DEVELOPMENT OF THE PVC MARKET IN RUSSIA This information is not subject for public use. Direct public disclosure of the attached data by distributing it in mass media, posting on web-sites or through any other way is forbidden and requires prior consent of RusVinyl LLC.
RUSSIA WAS A NET IMPORTER DURING LAST 9 YEARS 1200
960
1031 970
1000
879
859 758
800
659
320
657
926
461
411
358
279
554
595
604
638
352
215 600
486
119
162
22 400 531
540
543
541
501
-2
-5
2008
2009
526
200
0
-68
-1
-4
-200 2005
2006
2007
Production
Import
2010 Export
2011
2012
2013
2014
Consumption
•Profile segment was a key driver of consumption growth in 2005-2012 •But saturation in this segment led to consumption in 2013-2014 •Local players had high capacity utilization rate, periodically facing ethylene supply issue Source: RVL calculation based on agencies’ reports (ChlorKompleks, HimCourier, Market report ), custom statistic data and RVL research.
2
RUSSIAN PRODUCERS STARTED TO EXPORT OF PVC-S IN THE END OF 2014 PVC-S market balance 2014, kmt 1000
-14
4
900 800
279
700
926
600 500 400
639
300 200 100 0
Production
Import
Delta of stocks
Export
Consumption
Production (2014/2013): +6% The growth was primarily driven by RusVinyl start-up. Import (2014/2013): -22% Ruble depreciation and import substitution cause significant reduction of supplies from abroad. Consumption (2014/2013): -5% RF economy showed a slowdown in growth rates and expectations of decrease in construction activity. Source: RVL calculation based on agencies’ reports (ChlorKompleks, HimCourier, Market report ), custom statistic data and RVL research.
3
TOTAL CAPACITY IN RUSSIA IS 940 KT PER YEAR
Actual capacity, kt per year
Production 2014 kmt
Sayanskhimplast
300
283
BSK, Sterlitamak
240
222
Caustic ,Volgograd
100
91
RusVinyl
300
42
940
639
Producer
Total
•RusVinyl started in September 2014 •During last several years, Sayanskhimplast and BSC did several debottlenecking expansions •Some projects for further capacity increase were announced, but ethylene supply issue should be settled
PROFILE SEGMENT SHARE IS STILL MORE THAN 50%
2014
2014
PVC-S market structure by application, % 13% 10% 926 kmt
55%
10% 12%
YOY 2014/2013
7%
Profile
-6%
Cable
+2%
Sheet/Film Pipe
PVC-S market structure by grades, %
67 18% 71 926 kmt
+1%
60%
64
15% +1%
57
Other
• Sheet/film demand has been increasing annually over the past decade, but domestic production is limited by significant cash cost growth of imported stabilizers and modifiers which prices increased in ruble. • PVC pipes share in Russia still low (10% in total PVC-S consumption).
Source: RVL calculation based on agencies’ reports (ChlorKompleks, HimCourier, Market report ), custom statistic data and RVL research.
5
CHINA AND USA ARE THE KEY IMPORTERS
PVC-S import structure, kmt
PVC-S import structure, %
400 350
100%
51
14%
300
80%
200
175
57
150
60%
49%
Others USA Сhina
40% 63%
100 50
20%
45
250
16%
134
176
0 2013
2014
20%
37%
0% 2 013
2 014
•Enjoying cheap feedstock price, US dominated PVC world trade in 2010-s and had significant presence on Russian market as well •Producers from North-West China replaced significant part of US supply in 2014
Source: RVL calculation based on Custom statistic data.
