An early reflection of recent crisis on petchem industry

Eastern Europe has been facing one of the severest security crises in decades. The Russia-Ukraine conflict has already triggered a rally in crude oil and gas markets as well as a big dose of uncertainty, adding to the already high inflationary pressure on global commodity markets.

Price rising will definitely find a reflection on the downstream chain in the petrochemical industry, some of which has already been visible. Bewildered by the developments, players concur that it is too early to make a proper analysis of the recent situation.

Russia is Europe’s largest exporter of energy, natural gas, and hard coal. The continent depends on Russia for more than a third of its gas supply via Ukraine.The spike in energy prices will evidently have knock-on effects on production, especially in Europe, which will dent the recovery of trade from the Covid recession.

European petrochemical players are widely concerned about steeply higher utility costs. “Converters may have to lower their run rates to cope with tremendous gains in power and gas costs," said a manufacturer in Italy.

What is the importance of Russia in polymer trade?

Russia is undoubtedly not as strong in polymer exports as in oil, gas and coal. However, statistics suggest that Russia exports around 2.4 million tons of polymers per year, which is not a small volume.

PE makes up half of Russia’s overall polymer exports while PP stands for 30%. Their major destination is China for PE and Turkey for PP. As for PE, %50 of their export is to China, 9% to Kazakhstan and 4% to Turkey. Regarding PP, Turkey has a 23% share, standing at the top of the list. Poland and Belarus followed with respective shares of 15% and 12%.

Market players argue that Russia will maintain its exports to China and Turkey, even if some market share is lost in sales to Eastern Europe. Some even opine that Russian PP and PE may show up in these regions at competitive prices in case of stock pressure amidst narrower alternatives for exports.

News source: www.chemorbis.com