CMT’s 6th Global Chlor-Vinyl Market presentation by Sergey Yaremenko, MRC Managing Director. -Future market analytics -Current data of PVC market -Impact of Lukoil

1. Current Balance in Russia, Ukraine & Central Asia
CMT’s 6th Global Chlor-Vinyl Market
Istanbul, June 09-10, 2011
MARKET
Sergey Yaremenko R E P O R T C O M P A N Y
Managing Director, MRC

2. Agenda
About us
Future market analytics
Current data of PVC market
Impact of Lukoil

3. About MRC
We make market reports.
We focus on Russia and FSU countries.
We are specialists in PE, PP, PS, PVC and PET markets.

4. We produce 1500 reports annually
Price reports – for pricing data Monthly reports – for balance of supply & demand
ScanPlast – stocks analysis DataScope – prompt Export-Import data
Forecast – price forecasting Annual reports – everything

5. November, 2006

6. We provided data to Harriman Chemsult

7. Today we have a joint-venture with ICIS
ICIS-MRC covers data for FSU countries
MARKET
R E P O R T C O M P A N Y
MRC’ content:
ICIS’ content:
Russia
Asia
Ukraine
Europe
Kazakhstan
USA
Uzbekistan
Belarus’

8. ICIS-MRC reports today
MARKET
R E P O R T C O M P A N Y
Converters that used ICIS-MRC reports
consume 60% of PVC in Russia
… and many others

9. ICIS-MRC attracts big experts for co-operation

10. Separately MRC publishes the forecasting reports
All world experts make mistakes as
often as they make forecast.
Anyway we developed Price Forecasts
that include factors affecting prices.
Wheighting these factors at your sole
discretion you make your own
forecast.

11. Agenda
About us
Future market analytics
Current data of PVC market
Impact of Lukoil

12. today
when you don’t use any analitycs…
… you should go ahead but you don’t see anything

13. today
when you don’t use any analytics…
when you don’t use any analitycs…
… you should go ahead but you don’t see anything

14. today
when use good analitycs…
today
… you should go ahead but you have
to see to rearview mirror

15. today
today
when you use good analytics…
when use good analitycs…
today
… you should go ahead but you have
to see to rearview mirror

16. tomorrow
tomorrow
when use good analitycs… of smart navigation tools…
you will use a lot
today
… you see to rearview mirror
…but not pdf reports

17. Our future analytics
Logically
Immediately
MRC mobile MRC scan MRC news MRC alert MRC strategy MRC help MRC post MRC reports MRC account

18. MRC Mobile

19. Online expert discussion

20. MRC Alert

21. Agenda
About us
Future market analytics
Current data of PVC market
Impact of Lukoil

22. FSU PVC market
Ukraine
Kazakhstan
Uzbekistan
Belarus’

23. Oil prices return Russian Economy to “New Normal”
New normal is when consumption grows faster than enthusiasm among businessmen.

24. Consumption of PVC in Russia in 2010 reached historical peak
1 mln. MT

25. Russia: unexpected growth
+34%
+48%
The President of SIBUR: 2010 was a year between crisis and future, in 2010 the growth
was "unexpected even for us".

26. Russia is a big net importer of PVC
Net Import of PVC in 2010 exceeded 500 KT.

27. Import of PVC for profile extrusion is a key driver of 2010
Investments into PVC processing increased by 4% in 2010 .

28. Consumption by sectors

29. New converters’ capacities

30. TOP-15 investors into PVC processing
New capacities of profile extrusion in 2010 exceed162 КТа.

31. Main equipment suppliers
For the last two years converters have prefered Turkish extruders from Mikrosan Makina.

32. Market grew by 29% - 2011 (Jan-Apr)
Russian production of PVC decreased by 7% in Jan-Apr, 2011.
Import of PVC resin increased by 122%. Share of import is 62% in April, 2011.

33. USA is the biggest current PVC supplier
Russian traders and converters today prefer Oxyvinyls compared to Xinjiang Tianye in 2010.

34. Production dropped because of ethylene conflict
Salavat ethylene conflict

35. To know about Russia
Structure of polymers consumption in Russia by regions, %
Source: MRC
About half of PVC is consumed in Moscow region.
Sometimes distance between producer and customer exceeds 5’000 km.

36. PVC market of Moscow region is
equal to Polish market
4 times bigger then Ukrainian market
6 times bigger then Hungarian market
Source: MRC

37. Something about Russian converter
П
PET Size of PVC converter is 4 times bigger
than PE converter.
PVC If you want to sell even 200 KT of PVC
you could have only 30 annual contracts.
PP
PE
PS

38. Market is ready to use the contract system
Top-5 is 24% of market.
Top-10: 37%.
Top-20: 53%.
Top-40: 65%.

39. Domestic producers follow the prices of imported PVC
Source: ICIS-MRC

40. Again about “Logistic shield”
Local price PP-homo, CPT, Moscow, VAT incl, April 2008
Russia, Nizhnekamsk
Sibur’s President D. Konov introduced a
Logistics
Shield new term “logistics shield” (duties
Poland, Plock and tarrifs should help industry).
Current duty for PVC-S is 10%, but
S. Arabia, Al-Jubail
also there are the indicative prices.
0 300 600 900 1200 1500
Costs Price, FCA, export Duty Logistics to S Pb port Logistics to Moscow VAT .
Source: MRC
Usually this logistics shield is 50-150 USD/MT.
Russian producers want to control high customs duties and high indicative prices.

