Opportunities for the future

Make use of advantages
Future market Russia needs to modernise
The recession has increased awareness in Russia of the need to press ahead with modernising the economy. The best form of protection against future recessions is greater diversification and focus on innovation in the national economy. Russia intends to become more competitive internationally in the areas of nanotechnology, information technology, energy efficiency, atomic energy and pharmaceutics. The growing SME sector, booming regions such as Sochi (the venue of the Winter Olympics in 2014) and target programmes worth billions in, for example, the transport sector and water management and the development of the North Urals offer great potential in plastics and rubber processing for western suppliers.

Rising energy prices in the global market are ensuring that Russia’s budget revenue is on the rise again. For important economic sectors such as the packaging, construction and chemical industries, good opportunities for growth are forecast, and the need for modernisation in Russia and neighbouring states remains a priority. Russia is still a very promising future market for the plastics and rubber industry.

Show presence and gain a head start
Ranked third for exports, Russia and, indeed, Eastern Europe is still one of the most important markets for the industry. Russia has helped suppliers of plastic and packing machines by no longer charging import sales tax for a range of machinery and equipment since 1 July 2009. This has given foreign manufacturers a considerable price advantage. A precondition is that equivalent products are not also produced in Russia.

In particular companies which are using the difficult period to create medium and long-term business opportunities and to provide customer care can benefit from this. INTERPLASTICA in Moscow has proved that it is a stable platform for the plastics and rubber industry in Russia and that it is the leading trade fair in the region. It’s enough for a reason to exhibit at next INTERPLASTICA from 25 to 28 January 2011. We would be pleased to reserve a stand for you.

Special plastics in great demand
Advantages for suppliers of high technology
There is highly dynamic growth in the demand for high-quality plastics such as polypropylene or polyethylene in the Russian market. The most important group of customers is the packaging industry, but thermoplastics are also required in the automotive industry, in the manufacture of plastic pipes, in household equipment and for construction material. While imports of basic polymers are noticeably being replaced by Russian products, more complex materials and additives have to be imported. To date there has been a lack of appropriate production facilities for this in Russia. Demand should continue to rise in the medium and long term as the development potential for polypropylene is immense. In the USA, Western Europe and Japan, per-capita consumption is 20 to 25 kilograms per year. In Russia it is just 3.8 kilograms, one sixth the consumption in Western Europe.
The extrusion of polyethylene films is responsible for around 20 per cent of polymer consumption in Europe and, in Russia, the industry is making up considerable ground. The lion’s share of 86 per cent of PE films is used for the different types of packaging, above all food packaging. Here, high-quality products are increasingly in demand. On the one hand, Russians are shopping more and more in supermarkets while, on the other hand, their needs are changing with availability. Advantages such as the extended shelf life of fresh food and less damage in transit have resulted in greater consumption of co-extruded barrier film. Industry experts are expecting an increase in the production of PE film in Russia in the next five years. With rising quality requirements, the processing industry in Russia is in increasing need of modern equipment and specialist technologies.

Impetus for the Russian automotive industry
Despite the global crisis in the automotive industry, the Russian automotive market provides manufacturers and parts suppliers with good prospects for the long term. The number of vehicles in Russia should continue to rise and is expected to triple to 90 million vehicles by 2020. One reason for this is the age of cars, with more than a third more than 20 years old. They will need to be replaced urgently. The government has provided fresh impetus to the Russian automotive industry by paying a scrapping premium since March 2010. Anyone scrapping an old car will receive 50,000 roubles from the state to buy a new one, provided the car is manufactured in Russia. (Sources include: http://www.gw-trends.de/russland-startet-abwrackpraemie-927565.html

Modern technologies in great demand
The Russian rubber industry has benefited in recent years from the great rise in demand for tyres in the domestic market and from traditionally strong exports. However, in mid-2008, the Russian automotive market collapsed. The introduction of the scrapping premium should boost new car sales. Russian and foreign companies are backing the market and investing locally. Experts are assuming that the markets will pick up noticeably from mid-2010 and are expecting considerable growth in the automotive and therefore also the tyre industry in the next five years. As most of Russia’s current plants have technologies from the 1950s and 1960s, and are unable to meet rising quality standards, Russia continues to be reliant on the import of modern machinery and equipment.

The demand for high-quality silicone rubbers should experience dynamic growth in the next few years and continue to provide western companies with market share in Russia. Silicone manufacturers of the latest generation of safety cables and truck parts expect fresh momentum. As silicone requires highly specialised industrial manufacturing, the demand from Russian processing companies for silicone rubber will be covered increasingly by imports, providing foreign companies with good sales opportunities.

Good prospects for the long term in the construction industry
The cautious investment behaviour of industry in general slowed down the construction industry in the difficult trading year 2009. There is a substantial backlog, because important investment projects were delayed or discontinued. Real prospects for the construction industry are opening up in infrastructure construction. In mid-2009, a new state holding company was established which will oversee the construction and operation of toll roads. Western European companies are represented in the construction and operator consortia of the new motorways. New projects are also expected in the area of power plant construction. Around 26 billion dollars have been budgeted in 2010 to expand the power supply system in Russia. Major investment is also imminent to expand the water supply system and to construct wastewater treatment plants. The projects provide manufacturers and suppliers in the plastics and rubber processing industry with new business opportunities.

Efficiency technologies and lower energy consumption are also playing an increasingly important role in the Russian construction industry. In January 2010 the Russian Environment Ministry approved the criteria for the ecological certification of buildings. Due to the international awareness of construction projects in the Olympic city of Sochi and due to the new energy law, the subject is now higher up the agenda. The projects in the Olympics region will set new standards for ecological and sustainable construction, which will then have an effect nationwide. Most of the technologies and materials for "green buildings" would have to be imported, because they are not produced in Russia. This trend reveals new business opportunities for western technology providers in the Russian sales market.

Packaging industry
Despite the difficult conditions, Russia’s polyethylene manufacturers have increased production by one-tenth. Thanks to massive investment in expanding capacity and targeted quality improvements, Russia is now playing in the first division. A range of further investments is planned. In 2009 the production of, and demand for, high-density polyethylene was greater than the output and sales of low-density polyethylene for the first time. The hard polymer was responsible for over 50.5 per cent of Russian PE output in 2009. The polyolefin, with which drinks bottles, packaging and household goods are manufactured, is now responsible for around 55 per cent of the demand for polyethylene in Russia. Despite massive investment in new plants, Russia is not able to cover its demand for linear low-density polyethylene itself and continues to be reliant on imports.

Chemical industry
The chemical industry has suffered in the past year, in particular from weak demand from the construction sector and automotive manufacturers. Investment continues to be made in the chemical industry, though foreshortened. The Ministry of Economy is expecting chemical production to grow by up to 4 per cent by 2012. The industry is preparing for the future by expanding capacity, impetus being provided by the strong demand for nitrogen fertilisers and high-quality lubricants. By 2014 the Gremyachinski potash mine will be opened in the Volgograd region. In order to realise this project, 1.9 billion euros will be required, and an additional investment of 220 million euros is planned to develop the infrastructure around the storage site (housing, schools, hospitals and roads).

Financing
The financing of the investment project remains a key issue. However, credit lending is picking up again in Russia and trust in the ruble is growing. From 2010, the government only wants to issue state guarantees for new investment projects. In order to stimulate lending, the central bank has lowered the refinancing rate several times during the year, most recently in February, to 8.5 per cent. The base rate has never been so low in Russia. (Source: http://www.leitzinsen.info/zinsen.htm, 15.3.2010)