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Number of converters to go down 1.5 times

July 27/2009
MOSCOW (MRC) -- The number of Russian polymers producers is to decrease 1.5 times by 2014, MRC’s analysts state in the Annual Reports.

Today, many Russian companies have rubbed into a heavy “liquidity storm”.

Particularly this refers to businesses that have a lot of short-term loans borrowed for long-term projects. Companies were taking credits knowing that they could always be refinanced.

Such refinancing was possible still in summer 2008; now, it is impossible. Such companies will most likely take a decision to quit business. We assume that about 10-15% of Russian converters will become technical bankrupts due to the crisis.

The fast consolidation of more successful groups will be another consequence of the crisis. Moreover, integration can be both vertical and horizontal.

 The vertical model is not very popular (however, in Western Europe, every tenth polymer processing business belongs either to one or another petrochemical group). All world petrochemists will be restructuring their businesses; some of them will even announce bankruptcy. Petrochemists will very much unlikely go downstream, while the crisis is very good time for converters to expand their businesses horizontally.

In Russia, consolidation inside of sectors will picking up speed. The smaller ones will be selling businesses, and the bigger ones will be buying them. Most likely, over the course of five years, there will appear about 50-70 Russian groups similar to the European business (processing of no less than 50 KTa, a consolidated purchase and sales center, and plants all over the CIS territory).

There are already a dozen of such groups in Russia: Retal, Polyplastic, Europlast, Biaxplen, Penoplex, Tekhnonikol, Mega-Plast. Furthermore, there are already European groups in the Russian market that operate several plants in the country: Coca-Cola, Pepsico, Alpla, Profine, Veka, P&G, Henkel.

By the way, the business consolidation scenario has already been applied in other countries: in Benelux, there are only 750 converters that consume 3 596 KT of polymers / 4.8 KT/converter, in Spain - 2000 / 3 698 KT / 1984 MT, in Poland – 1700/ 2 054 MT / 1208 MT. There are about 5200 converters in Russia, and average annual consumption is at the level of 655 MT. This is nearly 8 times less than in Benelux, and 2 times less than in Poland. We do not except that by 2014 the number of Russian converters will reduce 1.5 - 2 times.

 Source: MRC


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