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Ukraine Petrochemicals Report Q2 2012

Ukrainian petrochemicals output performed consistently well throughout much of 2011 with primary
plastic output up 25% y-o-y to 550,500 tonnes, according to BMI’s latest Ukraine Petrochemicals Report.
Production was up on pre-crisis levels, despite the lacklustre performance of the domestic market.
Ukraine’s chemical and petrochemicals industry was one of the leading sectors throughout the year with
14.4% growth overall.
Output growth has been stimulated by both domestic demand and exports to Russia. As such, a
weakening global growth picture bodes ill for Ukraine’s export-dependent economy, and a faltering
domestic demand picture underpins our lower growth expectations for 2012. A weak external scenario
has large implications for Ukraine’s economy, which is heavily geared towards the export sector on
which petrochemicals depends, with exports of goods and services accounting for close to 50% of GDP.

The country’s export basket features low diversification being heavily geared towards the basic products.
A slowdown in exports will weigh on chemicals and petrochemicals production. Seemingly endless gas
pricing disputes with Russia colour the Ukraine’s energy landscape, putting pressure on the country to
maximise domestic production and diversify supply.

In Q112, Lukoil announced plans to invest more than EUR45mn in 2012 to expand Karpatneftekhim,
its Ukrainian subsidiary and the country’s largest producer of petrochemical products. Most of the funds
are to be allocated towards the launch of PVC production for window profiles, as well as modernisation
of production facilities of the plant. In addition, Karpatneftekhim also plans to start the design of facilities
for the production of emulsion PVC with a capacity of about 30,000tpa. The investment is an increase
from the EUR25mn spent in 2011, a significant part of which was allocated in the launch of PVC
production with a capacity of 300,000tpa. In 2011, the Ukrainian PVC market amounted to 125,000
tonnes in volume terms, the majority of which accounted was supplied through imports, mostly from the
US and the EU countries.

Ukraine remains in 8th place in BMI’s Central and Eastern Europe Petrochemicals Business Environment
matrix, although its score has risen by 1.3 points to 40.9 points. This puts Ukraine 1.6 points ahead of
Bulgaria and 4.2 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 that provides
some stability in the operating environment for the petrochemicals industry and trade relations with its
largest market, Russia. The score has improved as a result of a rise in its long-term financial markets
outlook related to the support of IMF credit, although Ukraine still faces a struggle keeping to the terms
of the loans.

Chemistry   Market study
Year:   2012
Publisher:   Business Monitor International Ltd.
Price:   530.00€
More about Business Monitor International
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