Boston, MA -- (ReleaseWire) -- 04/01/2014 -- Ukraine's petrochemicals industry continues to struggle out of recession with poor domestic growth and an increasingly competitive export market. BMI's latest Ukraine Petrochemicals Report sees little optimism in the years ahead, a position reflected in Lukoil's decision to again suspend production at its Karpatneftekhim's polyvinyl chloride (PVC) complex, just weeks after it was re-opened following an agreement with the government on protectionist measures.
The Ukrainian petrochemicals industry performed poorly throughout 2013, with the value of chemical sales down 10.6% year-on-year (y-o-y). Plastic production fell by 35.7% y-o-y to 313,300 tonnes in 2013, following an 11.4% fall in output to 487,500 tonnes in 2012.
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The decline is mostly related to the suspension of activity at Karpatneftekhim's complex. Karpatneftekhim's 300,000 tonnes per annum suspension PVC plant was idled for a maintenance turnaround in September and October 2012, but remained shut during a dispute with the government and was only reopened in September 2013. In Q413, the complex produced just 12,000 tonnes of PVC, implying a capacity utilisation rate of just 16%. In January 2014 it was closed again for four months due to poor market demand. The complex also includes polyethylene production. The full resumption of activity is crucial if Ukraine is to return to the kind of production levels it saw before the recession.
BMI notes the following developments:
- The performance of the chemicals and petrochemicals industries reflected the poor performance in the wider economy. The Ukrainian economy remains extremely fragile and is likely to remain a regional growth underperformer over 2014.
- With domestic petrochemicals consumption not expected to return to pre-recession levels over the medium term, Ukrainian production will rely heavily on export-led demand. However, the Russian market will be moving to a position of self-sufficiency and EU markets will see rising market share for competitively priced US and Middle Eastern production. In the midst of this challenging environment, it is difficult to see how the industry will be able to reach capacity utilisation levels that will return a profit.
- Ukraine remains at 14th place in BMI's Europe Petrochemicals Risk/Reward ratings this quarter, while its score has declined 0.3 points to 41.7 points due to a 3.0 points deterioration in industry risk as a result of low capacity utilisation and then temporary closure at Karpatneftekhim's PVC complex, in spite of an agreement between the government and owner Lukoil over import tariffs and other tax issues. Ukraine currently sits 3.4 points behind Romania and 2.1 points ahead of Bulgaria.
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