Rapid growth, tough competition and high cost of raw materials lead to general reduction in quality of manufactured goods.
On Tuesday, 26 April Creon with partnership of SABIC Innovative Plastics held the International Conference "Polycarbonate 2011". According to Sandjar Turgunov, CEO of Creon, who welcomed the participants, domestic market of polycarbonate needs radical restructuring and consolidation and an appearance of some large and reliable players, which could set general trends. The domestic polycarbonate production is stably growing, though there is only one manufacturer yet, Kazanorgsintez. However, according to Mr Turgunov, it`s time for one more producer to appear.
"Kazanorgsintez" manufactured more than 57 thousand tons of PC last year. In 2011 "Kazanorgsintez" plans to reach the installed capacity of 65 tons. The technology difficulties (increased yellowness of polycarbonate and the instability of melt flow in a single batch) are being solved in cooperation with BASF. The plant produces seven grades of polycarbonate for various purposes, but translucent sheets pre-protected against ultraviolet radiation have the greatest demand. They account for about 80% of sales in Russia. The export share in sales structure has reduced from 50 to 20%, while the domestic demand became more brisk last year and this encourages all the market players. "Kazanorgsintez" has no plans to build a second phase of PC production. But at the same time the basic raw material (benzene) deficit in Russia, the strengthening of the ruble and the rising demand make the polymer imports on the domestic market more attractive. The polycarbonates` plant manager Farid Minigulov and the Head of the company`s Sales department Alexey Malkin told the participants about the "Kazanorgsintez`s" production and sales experience.
According to Vladislav Trofimov, director of trading company KMC-M, the domestic polycarbonate market saturates after post-crisis revival and that intensifies the competition on it. The firm decided to start its production of PC sheets in addition to trading. However, the new player encountered some serious problems, which earlier lead many foreign companies to withdraw from the market. With the demand saturation, aggravation of competition and lack of uniform quality standards minor producers began to increase their market share. At best they supply polycarbonate sheets without UV protection, at worst PC sheets are made with gross violations of standard recipes. These plants can work 1-2 months of peak demand in year, their disposable products are supplied without any guarantee, but much cheaper than those of major players. That undermines confidence to the polycarbonate as the material; alienate it from potential customers, especially, construction companies.
The development director of "Carboglass" Anton Debabov spoke about the problems of using polycarbonate sheets in the construction. According to him, the polycarbonate sheet market has a distinct seasonality and the sales peak across all sectors of consumption in the spring: the time of the billboards installation, the start of construction, preparation of greenhouses. Demand for heavy sheets (25, 40 mm) is minimal; the highest is for thin sheets, but in their production and sales an infringement of technology standards is common. Thus, their quality and life cycle becomes lower, but nobody cares. Some dealers offer rolled up polycarbonate sheets, which in normal can not be transported or stored this way. Mr. Debabov thinks that major industry players should develop the common standards. The products should be divided into different classes and grades with the obligatory product properties and usage indication (for fundamental construction, seasonal buildings or greenhouses). Now several companies actively work together on the development and approving common standards in Russia, laboratory and factory tests are carrying.
However, the problem of "garage" products dominance and general decrease of quality standards is not the only one which concerns market participants. The domestic demand on polycarbonate stably exceed the supply volumes of Kazanorgsintez, which has limited experience in manufacturing of this plastic yet. With feedstock raise the processors would like to find the suppliers of relatively cheap but high quality pellets. One of the sources of such products is Iran. The local petrochemical industry uses the Western technologies and modern equipment, however, because of sanctions imposed on the country, can`t deliver the products to Europe legally. Alexander Sharov, the director of Transhimexport told about opportunities of Iran polycarbonate export to Russia from new production with capacity of 25 thousand tons, launched in 2007 with German Salzgitter technology.
Head of the "Krauss-Maffei Berstorff" extrusion equipment department Andrei Volkov gave an overview of the polycarbonate world market major trends and introduced the company`s new planetary calendering technology. The polycarbonate world market is estimated at 3 million tones and grows at 5-6% annually. In 1960s the product had been mostly used for films, in 1980s - for CDs. Now demand is moving forward with the window sheets, diffuse films and automotives. The window sheets as well as monitors backlight system are of particular interest, because they are much lighter than glass, retain heat better and do not break. The "Krauss-Maffei Berstorff" planetary calenders allow to change the time of contact of material with the rolls and to prevent internal stress, which strongly affect polycarbonate optical properties.
At the same time, in spite of innovative development of the industry, leading world players` problems are the same as that of their Russian colleagues. Marc Jamin, General Manager of the Base Polymer in Europe of SABIC Innovative Plastics, drew the attention of the audience on continuous feedstock price growth because of rising oil prices and supply limits. Despite global consulting companies` prediction, the prices on oil and basic petrochemicals continue to grow. The company runs the polycarbonate plant in Saudi Arabia with capacity of 250 thousand tons and now starts the development of the similar project in China. After launching of Chinese plant, released amounts of Saudi polycarbonate can be delivered to Russia, which is one of the priority markets for SABIC. Other global market players invest in production expansion, however, there are a little of projects in raw materials production expansion (benzene, phenol). That leads to exacerbate the raw materials shortage. Fares Kilzie, the head of Creon, assume the solution of this problem in new polycarbonate production creating where large resources of raw materials, benzene on acceptable prices are available. Russia in this aspect has competitive advantages and vertically integrated oil companies like Bashneft, Lukoil or Gazprom Neft could become successful producers of world level polycarbonate.
Speaking about the Russian PC processing market development, there is no market leader yet, there are lonely processors who are unsuccessfully trying to negotiate with each other and a lot of minor "underdog" producers who are pulling the market down. According to Mr. Kilzie, without the appearance of the market major that will lead the industry there is no hope for quality demand stimulation and for the PC products export, even in FSU countries.