BWRX-300 SMRs in Poland, targeting the first to be in operation by the end of this decade.

Chimcomplex-redundancies

Chimcomplex which operates Oltchim and Borzesti industrial platforms, is starting a collective redundancy programme targeting a number of 396 (of 1,936) employees in an attempt to cope with the explosion of energy prices.  Compared to the group's employment (1,936 on June 30), this means roughly a 20% workforce reduction.   The group is one of the largest natural gas consumers in the country.

Chimcomplex announced in August that it temporarily closes the production activity within the Borzesti industrial platform for a period of 14 days, as a result of the increase in electricity and natural gas prices.

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, increases the company’s production capacity to over 187,000 tpa.  The new plant is capable of functioning of around 30% higher energy efficiency, as state-of-the-art machinery and equipment have been designed based on the best available specific technologies.  The plant has 12 energy-efficient synthesis reactors, in which green polyols will be produced, those that use CO2 as their raw material, thus reducing Romania's carbon dioxide footprint.

Chimcomplex, the only producer of polyurethane polyols in Romania, has oriented its development strategy towards technological efficiency, energy efficiency and green and sustainable chemistry.  The main uses of the polyols produced here are flexible and semi-flexible foams, rigid foams, sealants, inks, elastomers, and adhesives. Most of the production of polyols subsequently becomes car components, dashboards and other castings in moulds, soles, eco-leather or furniture, mattresses, insulation, etc.

 

Russian chemical production Jan-Aug 2022

Russian Chemical Production (unit-kilo tons)
Product	Jan-Aug 22	Jan-Aug 21
Caustic Soda	856.0	853.1
Soda Ash	2,318.0	2,233.0
Ethylene	2,928.2	2,987.7
Propylene	1,885.9	2,047.6
Benzene	795.0	865.6
Styrene	479.5	484.6
Phenol	162.4	171.4
Ammonia	11,400.0	11,828.0
Nitrogen Fertilisers	7,831.0	7,528.0
Phosphate Fertilisers	2,838.0	2,816.0
Potash Fertilisers	5,203.0	7,186.0
Plastics in Bulk	6,948.0	7,307.0
Polyethylene	2,302.0	2,347.0
Polystyrene	383.2	364.3
PVC	687.0	714.0
Polyamide	115.8	132.0
Synthetic Rubber	1,023.0	1,127.0
Synthetic Fibres	126.9	134.2

Chemical and polymer production in Russia has been sustained at reasonable levels in the first eight months this year although most products have recorded slightly lower volumes than posted in 2021. 

Russian ethylene production decreased slightly in the first eight months from 2.988 million tons in 2021 to 2.928 million tons whilst propylene dropped from 2.048 million tons to 1.886 million tons.  Demand for olefins for the production of derivatives came under pressure in the third quarter, as the impact of sanctions feed through to the market. 

Polyethylene production followed ethylene dropping from 2.347 million tons in January to August 2021 against 2.302 million tons in the same period in 2022.  Synthetic rubber production fell from 1.127 million tons versus 1.023 million tons as sanctions have impacted on export sales to Europe, particularly butadiene rubber and halogenated butyl rubber.   

Production of chemicals and polymers could become more difficult in 2023 as producers are required to replace key components for technical processes that are only available in countries that have imposed sanctions.  This year producers have been dependent on usage of stockpiles of additives, catalysts, etc, but some of these supplies are running out and may prove hard to replace.   Furthermore, aggregate demand for chemical industry products is slowing down in the domestic market making exports more important for producers who are already encountering the effects of sanctions. 

Methanol is one of the products that escaped the fifth round of EU sanctions and has maintained stable export volumes.  China has become a new market for Russian methanol exports this year, in order to replace some European customers, but such trade is conducted only at a heavily discounted price.   Sanctioned products such as rubber have forced producers to seek out new customers in Asia, incurring higher logistics costs, longer lead times and lower profits.

EU sanctions on Russian chemicals & eighth package  

Expanded list EU sanctions for Russian petrochemicals
Butadiene	Methanol
Toluene	Phenol
Orthoxylene	Acetone
Paraxylene	PTA
Styrene	Caprolactam

Slightly under half of the chemical products sanctioned by the EU’s fifth package back in April are not produced in Russia.  From the list of 79 products, only 38 are produced at Russian plants, and thus consumers have been forced to seek out alternative sources. 

An eighth package of EU sanctions against Russia was introduced on 5 October, including a new range of speciality chemicals but also widening the category of mainstream chemicals to include methanol which had previously been excluded.  Methanol is the most important organic chemical exported from Russia by volume and value.  Already products from the polymer and synthetic rubber sectors had been sanctioned by the EU in the fifth package, and the eight package has only expanded this list. Benzene is not included, but main derivatives such as caprolactam, phenol  and styrene are included.   Propylene monomer remains one of the few commodity chemicals in the organic sector which has not been placed under sanctions.  Russia exports on average around 100,000 tpa of propylene.

