RusVinyl worldscale PVC plant opens in western Russia

LONDON (ICIS)–A new chapter in the Russian polyvinyl chloride (PVC) market has begun with the official opening of the 330,000 tonne/year RusVinyl project near Kstovo in the Nizhniy Novgorod region of western Russia, joint venture partner Sibur said on Friday.

RusVinyl – a 50/50 joint venture between Sibur and SolVin (a 75/25 JV between Belgium’s Solvay and BASF) – is a worldscale plant which required investment totalling over R60bn (€1.4bn).

It has capacity to produce 300,000 tonnes/year of suspension PVC plus 30,000 tonnes/year of specialty emulsion grade. Co-product caustic soda capacity is 225,000 tonnes/year.

The plant has already started producing test batches of product. When it reaches full capacity Sibur hopes the plant will achieve a 30% market share in Russian PVC.

Russia currently imports significant volumes of PVC and Sibur insists that production from the plant will mainly replace imports and not be targeted at exports.

Sergey Komyshan, managing director, basic polymers, and member of the executive board of Sibur, said Russia imported around half of its PVC requirements in 2013 to supply a Russian market totalling 1m tonnes that year.

“The plan is to sell PVC mainly in Russia/CIS as there won’t be much need to significantly tap export markets if at all. It will help Russia to dramatically reduce imports.” 

The Russian PVC market shrank by 4% year on year in 2013 and for 2014 Sibur forecasts contraction of 5% due to decreased construction activity, weaker infrastructure investment and the devaluation of the rouble.

But according to Komyshan: “RusVinyl will tap into imported volumes of PVC from the US, Europe and China because it is highly competitive. We expect the market to recover and from 2015 we expect growth of 3-5%/year to 2020, driven by construction.”

He points out that PVC consumption is only 7kg/head in Russia whilst it is 12kg/head in Europe so there is plenty of room for further market expansion.

Sibur provides ethylene feedstock for the plant and increased the capacity of its nearby cracker from 240,000 tonnes/year to 360,000 tonnes/year. It is a mixed feed liquid cracker using natural gas liquids (NGLs) and liquefied petroleum gas (LPG) from Sibur’s facilities in western Siberia, the Urals or from a Lukoil refinery.

According to Komyshan, the JV combines Solvay’s PVC technology expertise with Sibur’s local knowledge and experience in executing projects in Russia. Solvay and SolVin  are the licensors for the vinyls and chlor alkali technologies.

The RusVinyl JV is a separate business set up to operate the facility and sell to the market independently in Russia/CIS and via Solvay/SolVin outside of Russia.

SolVin has three RusVinyl board members, including one from the European Bank of Reconstruction and Development which invested €150m in the project and has a 21% share in SolVin, whilst Sibur has three.

The board appoints the top managers including the CEO (by SolVin) and CFO (by Sibur). Almost all of the operational staff will be Russian with a total of 500 employees. A small number of western process leads will be in place for a limited period of time

Sibur and SolVin shareholders will each take 50% of RusVinyl’s dividends.

Option to boost capacity

RusVinyl has been constructed to give it the option of being expanded from 330,000 tonnes/year to 500,000 tonnes/year when the market demands it.

Asked what criteria there are for a decision on the expansion, Komyshan said: “We should have a 30% market share in PVC, all caustic should be successfully sold and the plant operating rate should be basically at the design capacity. Plus forecasts for market growth should be reasonable.”

He added that the plant is designed to be debottlenecked with a minimum of investment. The logistics platforms and cracker are designed for an eventual expansion. 

Sibur’s growth strategy

Komyshan said RusVinyl fits perfectly with Sibur’s goal of capturing domestic growth, driven by demand as well as Sibur’s competitive hydrocarbon feedstock position.

“RusVinyl is a bit of both. We have increased cracker capacity to consume our available feedstocks. We have the option to increase our cracker capacity to consume more feedstocks and will sell to the demand currently satisfied by imports.”

He said demand for petrochemical products in Russia has grown and will do so again, eventually, as consuming industries grow. “Until now imports have satisfied much of this. But new capacities such as the Tobolsk polypropylene (PP) plant (onstream 2013) and RusVinyl mean we expect 2014 to become a pivotal year for Sibur to take domestic market share from imports.”

He added: “It’s a beautiful plant in which we have invested heavily, both financially and in the efforts of the two companies. We believe that no-one else in Russia will be able to construct such a huge and complex, integrated plant in the medium term. With this plant appearing we may see pressure on less competitive producers and some shutdowns of smaller players.”

“As a company, and personally, I have learned quite a lot from working with our partners. For example we have started outsourcing of technical gases because of our experiences with RusVinyl. Around 20 people are western employees at RusVinyl.”

No impact from sanctions

According to Komyshan, Sibur has not seen any restrictions on polymers so far as a result of sanctions linked to the Ukraine conflict. “We don’t expect to see any restrictions on the movement of polymers into Europe from sanctions,” he added.