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Recently Released Market Study: Ukraine Petrochemicals Report Q4 2013

New Energy market report from Business Monitor International: "Ukraine Petrochemicals Report Q4 2013"


Boston, MA -- (SBWIRE) -- 11/15/2013 -- The Ukrainian petrochemicals industry could get a boost if capacity is brought back online in H213, but the overall outlook is to the downside with a domestic market in recession and lacklustre external markets. BMI sees little dynamism in the Ukrainian petrochemicals industry in the years ahead. Ukrainian petrochemicals output continued to perform poorly in H113 with chemical sales down 2.7% yearon- year (y-o-y). Plastic production fell by 53% y-o-y to 138,800 tonnes, following an 11.4% fall in output to 487,500 tonnes in 2012. The decline is mostly related to the suspension of activity at Karpatneftekhim's complex.

Karpatneftekhim's 300,000 tonnes per annum (tpa) suspension polyvinyl chloride (PVC) plant was idled for a maintenance turnaround in September and October 2012, but by mid-2013 was still shut. The complex also includes polyethylene (PE) production. Its Russian owner Lukoil had claimed that the plant in Kalush, which only began operations in August 2012, was commercially unviable due to a disagreement over the issue of refunding value-added tax. Lukoil indicated that it may reopen the facility in August following an undisclosed deal with the government over tax disputes, including a 6.5% tariff on imports from the EU and US, a move that would mark a recovery in Ukrainian plastics production.

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- The Ukrainian petrochemicals industry is facing a tough outlook with the domestic economy in recession, compounded by a weak export base and currency instability. Signs of a robust recovery remain conspicuously absent in Ukraine, as weak external demand continues to drive considerable weakness in the economy.
- A weak external scenario has large implications for Ukraine's economy, which is heavily geared towards the export sector on which the petrochemicals sector depends, with exports of goods and services accounting for close to 50% of GDP. Household consumption should provide some growth opportunities, supported by double-digit real wage growth. Retail sales remained robust throughout 2012, and should continue to do so in H113. This should assist with the consumption of PE and polyethylene terephthalate, but beyond this, our expectation for hryvnia devaluation poses major risks to this dynamic.
- The automotive industry remains in the doldrums, dragging down the consumption of engineering plastics, particularly in the polypropylene segment. Vehicle production declined 54.2% y-o-y in H113, and the situation will not improve for the rest of 2013. BMI has long maintained a bearish outlook on the business environment and overall manufacturing and productive capacity in the country with little hope of a recovery to pre-recession levels in the forecast period.

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