Russian ethylene production, Jan-Aug 2022

Russian Ethylene Production (unit-kilo tons)
Producer	Jan-Aug 22	Jan-Aug 21
Angarsk Polymer Plant	131.0	130.2
Kazanorgsintez	445.9	403.3
Stavrolen	212.3	232.7
Nizhnekamskneftekhim	435.5	432.2
Novokuibyshevsk Petrochemical	29.2	31.5
Gazprom n Salavat	220.4	198.0
SIBUR-Kstovo	269.3	272.6
SIBUR-Khimprom	36.2	36.7
Tomskneftekhim	176.3	193.5
Ufaorgsintez	68.2	56.8
ZapSibNeftekhim	903.9	1000.2
Total	2928.2	2987.7

Russian ethylene production totalled 2.928 million tons in the first eight months in 2022 against 2.988 million tons in the same period in 2021.  Supply appears to be exceeding demand, with producers under pressure to reduce prices for merchant ethylene in the Volga-Urals region.  ZapSibNeftekhim at Tobolsk produced 903,900 tons in January to August 2022 down from 1.000 million tons in 2021. Nizhnekamskneftekhim produced 435,500 tons of ethylene against 432,200 tons in 2021 whilst Kazanorgsintez increased from 403,300 tons to 445,900 tons. 

Other important ethylene producers included SIBUR-Kstovo which produced 269,300 tons versus 272,600 tons.  In Bashkortostan Gazprom neftekhim Salavat produced 198,000 tons against 220,400 tons, whilst Ufaorgsintez increased production from 56,800 tons to 68,200 tons.  Stavrolen at Budyennovsk reduced ethylene production to 212,300 tons against 232,700 tons in the first eight months in 2021.

Tomskneftekhim completed scheduled stop repairs in September and is switching to an increased overhaul interval from a two-year to a four-year cycle. Investments in the modernisation of equipment amounted to about 1 billion roubles.  During the stoppage, Tomskneftekhim continued to implement digital tools, such as an ultrasonic detector for detecting leakage of gas media and video surveillance systems.

Russian propylene production, sales and exports, Jan-Aug 2022

Russian Propylene Production (unit-kilo tons)
Producer	Jan-Aug 22	Jan-Aug 21
Angarsk Polymer Plant	72.4	72.4
Kazanorgsintez	36.2	33.4
Lukoil-NNOS	207.0	159.7
Stavrolen	105.1	92.6
Nizhnekamskneftekhim	215.8	214.4
Novokuibyshevsk	18.1	46.1
Omsk Kaucuk	36.8	19.9
Polyom	127.6	131.8
Gazprom Neftekhim Salavat	96.6	73.7
SIBUR Kstovo	116.4	117.7
SIBUR-Khimprom	54.5	39.3
Tomskneftekhim	91.6	103.3
SIBUR Tobolsk	0.0	3.0
Ufaorgsintez	112.5	118.2
ZapSibNeftekhim	590.2	822.3
Total	1880.7	2047.6

Russian Propylene Exports (unit-kilo tons)
Producer	Jan-Aug 22	Jan-Aug 21
Lukoil-NNOS	54.5	62.9
SIBUR-Kstovo	10.6	14.4
Angarsk Polymer Plant	5.1	4.2
Stavrolen	18.7	22.1
Total	88.8	103.6

Russian propylene production amounted to 1.881 million tons in the first eight months in 2022 against 2.048 million tons in the same period in 2021.  The combined ZapSibNeftekhim and SIBUR Tobolsk plants reduced production from 825,300 tons in the first eight months in 2021 to 590,200 tons in 2022 due to extended maintenance. In Tatarstan Nizhnekamskneftekhim produced 215,800 tons of propylene in the first eight months in 2022 whilst Kazanorgsintez increased production from 33,400 tons to 36,200 tons. In Bashkortostan Gazprom neftekhim Salavat produced 96,600 tons of propylene versus 73,700 tons whilst Ufaorgsintez reduced production from 118,200 tons to 112,500 tons.  In the Nizhny Novgorod region SIBUR-Kstovo reduced production of propylene from 117,700 tons to 116,400 tons in 2022.  Lukoil-NNOS at Kstovo increased production from 159,700 tons to 207,000 tons. 

Russian propylene sales Jan-Aug 2022

Propylene exports from Russia amounted to 88,800 tons in the first eight months in 2022 against 103,600 tons in the same period in 2021.  Lukoil-NNOS reduced export shipments from 62,900 tons to 54,500 tons whilst SIBUR-Kstovo shipped 10,600 tons against 14,400 tons in January-August 2021. 