41. Energy saving – main driver of PVC market during the next decade
Heat consumption on 1 m2 of living area in Russia is 50% bigger than in the Scandinavian countries.
In water consumption - 350 litres per person in Russia against 114 litres per person in Denmark.
Russian housing energy consumption is 230 kilowatt-hour per m2 annually, while in EU is 77 kilowatt –hour.

42. Other PVC markets of CIS
Azerbaijan, KT
Ukraine, KT
15 6
10 4
5 2
0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
Kazahstan, KT Belarus' KT
3 0,5
0,4
2
0,3
1 0,2
0,1
0
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
Source: MRC
Ukrainian market is 3 times bigger than Azeri, Kazakh and Belorussian market together (data of 2008).
Unfortunately we don’t have good data about PVC market in Belarus’.

43. UA & KZ markets in 2010
Kazahstan, KT
Ukraine, KT
3
24
2
16
1
8
0
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
0 8 000 16 000 24 000 32 000 40 000 0 1 500 3 000 4 500 6 000
Xinjiang Tianye
Formosa
Xinjiang Zhongtai
Vinnolit
Vladimir Chemical Plant
Anwil
LG Chem
BorsodChem
Sayanskchemplast
Oxyvinyls
Polygran
Spolana
Kerem Plastik
Veka Caustic, Sterlitamak
Ineos ChlorVinyls Spolana
Georgia Gulf Ekmen Plastik
Vestolit 2009 2010 2011 Sintas Plastic 2009 2010
Source: MRC

44. Ukraine still increases
Source: MRC
Import of PVC in Jan-Mar, 2011 increased by 42%.

45. Before the launch of Kalush Ukraine orients on spot prices
US producers are the current leaders in import of PVC into Ukraine.

46. Agenda
About us
Future market analytics
Current data of PVC market
Impact of Lukoil

47. May 27, 2011: new PVC plant in Kalush oficially lounched

48. Lukoil had better visible reasons to produce PVC
Necessary investments:
PVC, VCM, Short chain
Ethylene Caustic/PVC
own ethylene/VCM
+300
+300
PVC, VCM, Ethylene, PVC,
lavsk
Berezniki caustic, salt VCM
ush Moscow Dzerzhinsk
Nizhnekamsk
+150
Kstovo
Kazan Ufa
+160
PVC, VCM,
Novomoscowsk Tomsk
Bratsk Ethylene
+120 Sterlitamack
Volgograd
+160 Chapaevsk
Salavat Sayansk
Usole
ga Budennovsk
Omsk
?
Sumgait
Angarsk
? Navoi
Declared production
Shurtan
capacities growth up to 2015:
1015 KTa

49. Kalush will export PVC not VCM
Export before
Product
maintenance, MT
VCM 222 958
Propylene 106 992
HDPE 94 963
PVC +300 KTa Benzene 39 895
Ethylene 25 776
Caustic 23 602
Source: MRC
Ethylene, KT
Caustic, KT +200 Chlorine, KT
VCM, KT +180
300 150
300 150
234 236 118 104
227
208 195 94 91
200 173 82 73
200 70 75 62
150 120 75
100 0 0 0
2002 2003 2004 2005 2002 2003 2004 2005 2002 2003 2004 2005 2002 2003 2004 2005
Source: MRC

50. Russian PVC market before Lukoil
Model of Russian PVC market, 2009-2010, KT
Average Converter, monthly, MT
800
70% of sales are contracts
250
600
Only spot
400 70 Others 90% of sales are contracts
Mainly spot
40
200 150 88
Mainly spot
102
0
45,0 45,5 46,0 46,5 47,0 47,5 48,0 48,5
Price RUB, СРТ, Moscow, VAT incl., Sep. 2010
Source: MRC

51. Russian PVC market with Lukoil
Model of Russian PVC market, 2011-2012, KT, est.
Av erage Conv erter, monthly , MT
800
600
400
170
200
0
45,0 45,5 46,0 46,5 47,0 47,5 48,0 48,5
Price, RUB, CPT, Moscow, VAT, incl, sep. 2010
Source: MRC

52. Two Chinese plants from Xinjiang will have long-term strategic
advantage compared to current spot supplies from USA.
Because of good logistics and custom clearance in Dostyk.

53. Some conclusions
Russian PVC market could be equal the German market soon.
The is only one big driver. It’s a window market.
Presidential election in 2012: we expect additional investments into Russian construction.
Shortage of TiO2 is key limitation of the market.
Cable compounds are replaced by PE-X (40 KT).
Lukoil will change the shares of all market players.
Because of low profitability in Kalush, we expect an increase UA custom duty from 0% to 5-6.5%.

54. Many thanks
Sergey Yaremenko
Managing Director
Market Report Company
sergey.yaremenko@mrcplast.com; www.mrcplast.com
Moscow +7 495 543 91 94; Kiev +38 044 240 82 35