The polyamide processing is growing too slowly in Russia, despite the market players efforts. It will be more correctly for business development to bet on exports, but the producers can`t solve the related raw problems of their own.
On Thursday, June 10 at the Hotel Balchug Kempinski Moscow an international Creon conference "Caprolactam and Polyamide 2011" was hosted. According to Creon CEO Sandjar Turgunov this conference is somewhat traditional, but at the same time something new, because the market situation has recently changed dramatically and everybody want to know how the industry will look like in the nearest future. The industry is moving from finding ways to survive to searching for ways to develop, gently feels for them and looks to the future with a moderate optimism.
Dmitry Rybkin, marketing director of KuibyshevAzot told the audience about world and Russian market of caprolactam and nylon. World demand on caprolactam is 4,4 million tons and according to estimates will grow by 2 % per year average for the next 5 years. In this case traditional usage of caprolactam for polyamide fibers launch give the position of new products: plastics and films on the basis of polyamide. They account for 28 and 10% of consumption respectively. At the same time over the past decade polyamide fibers consumption grew very slightly and only at the expense of technical yarns, polyamide usage in textile industry is reduced. The geography of caprolactam world production and consumption strongly don`t match with each other as Asia market, which accountes moreover than half of world demand on. It is imported more than 1 million tones of caprolactam from other regions, basically from Europe and CIS countries. At the same time from the era of widespread polyamide fibers using in textile industry Europe, USA and CIS countries inherited the huge production capacities which are using to satisfy the growing demand in Asia. As a result the world capacities are loaded almost completely, however, Asian, China companies primarily, expands the production actively, that`s why according to forecast the import volumes of caprolactam to Asia will decline gradually.
In the 1990s The CIS countries have become major exporters of caprolactam. It was a result of landslide downturn in the industry of polyamide fibers of processing especially textiles. In the 2000s the caprolactam industry`s export orientation helped restore and increase the production capacity. More than 60% of the produced caprolactam is exported now, and the capacities of all producers are fully loaded and there will be expansion. In particular, each of "KuibyshevAzot" and "ShchekinoAzot" plan to expand the capacities for 15-30 thousand tons, "GrodnoAzot" for 10-20 thousand tons. The capacities of the caprolactam polymerization can grow only for 91 thousand tons when the investment projects in Belarus will be implemented. The shortage of raw materials and the uncertain prospects of exports to China (where import substitution is actively developing) hamper the capacities growth. So the producers have great hopes about the caprolactam processing development and about the polyamide consumption increasing in the CIS countries.
Domestic polyamide market survived the heavy recession in recent crisis time, however, restored completely in 2010 year. Although, unlike most developed countries, polyamide plastics usage in CIS is tiny, the greater part of polyamide is processed to fibers and threads and is exported too. It`s expected however, that to 2015 the polyamide consumption will grow by 37 % and its export share will decrease. In this case, according to Mr. Rybkin , the main hopes on engineering polyamide plastics consumption growth are connected with foreign companies business in CIS countries. These companies will come after (following) the other industries players automotive industry primarily. Generally, the caprolactam consumption in CIS countries will increase in 1,5 times.
"KuibyshevAzot", which produces more than 90% of polyamide in Russia, has no plans to expand the polymerization capacities. 35% of the 157 thousand tons polyamide capacities are plastics grades and 35% textile fibers grades, 15% - for film production and the same amount - for high-strength fibers production. The global margins of caprolactam processing is rather stable and is about 300 dollars per ton, but in Russia the deficit and the price of raw materials (aromatic hydrocarbons) makes processor`s work much more difficult. "KuibyshevAzot" is going to resume the project with the Magnitogorsk Metallurgical Plant of coke benzene purification. Head of Strategy "Sibur-Mineral Fertilizers" (another major caprolactam producer) Georgiy Eliseev told about the resource efficiency increasing strategy without a large capacity expansion.