Russian Propylene Domestic Purchases (unit-kilo tons)
Consumer	Jan-Aug 22	Jan-Aug 21
Saratovorgsintez	117.0	81.9
Volzhskiy Orgsintez	7.7	7.6
Akrilat	17.8	1.1
SIBUR-Khimprom	24.5	34.4
Omsk-Kaucuk	5.0	9.9
Tomskneftekhim	1.7	3.3
ZapSibNeftekhim	78.9	37.3
Ufaorgsintez	7.5	7.4
Khimprom Kemerovo	4.9	4.3
Plant of Synthetic Alcohol	3.4	8.2
Others	4.4	15.8
Total	272.8	212.3

In the first eight months in 2022 ZapSibNeftekhim purchased 78,904 tons of propylene on the merchant market against 37,300 tons in the same period in 2021.  Russia’s largest merchant consumer Saratovorgsintez increased purchases of merchant propylene from 81,900 tons last year when the acrylonitrile plant underwent an extended shutdown to 117,000 tons, and SIBUR-Khimprom at Perm reduced purchases from 34,400 tons to 24,500 tons.  Other merchant consumers included Akrilat at Dzerzhinsk which is part of SIBUR-Neftekhim. 

Russian Propylene Domestic Sales (unit-kilo tons)
Company	Jan-Aug 22	Jan-Aug 21
Angarsk Polymer Plant	17.0	24.2
SIBUR-Kstovo	91.9	83.0
Lukoil-NNOS	122.7	88.2
Stavrolen	17.7	3.6
Others	23.1	13.3
Total	272.8	212.3

Russian sales of propylene on the domestic merchant market amounted 272,800 tons in the first eight months in 2022 against 212,300 tons in the same period in 2021.  The largest propylene supplier to the domestic market was Lukoil-NNOS, shipping 93,000 tons against 73,900 tons in January to August 2021.

Russian styrene production, sales and exports, Jan-Aug 2022

Russian Styrene Production (unit-kilo tons)
Producer	Jan-Jun 22	Jan-Jun 21
Nizhnekamskneftekhim	154.6	155.4
Angarsk Polymer Plant	19.5	22.5
SIBUR-Khimprom	75.2	72.8
Gazprom n Salavat	97.0	104.2
Plastik, Uzlovaya	24.4	35.3
Total	370.8	390.4

Russian Styrene Exports (unit-kilo tons)
Producer	Jan-Aug 22	Jan-Aug 21
Angarsk Polymer Plant	3.7	1.8
Plastik Uzlovaya	0.0	0.5
Gazprom neftekhim Salavat	47.1	55.1
Nizhnekamskneftekhim	2.0	1.0
SIBUR-Khimprom	6.9	0.6
Total	59.8	59.0

Russian styrene production declined slightly from 390,400 tons in the first eight months in 2021 to 370,800 tons in the same period this year. Nizhnekamskneftekhim reduced production from 155,400 tons to 154,600 tons, where most of the styrene is used internally for polystyrene and synthetic rubber output.  Gazprom neftekhim Salavat reduced styrene production from 104,200 tons to 97,000 whilst SIBUR-Khimprom increased 72,800 tons to 75,200 tons.

Styrene was included on the list of EU sanctions and thus exports to Europe will drop in the second half of 2022.  For the first eight months in 2022 exports amounted to 59,800 tons against 59,000 tons in the same period last year. 

Russian Styrene Domestic Sales
Producer	Jan-Aug 22	Jan-Aug 21
Angarsk Polymer Plant	14.5	16.6
Plastik	0.4	1.5
Gazprom n Salavat	33.2	38.9
SIBUR-Khimprom	21.4	24.9
Nizhnekamskneftekhim	0.5	1.7
Total	70.1	83.6

Domestic merchant sales of styrene reduced from 83,600 tons in the first eight months in 2021 to 70,100 tons in the same period in 2022.  Angarsk Polymer Plant reduced sales from 16,600 tons to 15,100 tons whilst Gazprom neftekhim Salavat reduced sales from 38,900 tons to 33,200 tons. 

Polystyrene producer and styrene merchant buyer Penoplex shut down its Kirishi plant in mid-August for a two-week shutdown for scheduled repairs.  The Angarsk Polymer Plant resumed styrene production by 10 August after a scheduled overhaul.  In early August, the Angarsk Polymer Plant announced a tender for the sale of styrene monomer in the domestic and foreign markets comprising a total of 900 tons. 

Russian polyethylene production Jan-Aug 2022

Russian polyethylene production totalled 2.302 million tons in the first eight months in 2022 against 2.347 million tons in the same period in 2021.  Even though export activity to the EU countries was strong until Jul this year production was lower due to outages, particularly ZapSibNeftekhim at Tobolsk.    

Kazanorgsintez shutdown of HDPE and LDPE plants

Kazanorgsintez started maintenance at its ethylene complex and ethylene-consuming industries in late September, including the production of HDPE and LDPE.  Production resumed in the second half of October.  The repairs consisted of routine maintenance, combined with the preparation to increase the capacity of ethylene and HDPE to 660,000 tpa.  Kazanorgsintez is currently able to produce 640,000 tpa of ethylene, 510,000 tpa of HDPE and 230,000 tpa of LDPE.

