Развитие рынка ПВХ в России

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)

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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