Michael Katsevman, the director of science and development of Polyplastic Group told about domestic market of composite materials on the polyamide basis. According to him, Russian market move forward not fast but confidently and it`s about 22 thousand tones. Above half of polyamide composites is applied in automotive industry, 20% is in electrical engineering, the other volumes go for needs of machinery and furniture industry, and such consumption structure is normal for developed countries majority. The basic products are glass-filled -grades, more complicate technologically products are shockproof grades and the most promoted ones are nonflammable grades for sockets and other electrical products. Hopes for rapid growth of polyamide consumption in automotive industry are not justified as even in most developed countries it`s only 14 kg of polyamide used for one car while in Russia in 2014 it will be no more than 2,1 million cars assembled. It means that demand for polyamide will not exceed 30 thousand tones. And now because of raw materials` price growth the polyamide loses competitive characteristics comparing to polybutyl terephthalate, polycarbonate and other alternative materials and the key players are in waiting position as the prices could be high for one-two years more. According to Mr. Katsevman, the polyamide demand boom in automotive industry will not be visible in Russia, unless domestic automotive industry becomes export oriented. Apparently, Western companies, running business in composites production, are also act according to such scenario. Otherwise, Russia will become interesting for them only in long-term perspective as automotives` producers now prefer to invest in Eastern European countries instead.
The "NTL Packaging" Development and Marketing Deputy Director General Alexey Chubykin told the participants about the Russian polyamide films industry. According to him, this market stays niche, but interesting enough. The packaging industry, which works by orders from sausages, meat, cheese producers is the main consumer of nylon barrier films. The total market barrier films is estimated at 20 thousand tons, it experienced a painful crisis because of falling demand for expensive food products, but is now recovering. Production of barrier films appeared in Russia in the 1990s, but in a large scale began only recently, at the Volgograd Sealed Air factory, where ten independent films lines are running. Most other market players` projects were commercially unsuccessful, because they often tried to fill a lot of small orders with a single line, which led to an increase in production costs and high technological losses. Now the companies, who developed the new nylon barrier films production, converted into polyolefin films manufacturing. At the same time, there are examples of successful business in this area without the foreign capital participation. But they are all in the Ukraine, where "Ukrplastik" company was able to establish itself, not in Russia.
With difficulties of quantitative growth quality development and introducing of new products must be the primary goals as well as increase of technical effectiveness of existing production. The independent specialist Yuri Pavlov told about domestic researches of catalists for caprolactam production. Their characteristics are not inferior to import analogs, however, due to the fact that their twice as cheap and have the same service life, the caprolactam cost can be 3-5% lower. Dmitry Sapozhnikov, senior researcher of Institute of Organoelement Compounds, RAS and Svetlana Hashirova, professor of the Kabardino-Balkar State University told about promising developments of composite materials on the polyamide basis. Mrs. Hashirova`s report devoted nanocomposites with layered silicates. It`s planning to create the first domestic innovative production with capacity of 10 thousand tones per year in Nalchik with local montmorillonite application. Mr. Sapoghnikov told about Institute`s developments in modified polycaproamide obtaining area, which differ improved mechanical properties and UV-stability. The first parties of experimental production will be on the market in 2012.
According to Creon`s Chairman Fares Kilzie, Russian caprolactam producers shouldn`t rely on domestic processing development. Polyamide fibers market receded into the background and European automotive composites producers has taken a waiting position about Russia, because they understand that without their technology the Russian industry can not develop. The industry should bet on the competitive feedstock and geographic advantages implementation: to use the aromatics resources and proximity to China to strengthen its positions on this market and to phase out the players, who do not have their own low-cost raw materials. The producers should switch to nylon export, not caprolactam, because a new producer of this polymer (comparable in strength to the "KuibyshevAzot") will appear soon. However, it needs to resolve issues with the aromatics supply, which strongly inhibit the industry investment development. The major oil companies, such as "LUKoil" and "GazpromNeft", have the greatest opportunities.