Having been merged into the SIBUR Group in 2021 Kazanorgsintez is now benefiting from improved feedstock arrangements allowing the polyethylene facilities to run at full capacity.  Kazanorgsintez has been fully included in the unified system of sales, service and logistics of SIBUR.   Ethane supply is the main problem for Kazanorgsintez, which it sources from Orenburg and Minnibayevo gas processing plants owned by Gazprom and Tatneft respectively.  It is not clear precisely how SIBUR could have improved the flow of ethane where the options are limited.  Propane can act as an alternative feedstock but not all furnaces at Kazanorgsintez are configured to use other raw materials.  Nizhnekamskneftekhim has also benefited from inclusion into SIBUR’s structure, stabilising the naphtha feedstock position with the local Taneko refinery. This is in addition to support and organisation in the completion of the new 600,000 tpa ethylene cracker after a change in contractor became necessary.  

Russian LLDPE trade-Jan-Aug 2022

Russian Imports of LLDPE from South Korea
Period	Ktons	$ million	Av price $/ton
Jan-Aug 22	39,685	65.462	1650
Jan-Aug 21	30,130	41.138	1361

Russian imports of LLDPE from South Korea totalled 39,685 tons in the first eight months in 2022 against 30,130 tons in the same period in 2021, with average prices rising from $1361 per ton to $1650.  Imports have risen from South Korea this year due to lower shipments from Europe.  South Korea was the largest supplier of LLDPE to Russia in 2021, providing 39.4% of the total 61,000 tons of imported product.  Other suppliers included Finland with 24% and the US with 15%, but volumes from both of those sources have declined this year.

Russian HDPE trade-Jan-Aug 2022

Chinese HDPE Imports ($ million)
Country	Jan-Aug 22	Jan-Aug 21
Saudi Arabia	960.9	976.4
Iran	791.8	894.1
UAE	949.6	835.4
South Korea	738.7	604.9
Russia	155.9	238.3
US	138.1	184.4
Qatar	113.9	146.2
Thailand	143.1	162.6
Kuwait	135.5	144.1
Others	556.6	749.6
Total	4684.3	4936.1

Exports of HDPE from Russia to China fell in value terms from $238.3 million in the first eight months in 2021 to $155.9 million in the same period in 2022, with Russia’s share dropping from 4.8% of total Chinese imports to 3.3%.  Although volumes into China were down overall Russian exporters lost some market share to other producers, largely from the Middle East.

In the first half of the year Russian producers significantly increased the export of polyethylene and polypropylene to Europe, but this direction of trade has seen falls since the start of the third quarter.  In the meantime, China’s HDPE and LLDPE markets head for their lowest levels of growth in 2022 for at least two decades.  Thus, any gains for Russian polyethylene producers from extra sales to the EU and Turkey were offset by the drop in purchases from China. 

EU sanctions for more plastic products to take effect on 8 January 2023 The European Union, as part of the eighth package of sanctions against Russia, banned from next year the import of primary polymers and products, including plates, sheets, films, tapes, pipes, hoses, etc.  In 2021 Russia supplied a total of $948 million worth of these materials to Europe (an average of $80 million per month).  The largest category of exports consisted of polymers $327 million, and in second place plates, sheets, films and tapes of plastics ($109 million).  In accordance with the new European sanctions, the export of such products can continue until 8 January 2023 under contracts concluded by 7 October 2022.

Polyethylene manufacturers in Russia encounter raw material shortages

Russian manufacturers of polyethylene pipes claim to be faced with a shortage of raw materials, affecting up to 100 companies of various sizes in the pipe sector.  Some of the plants which produce pipes for gas pipelines, water pipelines and sewerage, face serious difficulties in securing feedstocks.   Despite all the assurances of producers of raw materials, particularly SIBUR, processors are struggling to secure polymers.  In October, raw materials were distributed to around 45 of the 100 pipe manufacturers.  The remainder will either be forced to suspend production or produce a pipe from a material that does not meet the requirements.

ZapSibNeftekhim increases production of polyethylene pipe grade ZapSibNeftekhim reported an increase in the third quarter this year by 40% in the production of raw materials for the production of polyethylene pipes.  By the end of the year, the volume of production of all pipe grades of SIBUR's polymers will grow by 52%, as reported by the company.  It is expected that from 2023, after passing the brand certification, ZapSibNeftekhim will be able to produce up to 40,000 tpa of pipe grade polyethylene.

Polyethylene pipes are used in Russia to replace steel and cast-iron pipes. They are more durable and easier to use, and in terms of strength they are not inferior to comparative products made of other materials.  SIBUR is the only producer in Russia, and thus without imported suppliers means it holds an essential role. 

For consumers, there are specific signed gasification contracts with Gazprom and other groups that need to be completed for the supply of polyethylene pipes which are also used in different applications such as irrigation systems, water treatment systems, and housing and communal services.  SIBUR has not officially acknowledged that it cannot supply the raw material grades necessary for the market, and has announced that they have actually increased the volume of pipe grades.  One of the main short term problems of importing the additives for pipe grade polyethylene production is that it requires a long procedure for certification.  Laboratory tests can take no less than six months, and even then there is no guarantee that it will pass the government standard. 