6
MARKET WILL RECOVER WITH IMPROVING INVESTMENTS IN CONSTRUCTION SEGMENT PVC-S market balance 2015-2019, kmt 950
650
42
42
42
42
806
777
797
848
904
907
910
913
-154
-157
-118
-76
2016f
2017f
2018f
2019f
58
836
881
350
50 -82 -250 2015f
PVC-S Production
PVC-S Import
PVC-S Export
PVC-S Consumption
• Production will grow by 6% due to RusVinyl production growth and Sayanskkhimplast production recovery. • Profile segment will still the biggest consumer • Economy recovery from 2017 it’s expected •Export can be doubled (India, Turkey, Iraq) in 2016 and will be limited by future consumption recovery
Source: RVL calculation based on agencies’ reports and forecasts (IHS, ChlorKompleks)
7
RUSVINYL BECAME SINGLE RUSSIAN PRODUCER OF PVC-E AFTER KHIMPROM VOLGOGRAD CLOSURE in 2014 140
135 115
120 102 100
133 124
120
106
88 82
80
55
73
66 60
115
78
38
95
100
22
22
-2
-1
2010
2011
115
108
63
40
20
44
51
43
37 26
0 -16 2005
-9
-8
-19
-14
2006
2007
2008
2009
21
17
16
2012
2013
2014
-20 Production
Import
Export
Consumption
•Market reflects construction growth as the key applications of PVC-E is flooring materials •Russian consumers had stable supply from European majors (Vinnolit, Vestolit, INEOS and Solvin) •Rusvinyl capacity is 30 kt Source: RVL calculation based on agencies’ reports (ChlorKompleks, HimCourier, Market report ), custom statistic data and RVL research.
8
LAST YEAR IMPORT COVERS AROUND 90% OF RUSSIAN DEMAND
PVC-E market balance 2014, kmt 120
0.27
100
80
108
60
124 40
20
16 0
Production
Import
Export
Consumption
Production (2014/2013): -7% Khimprom Volgograd was stopped in October. Import (2014/2013): -5% Due to consumption decline and ruble devaluation. Consumption (2014/2013): -6% Slowing in construction activity. The biggest flooring producer Tarkett decreased its production.
Source: RVL calculation based on agencies’ reports (ChlorKompleks, HimCourier, Market report ), custom statistic data and RVL research.
9
FLOORING IS KEY APPLICATION FOR PVC-E IN RUSSIA
PVC-E market structure by application 2014, %
Flooring 1%
13%
Wallpapers
3% 3%
Artificial leather
9%
Sealants 79% 3%
PVC plastisol Others
Source: RVL calculation based on agencies’ reports (ChlorKompleks, HimCourier, Market report ), custom statistic data and RVL research.
10
IMPORT SUPPLY WILL EXEED 70% IN UPCOMING YEARS PVC-E market balance 2015-2019, kmt 140 123 120
112
117
108
111
81
86
92
78
30
30
31
31
2016f
2017f
2018f
2019f
100 80 60
91
40 20 21 0 2015f
PVC-E Production
PVC-E Import
PVC-E Consumption
• Flooring will still the biggest consumer. The main player is Tarkett with consumption more than 80kmt. • After Khimprom Volgograd closure, Rusvinyl is the sole producer in CIS and market still depends on import supply •With entrance of China and US producers, geographical structure of import supply will diversify Source: RVL calculation based on agencies’ reports and forecasts (IHS, ChlorKompleks) .
11
CAUSTIC MARKET WILL ALMOST BALANCED IN 2014
NaOH market balance 2014, kdmt 1200
1000
13 123
800
600
918
808
400
200
0 Production
Import
Export
Consumption
Production (2014/2013):+2% RusVinyl start-up and Sayanskhimplast production increase. Khimprom Volgograd was stopped in October. Import (2014/2013): -35%(-7 kdmt) Supply to North-West region was substituted by RusVinyl. Export (2014/2013): -5% Due to consumption growth. Consumption (2014/2013):+2% Chemical and P&P segments (Korund, Volzhskiy orgsintez, Metafrax, Phosphorit, Mondi, KuibyshevAzot) increased consumption. Source: RVL calculation based on agencies reports (ChlorKompleks, HimCourier, Market report ), custom statistic and RVL research. .
12
CAUSTIC SODA MARKET WILL NOT IMPOSE CONSTRAINTS TO LOCAL PVC INTEGRATED PRODUCERS NaOH market balance 2015-2019, kdmt 1300 12
12
12
12
846
863
880
893
907
1048
1099
1102
1104
1106
-214
-249
-234
-223
-212
2015f
2016f
2017f
2018f
2019f
1100
12
900 700 500 300 100 -100 -300
NaOH Export
NaOH Production
NaOH Import
NaOH Consumption
•All PVC producers (RusVinyl, Sayanskhiplast, BSC, and Caustic Volgograd) have own electrolysis units •Caustic soda export will count around quarter of local production •Significant demand in Ukraine, Turkey and Scandinavian countries facilitate export outside Russia Source: RVL calculation based on agencies’ reports and forecasts (IHS, ChlorKompleks) .
13