Market Report, "Ukraine Petrochemicals Report Q2 2016", published
New Energy research report from Business Monitor International is now available from Fast Market Research
[USPRwire, Sun Feb 28 2016] Ukraine's petrochemicals industry will remain beset with the problems caused by the country's political turmoil and resulting economic collapse. The devaluation of the hryvnia has added to the economic headwinds, while the end-markets for petrochemicals - notably the automotive and construction sectors - remain in a slump. Even if consumption does recover, a return to pre-crisis levels of petrochemicals output is unlikely and polymer and fertiliser plants will produce at a fraction of capacity, if they are operating at all.
BMI estimates that in 2015, rubber and plastic production was down 11% y-o-y, with rubber output falling 20% y-o-y and plastic down 9%. The rate of rubber output decline eased in H215 with some growth from September. However, growth in the final months of 2015 was from a very low base and well below the rate necessary to return to pre-crisis levels. Further upstream, most of Ukraine's refineries remain closed as of 2015 leading to a severe underutilisation of its refining capacity with knock-on effects for the country's embattled petrochemicals industry, which lacks sufficient local feedstock access.
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The industry will not pick up in the context of the current circumstances. We maintain this situation will endure until amelioration in the political, economic and security situation comes through. In terms of consumption, the market will remain well below the 2007 peak over the forecast period and while growth may return, recovery will be impeded by the country's political splits and economic slump. Under IMF reform plans, Ukraine is implementing restructuring that will have a detrimental effect on the domestic industrial sector, which consumes most of Ukraine's petrochemicals output. Among these reforms is the implementation of a rise in gas tariffs which will adversely affect residential and industrial gas users.
Ukraine's largest petrochemicals producers - the fertiliser producer Stirol, which operates in the troubled east, and Lukoil-owned Karpatneftekhim, which operates the countries polyethylene and PVC plants - are shut, with no firm plans to re-open them at the time of writing.
The automotive and construction industries, the main domestic consumers of petrochemicals, will remain in a crisis situation and will decline to new historical lows this year. Meanwhile, export markets - of which recession-hit Russia, with which the country is in de facto conflict, is the main market - are unlikely to offset the domestic decline.
This quarter, Ukraine's Petrochemicals Risk/Reward Index (RRI) score remains steady at 38.4 after several quarters of decline. In spite of the stability in its score, the country has fallen to last place in the Europe rankings, putting it 0.1 point behind Azerbaijan, which has risen this quarter. The country's economic and political crisis is unlikely to abate any time soon, which ensures the country will retain a low score and rank.
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