Polyethyene and gas processing projects at Ust Luga

Capacities for Gas Processing and Gas Chemicals at Ust Luga
Product	Capacity
Gas processing	45 bcm
LNG	13 million tpa
Ethane	3.8 million tpa
LPG	2.4 million tpa
Pentane-hexane fraction	0.2 million tpa
Polyethylene (various grades)	3 million tpa

A decision on financing a complex for processing ethane-containing gas and producing LNG at Ust-Luga in the Leningrad Region is awaiting clarification of the technology issue as a result of sanctions.  Even though power sources and other units are being installed at the Ust Luga site for a gas processing and gas chemical complex there are doubts whether the entire project can be completed. 

Licensed technology from Linde has been sanctioned which is difficult to replace, and thus whilst officially these projects are proceeding to schedule at the very least they are likely to incur long delays from the original 2024 target.   

The project for the construction of a gas processing and liquefaction complex is being undertaken by Gazprom and Rusgazvydobuvannya (the operator is RusKhimAlliance, owned on a parity basis by Gazprom and Rusgazvydobuvannya).  The project provides for the creation of an integrated complex for the processing and liquefaction of natural gas in the area of the seaport of Ust-Luga (Leningrad Region).  The raw material for the enterprise will be ethane-containing natural gas from Gazprom's fields in the Nadym-Pur-Taz region, delivered through dedicated gas pipelines.

Russian polypropylene trade Jan-Aug 2022

South Korean Exports of Propylene Copolymers to Russia
	Jan-Aug 22	Jan-Aug 21
Ktons	14,204.8	23,033.9
$ million	25,865.0	37,584.0

Expanded list of polymers placed under EU sanctions for Russia
3901	polymers of ethylene
3902 30	propylene copolymers
3902 90	polymers of propylene
3903 90	polymers of styrene and ABS
3904 10	PVC in primary forms
3904 50	vinylidene chloride polymers
3905 12	polyvinyl acetate
3905 19	polyvinyl acetate
3905 21	vinyl acetate copolymers
3905 29	vinyl acetate copolymers
3906 10	polymethyl methacrylate
3907 21	polyethers
3907 40	polycarbonates
3908 10	polyamides

Russian imports of propylene copolymers from South Korea dropped in the first eight months to 14,205 tons from 23,034 tons in the same period in 2021. This is attributed to partly lower demand inside the Russian market and also a reorientation of Russian polypropylene producers towards the domestic market. 

SIBUR has established the domestic market as its chief priority SIBUR for this year but as sanctions on sales to EU take effect the group is looking to develop new external markets.   The group hopes to increase exports to South East Asia, but needs to create transit points and distribution centres.  Russian producers are trying to compensate for sanctions and reduce dependency on other imports for a wide range of industries and applications such as automotive, food packaging, etc. 

Polypropylene project Voronezh?

In the absence of Western technology Russian investors have been forced to think of alternative solutions in order to build more polymer capacity.  One such case involves RIF Corporation at Voronezh which has formed a provisional agreement with China Power Engineering Consulting Group (CPECGC) to build a gas processing complex.  The complex has been set a completion date of 2026 will be capable of producing around 100,000 tpa of polypropylene.  Investment costs have been estimated at 24 billion roubles ($389 million).  The last major investment project for gas processing announced in the Voronezh region was unsuccessful. In 2018, the Moscow-based Cryomashgaz LLC announced the construction of liquefied natural gas (LNG) production in the Anninsky district worth 5.5 billion roubles.  The company abandoned the project later due to disagreements with local authorities.

Astrakhan PVC complex

In the PVC sector a new complex is planned for construction at the Astrakhan Gas Processing Plant, with a capacity of 650,000 tpa, has been set a completion target for construction by 2026.  The PVC plant is intended to be combined with 440,000 tpa of liquid and solid caustic soda.  The complex investors include the Caspian Innovation Company LLC and Gazprom Pererabotka (Refining).  Ethane fraction extracted from the Astrakhan GPP, will then be processed into ethylene and then PVC using the technology of cryogenic gas separation. Gazprom Linde Engineering has been entrusted with synchronizing engineering solutions and technologies for the future complex, with possible Chinese involvement in creating an ethylene facility.  Furnaces could be delivered by barge along the Volga.  If this project goes ahead the Astrakhan plant would make it largest PVC producer in Russia.  The Caspian Innovation Company intends to export about 80% of its products, in particular, to India, Turkey and North Africa.

Kazanorgsintez-polycarbonate modernisation

As part of the modernisation of the polycarbonate plant Kazanorgsintez has m received advanced pumps from Japan which are used to transport the polymer melt from the extruder through the polymer filter to granulation. This equipment is part of the expansion of polycarbonate capacity at Kazan to 100,000 tpa and the pumps will be installed during the next shutdown repair.  Delivery of the equipment followed the route Japan-Vladivostok-Kazan.

Russian recylcing PET market overview

PET producers in Russia are striving to utilise more recycled waste, and only Ekopet is yet to use secondary materials in its production.  The resulting granulate from PET waste processing is in wide demand among a broad range of industries. These recycled plastic materials can be sold to manufacturers of containers and packaging materials, PET bottles, ventilation ducts, pipes and plastic furniture.  Recycled plastic is also actively used by factories for the manufacture of synthetic fabrics.  

