PETpla.net Insider 07+08 / 2020

SURVEY PETplanet Insider Vol. 21 No. 07+08/20 www.petpla.net 34 Focused on feedstock affordability and low-margin converting Russian PET market by Maria Dimenko, Alina Ilyicheva, Creon Market Monitor The 15-20% increase in demand for plastic packaging in March and April has revived the PET market, and in May Russian feedstock producers raised the prices. Since then, many converting companies switched to more affordable supplies from China; the local PET market became loose. The bottle-grade PET accounts for about 94% of virgin PET market volume in the consumption struc- ture of the Russian market, and the remaining 6% belong to fibre, sheet and film-grade PET. Currently, the total capacity for PET produc- tion in Russia is 635,000 t. In 2019, 602,000 t of virgin PET was pro- duced. That was slightly lower than in 2018, and was caused by the unplanned turnaround at Polief plant. Market participants interviewed by Creon said that due to self-isola- tion and rainy season, the sales of PET-bottled soft drinks had dropped by more than 25% compared to the same period of previous year. At the same time, Russian produc- ers of feedstock raised the spot prices in March and April anticipat- ing increased consumption. After that in May, converting companies switched to lower-priced virgin PET from China, where the output grew since the quarantine had been lifted. This situation led to the stocked warehouses and oversupply in the market. “Russian producers of feedstock raised the price too high, and converters started imports from China, so the import share in the PET segment was large in the first five months. By the end of May, Rus- sian producers lowered the prices, and locally produced PET will be back in demand again gradually. The situation was disturbing, as this was the way to lose your clients; sup- pliers’ strategy was wrong as they expected the short-term profit”, said the source in the market. Indeed, in the first week of June, the spot prices of Russian producers fell from 80,000 rubles per ton [992 EUR] to the level of contract prices at 72-74,000 rubles per ton [893-918 EUR]. Decline in soft drinks, growth in packaging Consumption of carbonated soft drinks has suffered most notably, first of all in the premium seg- ment. “Consumers started cut- ting expenses, and the premium segment was affected the most. Roughly speaking, children would get their soda, but in a cheaper category”, said one of the sources in the market. The PET demand saw changes in the bottling size in favor of larger volume: while 0.33 l bottles were more popular earlier, the trend is now shifting towards larger bot- tles, 1 l to 5 l. However despite a sig- nificant reduction in the demand in May, the PET converters are expect- ing recovery this summer, assum- ing hot weather. “We expect to be revived when the heat comes”, the expert says. “If we compare month- to-month data, the market is down, but if we compare the period of January-May, we see an increase of about 10%”. Experts also noted the increase in demand for PET pack- aging: “We see that plastic is back, it’s everyone’s good friend again”, says the manufacturer of PET pack- aging equipment. In March/April, the demand for food-grade plas- tic packaging grew sharply. How- ever, already in May, this segment lost 75%, since street trade was suspended and restaurants were closed. “Overall, consumption pat- terns have changed a lot: “eat-to- go” has gone completely, although earlier it was developing rapidly. Restaurants are closed, people are sitting at home. For example, demand for sunflower oil went up first, and then it fell. We can’t com- pare 2020 and 2019 data, as they are radically different”, - said the major producer. Where does the market go Market participants are cautious in long-term forecasts. However, new production lines, equipment and recycling projects are being planned, and new players are emerging. “This year we are not expecting large investments, but the overall trend is towards investing in production, con- verting and recycling. And this is real money”, says the industry expert. To date, pharmaceutical and food sectors remain the most demanded, show- ing an increase of about 20% since March due to the explosive demand for personal protective equipment and online delivery services. Rus- sian converters also increased output of PET sheets during pandemic, as these are now widely used in shops, banks, gas stations, and other places where physical contact between people needs to be prevented. Ekopet company has increased daily produc- tion by 4.5% and, according to Alex- ander Anikeev, general director, at the moment the operation rate stands at 109%. Overall, experts agree that the packaging market will continue to grow, but its focus will shift towards cheaper and lower-margin packaging. “We still believe that new capacities for PET production and converting in Russia are needed, as the demand will recover, and the lobbyist attempts to restrict plastic packaging have gone quiet. Globally, PET is oversupplied, so the import alternative will remain affordable, but for the Russian market to develop, it needs locally produced granules, preforms, and converted products even more. Moreover, I hope that the share of recycled PET will increase and find its demand”, said Nikolay Asatiani, CEO of Creon Energy Asia. www.creon-conferences.com/en