A competition between polymer materials and their suppliers in the cable industry is toughest. Companies try to avoid it by going into niche products or manufacturing surrogates.
On Monday 16 May the Creon conference "Plastics for Cables 2011" was held at Baltschug Kempinski Hotel in Moscow. Partners of the event were Dow Chemical, Lubrizol and Elastoimpex. Russian cable industry recovers from the crisis and the demand for polymer materials in the industry is also growing. There are not only quantitative but also qualitative changes in demand for insulation materials: PVC compounds inferior position for polyethylene, polyurethane and other more innovative and advanced materials. However Creon CEO Sandjar Turgunov noted that all market players are interested in how quickly these changes will occur and how it will affect on the final product price (because the new materials are not only better but also much more expensive).
Oksana Shashkova, CEO of Marketing Agency Nuzhnye Lyudi presented review devoted to domestic cable industry. Despite the rapid growth in 2010, the industry couldn`t restore pre-crisis production volumes. It`s expected to happen this year. The main demand drivers in the industry are electrical, automotive industry and only then construction. Domestic cable production concentrates mainly in the same area where it is consumed - in Central Russia. However, domestic suppliers can`t fully meet demand and more than 15% of cables in Russia are imported. Herewith, all demand for 110 kV and higher voltage cables being satisfied by imports. By the way, XLPE and polyurethanes, raw materials for modern cable insulation launching, are imported. Besides, the polyurethanes market grows fast enough. However, in general volumes of insulation consumption Rubber and PVC plastic dominate.
Timofey Rassokhin Development and Distribution Manager in Europe Dow Wires & Cables told the participants about the prospects of using cross-linked polyethylene in cable insulation. The company delivers cross-linked polyethylene for power, radio and fiber cables, and also elastomers and compounds, leads the development of PVC bioplasticizers. The company`s German plant exports products to Russia, the demand for Dow products in the country is quite large and formed by the active energy infrastructure upgrade: generation, transmission and distribution as well. Only 30% of consumption is the share of cross-linked polyethylene (its market in Russia is about 15 thousand tons), but by the 2017-18 it will become the predominant insulation material. All high voltage cables already made with cross-linked polyethylene insulation, but the high price limits the material mass expansion. Cross-linked polyethylene is priced for around 2 euros per kg now, which is more expensive than most PVC compounds by a quarter. The power engineering specialists are interested in the cable`s reliability and durability, but first of all they are interested in lower price. This is due to the extremely high competition between cable plants as half of medium voltage cables capacities are not utilized now.
The high price limits thermoplastic polyurethanes usage as well. The prospects of this production usage for cable insulation were told by Anatoly Shipov, product manager of Lubrizol and Oleg Michurin, the director of Elastoimpex. Thermoplastic polyurethanes are made of isocyanates combining of rigid and flexible fragments in the polymer chain. TPU are frost-resistant and keep flexibility at low temperatures, they are simple in processing, resistant to mechanical wear and burning and to aggressive chemicals. However, in view of the fact that selling price of thermoplastic polyurethanes ranges from 4 to 8 euro per kilogram, demand for these products in Russia is minimal. All domestic market of this polymer is estimated of Elastoimpex in 4 thousand tones and besides only 30 % of consumption account for the cable insulation while in Europe and US this figure raises to more than one half. It`s not easy to find consumers for these products. Elastoimpex, supplying the BASF production, started the work in this segment in 1998 with raw materials supplies for field geophysical cable. A new usage area which is anchored high one`s hope is battery cables for electric cars. Lubrizol plans to begin industrial supplies of thermoplastic polyurethanes to Russia in the nearest future.
Oleg Barashkov Technical Director of Vestplast spoke about the PVC compounds (the most popular cable insulation material) production prospects. PVC is "buried" not for the first year, but Mr. Barashkov noted that during the conference in Cologne European specialists were surprised to find that this material consumption has not decreased. This happens because PVC is cheap, the cable plants` equipment is designed for its processing, the analogs doesn`t have great advantages, a lot of cable plants have their own PVC compounds lines and because the PVC producers stimulate the demand maintenance. These reasons also support the demand for PVC compounds in Russia. But the changes in the industry happen, mostly in commodity components environmental features. The ban of lead-containing stabilizers became the first initiative, then - the ban of DOP plasticizer suspected of carcinogenic properties, and also the ban of antimony-containing reagents. The market players expect a ban of all the other phthalate plasticizers and then the mass bioplasticizers made of organic materials introduction. PVC compounds have a chance, because such major market players like Dow are developing new versions of them. However, Russia has its own peculiarities - many producers are trying to minimize the cost by producing surrogates. Thus, a PVC compound 45 rubles per kg emerged on the market. It`s being produced by replacing the plasticizer to `Oxal` chemical in the formula, and it`s obvious that this product meet some demand. But the industry`s resource base qualitative degradation also takes place: it is simply impossible to produce many PVC compound grades without imported additives.
This problem is especially actual for cables that are used in military. Vadim Filippov, the chief of 46th department of Central Research Institute of the Russian Defense Ministry told the audience in his report about current situation in normative acts which permit import materials application in case of absence of domestic analogs only or its nonconformity the requirements. The price question is not discussed, but, however, in practice, domestic suppliers, even delivering production that is comparable to imports in price, unlike the Western firms are not able to guarantee the product life and cannot be responsible for a failure. At the same time the Ministry of Defense set product life limits, which sometimes lasts for decades, while the market participants oriented to consumer goods with much shorter product life cycle. The Chief of Plastics Department of OKB CP Gennady Ryvkin focused on fluoropolymer industry. The last ones are used for special fireproof insulation. According to him there is the paradoxical tendency of domestic production export and demand satisfaction with imports. At the same time, until recent years Russian fluoropolymers have exceeded foreign analogs with reliability. New processors predominantly orient themselves to foreign raw materials. Among other innovative materials Mr Ryvkin noted PEEK, that resistant to radiation and high temperatures and thermoplastic polyurethanes, which are used widely in oil pipelines diagnostics cables. However, PE and PVC producers replied on beginning expansion of these materials by creation of new grades of thermoplastic elastomers. The last ones are much cheaper although have similar properties.
During the discussion participants noted that the PVC and rubber maintain positions as insulation materials for producing a very wide range of cables but the most commercially interesting cables for the oil industry and energy are produced using the imported raw materials, or its analogs. For example, instead of reactor cross-linked and fairly expensive Borealis and Dow polyethylene some processors use a cheaper LLDPE cross-linked by some craftsmen independently, which successfully sold on the market. The Gerobplast CEO Nikolai Lavrinenko spoke about this topic. The Metakley Deputy General Director of the composites production Mikhail Anisimov told, that the company created their own catalyst analogs of the Western ones. The export projects actively moving forward the industry, as far as the import substitution. For example, DINP is actively used in Russia, despite the legal status of DOP. The produced PVC compounds are used for appliances cord insulation and Russian "cablemen" sell these cords in EU countries, where the DOP is prohibited.
According to Fares Kilzie, the Chairman of Creon, the fact of discussion of the prospects of PVC replacement by other materials says that this product life cycle is in phase of decline. Its future as well as the future of business of all related market players is under big question. The demand on the plastic is supported only by its cheapness and opportunities of surrogates` manufacture. In Russia unlike other countries ecological factor is absolutely ignored. However, while in Europe PVC plastics use is limited gradually, in Russia everything can be different. When lobbying abilities of PVC advocates fade away, the producers of competitive materials may achieve the ban of its output and use.