LMR Plast-PET recycling Plastics processor LMR Plast in Tatarstan has started processing of PET waste and the production of secondary plastic granules.  Due to price increases in prices for the company’s main raw materials polypropylene, which it purchased from Nizhnekamskneftekhim, LMR Plast decided to install equipment for the processing of PET waste and the production of granules.  These cannot be used for all products but the processed granules can make some products at a low cost and price.

Currently 23 companies operating inside Russia for PET recycling, with a total capacity of 233,000 tpa.  The main obstacle to using this capacity is the lack of PET waste.  Many regions in Russia have started collecting PET bottle waste to be sent for recycling but investments are required in the infrastructure and logistics of moving this waste to plants.

In 2021 the Russian market of injection moulding PET amounted to around 729,000 tons.  The production capacity of PET for the production of preforms by Russian players is 640,000 tpa, and thus the missing raw materials are imported by processors most of which comes from the countries of Southeast Asia.

Russian PET Recycling Capacity
No of companies	Capacity (ktpa)	Flex consumption
23	233	200-220
Polief	144	Vivilen

PET-flex consumption market in Russia is estimated at 200-220,000 tpa of secondary raw materials.   Due to the low volumes of collection and processing of secondary raw materials, the cost of such raw materials in Russia is higher than abroad.

Senezh usage of secondary PET

Russian PET Granulate Production
Company	Capacity (ktpa)	Name of Product	Flex usage (Ktpa)
Senezh	130	CleverPET	35
Polief	144	Vivilen	34

The Plant of New Polymers "Senezh" at Solnechnogorsk, which is part of the group Europlast, achieved a record daily capacity of 350 tons of PET granulate per day in September 2022.  A significant increase in production volume was made possible through usage of a new technology FTR (flakes-to-resin).  FTR allows up to 30% of secondary polyethylene terephthalate (rePET) to be added to primary raw materials to create food granulate under the new CleverPET brand.  FTR is an environmentally oriented technology and refers to innovative methods of mixing primary and reduced raw materials.  Senezh takes Flexa (PET flakes from recycled bottles) for the production of re-granulate from the Plarus plastics processing plant (part of Europlast).  Senezh has already received a sanitary and epidemiological conclusion (FEZ) and confirmed compliance with high regulatory requirements for food safety. 

Polief starts usage of secondary PET

SIBUR launched the production of PET granules from secondary raw materials in September 2022 at its subsidiary Polief at Blagoveshchensk.  This is the first subsidiary for SIBUR to produce synthetic products using recycled materials.

Polief will now produce a new product entitled Vivilen rPET granule which contains up to 25-30% of reusable polymer.  For the production of granules as recyclables, the company uses flex (cleaned and crushed plastic bottles), supplied by the partners of the holding.  Polief possesses production capacities for PTA at 350,000 tpa and primary PET at 219,000 tpa.  After reaching its design capacity and use of up to 34,000 tons of secondary materials or equivalent of 1.7 billion used plastic bottles, Polief will be able to produce up to 144,000 tpa of Vivilen PET granules.  To launch this production, SIBUR needed to integrate a secondary raw material supply line into the existing technological chain of primary PET production at Polief.  This raises the total capacity for PET to 253,000 tpa. 

Russian rubber production and consumption Jan-Aug 2022

Russian production of synthetic rubber dropped to 902,000 tons in the first eight months in 2022 from 999,000 tons in the same period in 2021.  Production has declined since the introduction of EU sanctions. August production levels stabilised after the declines in June and July but was still down on the same month last year.

Russian exports of synthetic rubber

Whilst Russian exports of butadiene rubber and halogenated rubber to Central Europe are affected by logistics and sanctions other regions such as China and Asia become more important for these products.  Although not falling under EU sanctions, isoprene rubber exports to China from Nizhnekamskneftekhim have risen sharply this year by values and volume. 

As a consequence of sanctions and Nizhnekamskneftekhim is being forced to change geographical direction of its sales and to move away from the EU market which accounted for around 20% of the company’s total revenues in 2021.   The takeover by SIBUR in 2021 provides Nizhnekamskneftekhim with a much stronger financial base in order to survive this year and beyond.  This year Nizhnekamskneftekhim and SIBUR are working on the basis of a 5% fall in revenues and profits from 2021.  In the second quarter sales of synthetic rubber by Nizhnekamskneftekhim to Europe dropped by around three-fold.  Q3 and Q4 may be better than Q2 if new markets can be identified quickly.   

Types of Russian Synthetic Rubber affected by EU sanctions
4002 11	Styrene-butadiene rubber SBR and XSBR
4002 20	Butadiene rubber
4002 31	Butyl rubber
4002 39	Halogenated butyl rubber
4002 41	Chlorobutadiene rubber
4002 51	Nitrile butadiene rubber

SIBUR challenges for rubber production

According to SIBUR more than 700 European companies have refused to cooperate with the group over the past few months, including both customers and suppliers, against the background of Western sanctions,.  SIBUR claims that it had managed to replace around 90% of the raw materials that they purchase for synthetic rubber production.  Although not huge in value SIBUR has lost its traditional suppliers of the most important catalysts, part of the spare parts, suppliers of technologies, licenses.  Officially the company says all is well, but private views may differ. 

