2012-02-03 16:11:01 - Ukraine Petrochemicals Report Q1 2012 - a new market research report on companiesandmarkets.com

Strong growth in Ukrainian chemicals and petrochemicals output seen in 2011 will come to an end in 2012 due to poor domestic and external forecasts with potential for a contraction in the sector, according to our latest Ukraine Petrochemicals Report.

Ukrainian petrochemicals output performed consistently well in the first three quarters of 2011 with primary plastic output up 80.4% y-o-y to 397,200 tonnes. Production was up on pre-crisis levels, despite lacklustre performances of the domestic market. Ukraine´s chemical and petrochemicals industry was one of the leading sectors throughout the year with 18.2% growth overall in the first nine months of the year.

Output growth has been stimulated by both domestic demand and exports to Russia. An expected slowdown in exports will weigh

 

 

on chemicals and petrochemicals production. A softening domestic demand picture, particularly in household spending, is also a cause for concern. We expect a weakening in private consumption expenditure going forward and this will depress local demand across the petrochemicals market. Meanwhile, the stimulus created by one of the main government boosts to capital expenditure – the European Football Championships in 2012 – is likely to diminish as the year progresses.

The opening of a new suspension PVC plant by Karpatneftekhim in Kalush in August 2011 has further boosted the petrochemicals sector´s capacities, although we do not believe that it was up to full capacity by end-2011. The plant´s capacity is 300,000tpa, which is twice the level of Ukrainian PVC imports. As such, bringing the plant up to full production will require demand on export markets, particularly the Russian construction sector. In 2012, the company plans to start building a further plant for emulsion PVC, with capacity of up to 30,000tpa. It also has plans to begin making profiles from sPVC with a capacity of 20,000tpa.

Ukraine remains in 8th place in our Central and Eastern Europe Petrochemicals Business Environment matrix, although its score has declined by 0.4 points to 39.6 points. This puts Ukraine 0.3 points ahead of Bulgaria and 6.2 points behind Romania. The score had been strengthened in recent months due to progress on a 300,000tpa PVC plant in Kalush, an improvement in market risk ratings due to a deal with Russia over cut-price gas supplies and the election of a new Moscow-oriented government which provides some stability in the operating environment for the petrochemicals industry and trade relations with its largest market, Russia. However, the score is held back by very weak a long-term financial markets outlook, although this can get better in the event that IMF credit is sustained and the banking system revived. As a result, its country risk score has declined. The overall petrochemicals rating score has plenty of upside potential.

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