One of SIBUR’s reagent imports butyllithium had been blocked by European suppliers prior to be being sanctioned on 5 October by the EU.  

Last year the UK and Germany were two of the largest suppliers, but both stopped transactions earlier this year to SIBUR without explanation.  N-butyllithium is widely used as an initiator for anionic polymerization reactions for molecules like butadiene, isoprene, and styrene.

Russian methanol production Jan-Aug 2022

Russian Methanol Production (unit-kilo tons)
Producer	Jan-Aug 22	Jan-Aug 21
Shchekinoazot	1014.2	646.5
Gazprom Methanol	489.3	660.0
Metafrax Chemicals	745.0	769.2
Akron	64.1	71.5
Azot Novomoskovsk	153.0	170.3
Angarsk Petrochemical	21.4	20.1
Azot Nevinnomyssk	74.4	83.6
Tomet	365.2	387.6
Ammoni	66.5	77.4
Totals	2993.2	2886.3

Russia produced 2.993 million tons of methanol in the first eight months in 2022 against 2.886 million tons in the same period in 2021.  Metafrax Chemicals at Gubakha produced 745,000 tons against 769,200 tons in January-August 2021, whilst Gazprom Methanol at Tomsk reduced production from 660,000 tons to 489,300 tons.  

Tomet produced 365,200 tons of methanol in the first eight months in 2022 against 387,600 tons in the same period in 2021. 

Shchekinoazot produced 1.014 million tons in the first eight months in 2022 against 646,500 tons in January to August 2021, the increase due to the addition of new capacity.  Also, in the Tula Oblast Azot at Novomoskovsk reduced production from 170,300 tons to 153,000 tons.  Ammoni in Tatarstan reduced methanol production from 77,400 tons in the first eight months in 2021 to 66,500 tons in the same period this year.   

Effectively the difference in the Russian production volumes this year can be attributed to the restart of the second line at Tomet and the start of the third plant at Shchekinoazot, although Tomet’s second line has been stopped again due inactivity in export markets.  In August Tomet produced only 2,462 tons which now means that production for the first eight months dropped below the level recorded in the same period in 2021.

Russian methanol exports, Jan-Aug 21022

Russian Methanol Exports by Producer (unit-kilo tons)
Producer	Jan-Aug 22	Jan-Aug 21
Azot Nevinnomyssk	1.4	4.8
Azot Novomoskovsk	55.4	61.4
Akron	4.9	6.1
Metafrax Chemicals	287.4	256.3
Gazprom Methanol	179.9	349.3
Tomet	119.9	132.9
Shchekinoazot	746.0	454.9
Ammoni	1.5	0.0
Total	1396.3	1265.9

Russian producer exports of methanol rose from 1.266 million tons in the first eight months in 2021 to 1.396 million tons in January to August this year.  Tomet exported 119,900 tons of methanol in the first eight months down from 132,900 tons in the same period in 2021. 

Russian Methanol Exports by Destination
Country	Jan-Aug 22	Jan-Aug 21
Belarus	162.1	84.3
China	38.6	0.0
Finland	487.0	631.5
Germany	1.2	1.6
Kazakhstan	25.9	16.5
Latvia	58.7	7.9
Lithuania	44.2	55.9
Netherlands	137.1	81.2
Poland	291.1	208.2
Romania	26.5	50.8
Slovakia	49.0	155.1
Turkey	70.1	6.4
UK	8.4	0.0
Ukraine	11.9	43.8
Others	0.5	1.5
Total	1412.6	1344.9

Metafrax Chemicals increased exports from 256,300 tons in January to August 2021 to 287,400 tons this year whilst Gazprom Methanol reduced exports from 349,300 tons to 179,900 tons.  The largest Russian exporter in the first eight months was Shchekinoazot shipping 746,000 tons versus 454,900 tons in January to August 2021. 

Destination figures for methanol exports comprised 1.413 million tons for the first eight months versus 1.345 million tons last year.  Finland accounted for 487,000 tons of Russian methanol exports in the first eight months against 631,500 tons in the same period in 2021.  Poland increased deliveries from Russia from 208,200 tons to 291,100 tons whilst exports to the Netherlands rose from 81,200 tons to 137,100 tons.  The rise in exports to the Netherlands was due to higher production and transhipment in 2022 from Tomet at Togliatti.  That business has now stopped as have direct exports to Romania, Slovakia and Ukraine. All of the methanol purchases made by those three countries this year appear to start in Poland. 

Market overview & sanctions

The introduction of sanctions by the EU against Russian methanol exports to the region states that all transactions for contracts concluded prior and to 7 October 2022 need to be completed by 8 January 2023.  This would clearly be a major setback for Russian producers, and the overall Russian market which is heavily dependent on exports to the European countries.  On average around 70% of exports are directed monthly to the EU.  It is not feasible to be able to replace this trade, at least in the short term and probably even the medium term considering the geographical locations of the plants.  New destinations for Russian exports this year have included China and Turkey, but volumes to both countries are limited by logistical hurdles.  Most plants in Russia are located in the western half of the country that make selling to China or the Far East difficult logistically and economically.

The share of the country’s methanol exports to the EU has remained very significant this year measured against total exports, despite the situation in Ukraine.  Although dropping to 58.9% of total exports in July, shipments to the EU rebounded in August following a resumption of deliveries to Finland.  European markets provide the best profitability for Russian producers, the shortest lead-times, etc, but self-sanctioning has turned away some consumers particularly where alternative sources are available.  Polish traders have been very active this year in sourcing Russian methanol for redistribution in Central and South East Europe.

For the first eight months the Russian methanol market performed relatively under the conditions of war, sanctions and difficulties in doing business generally.  Domestic demand has held up on the surface, but consumption is showing signs of slowing and together with internal processing can not provide a substitute for export activity.  Production at Russian methanol plants weakened over the summer due to shutdowns, notably Metafrax.  Although August saw higher volumes the industry is now faced with challenges in the face of EU sanctions.

Shchekinoazot is the methanol producer most vulnerable to restrictions on exports to the EU.  Overall, the company exported 73.7% of its production in the first eight months in 2022, with Poland receiving the largest amount of its exports by rail.  Shchekinoazot does use methanol for formaldehyde and resin derivative production, but this accounts for only a small percentage of its market sales.  New units for formaldehyde derivatives are planned to start construction shortly, but If exports fall as expected the company will most probably have to shut at least one of its three plants.

Metafrax Chemicals exported 44.9% of its production in the first eight months in 2022.  Although still important the company also processes large volumes internally in addition to selling on the domestic merchant market.  In the event of reduced exports or restrictions to exports Metafrax will most probably adjust its utilisation rate downwards.  To what degree would depend on how the domestic market performs. 

Russian Methanol Supply/Demand Balance (unit-kilo tons)
	Jan-Aug 22	Jan-Aug 21
Production	2993.2	2886.2
Exports	1396.5	1196.3
Domestic	1097.9	1076.8
Market Balance	498.8	613.1

Regarding other producers, Tomet has already closed one of its two lines having stopped export activity in May-June this year.  As a company with no downstream production, domestic merchant sales represent the only focus at present.  Azot at Novomoskovsk and Gazprom Methanol are the two other plants where there is no internal processing and thus are totally dependent on merchant sales whether it be domestic or export.  Gazprom Methanol has started shipping methanol to China in recent months but not in volumes that would compensate entirely for its loss in European markets.

Despite global growth potential numerous Russian new methanol projects in Russia are likely to be cancelled or delayed.  Even priory to sanctions, Russian sea shipments have been limited by transhipment capacities.  The European problem for Russian producers has increased interest in selling to China, but at present this option appears loss-making in terms of higher logistical costs and lower sales prices.  Weak demand for methanol in China against the background of COVID linked lockdowns combined with limitations on how much can be shipped means that there is no straightforward alternative to the European market. Recognising the difficulties in constructing new methanol terminals, studies are underway concerning containerization as a short term measure that would allow the transportation of tanks.  The question is whether or not this would be too expensive.  It is clear though producers will need to coordinate some degree of logistical planning in order to avoid significant falls in production levels.

Russian methanol domestic sales, Jan-Aug 2022

Russian Methanol Domestic Sales (unit-kilo tons)
Producer	Jan-Aug 22	Jan-Aug 21
Azot Nevinnomyssk	15.5	15.5
Azot Novomoskovsk	98.2	106.9
Metafrax Chemicals	261.0	281.4
Gazprom Methanol	247.9	277.1
Tomet	239.5	224.9
Shchekinoazot	199.0	126.7
Ammoni (Mendeleevsk)	35.3	44.2
Total	1096.5	1076.7

Merchant sales of methanol on the Russian domestic market amounted to 1.097 million tons in the first eight months in 2022 against 1.077 million tons in the same period in 2021.  Tomet increased sales from 224,900 tons to 239,500 tons whilst Gazprom Methanol reduced sales from 277,100 tons to 247,900 tons.  Metafrax Chemicals reduced shipments to the domestic market from 281,400 tons in January to August 2021 to 261,000 tons in the same period this year.    

Russian Methanol Purchases by Consumer (unit-kilo tons)
Consumer	Jan-Aug 22	Jan-Aug 21
Nizhnekamskneftekhim	195.3	204.5
Togliattikaucuk	39.7	82.9
Uralorgsintez	34.2	39.0
SIBUR-Khimprom	1.1	18.8
SIBUR Tobolsk	29.7	26.2
Omsk Kaucuk	76.0	60.1
Novokuibyshevsk NPZ	21.3	21.2
Uralkhimplast	12.1	16.4
Slavneft-Yanos	8.3	9.8
Metadynea