| |
| |
 |
After a two-year delay, RusVinyl’s $1.3bn Nizhny PVC plant breaks ground |
|
Oleg Kouzbit, Online News Managing Editor
Over the past three years Marchmont reported on-again, off-again plans by Russia’s SIBUR and Belgium’s SolVin to build one of Eastern Europe’s largest PVC manufacturing projects just outside Nizhny Novgorod. Construction schedules were moved back three times between 2008 and now. But earlier this month the consortium finally announced ground-breaking for its new factory, which is expected to begin production by Q3 2013. The construction cost has mushroomed to $1.3bn. RusVinyl’s first hurdle is to get 60% of the funding it needs from Sberbank, the EBRD and some others. The second is whether the Russian market for PVC will be robust enough for the company to sell its expected 330,000-ton annual production.
RusVinyl, a JV set up three years ago by St. Petersburg’s SIBUR, Russia’s leading petrochemical group, and Belgium’s SolVin, to carry out a PVC project in the Nizhny Novgorod region, has finally broken ground on Phase 1 of its $1.3bn polyvinylchloride plant that was originally planned for 2008.
According to SIBUR Holding president Dmitry Konov, the first stage with a capacity of 330,000 tons of PVC and 235,000 tons of caustic soda a year is scheduled to be launched by the Q3 2013.
It took the consortium more than eight months to finalize project details after all necessary government approvals were received last fall. The complex will be built in the town of Kstovo, a suburb just outside Nizhny Novgorod.
The RusVinyl shareholders will reportedly fund about 40% of the investment; Sberbank and the European Bank for Reconstruction and Development are expected to provide a $190m loan each, with the remainder hopefully raised as commercial loans against guarantees by yet-unnamed export credit agencies.
With an anticipated 11-year loan term, SIBUR’s Mr. Konov forecasts the project payback period to be in the same ballpark.
Same idea, different plans
SIBUR and SolVin first came up with their idea for a state-of-the-art PVC plant more than three years ago. The partners spent a year on market studies and Marchmont reported the project was on track for ground-breaking in the fall of 2008.
The global financial crisis and its aftermath caused both the financials and the timing to be repeatedly revised. The original construction estimate was $940m; the much weaker ruble has caused it to mushroom to $1.3bn. The new factory was first supposed to be launched in the Q3 2008; then the commissioning was moved back to mid-2010; now plans call for production to start in 2013.
Last year the partners pinned their hopes on an $860m loan from government-owned Vnesheconombank (VEB). When the loan failed to materialize, RusVinyl turned to Sberbank and the EBRD to secure funding.
Eyeing an SME-focused cluster
SIBUR and its Belgian partner hope their Kstovo production site will be the nucleus of an industrial cluster making polymer-based products.
Analysts believe the consortium’s model is a similar polymer hub that operates in Tatarstan’s Alabuga SEZ (special economic zone). That cluster is located next to the supply (local petrochemical firms) and demand (auto maker Sollers) ends of the production chain.
Kommersant quotes Renaissance Capital’s Marina Alexeyenkova as saying, “…to establish a Nizhny regional cluster RusVinyl may involve local SME partners…” She thinks by supplying high-quality PVC the Kstovo factory will get close attention from regional small and medium-sized companies that will use the material to replace poorer PVC from older domestic suppliers.
There’s a lot of agreement that most Russian PVC is not really adequate for the predominantly imported equipment used by these SMEs. RusVinyl is counting on them to buy their products so they can start making internationally competitive polymer items.
Solid timing or plastic dreams?
SIBUR Holding is already reportedly mapping out expansion for its PVC division. According to management, the company may decide to increase the prospective plant’s output to 500,000 tons provided that PVC consumption in Russia shows steady growth. But this growth is partially dependent on the salt deposits in the Nizhny Novgorod region, which need to be more aggressively developed to provide the raw materials the plant needs to step up its production.
Renaissance Capital thinks the project timing is on track to fill Russia’s growing needs for PVC, noting that a significant amount of PVC is still imported.
But a closer look at the market still reveals a lot of softness.
Until very recently, Russia’s PVC market was deeply depressed. Last year it barely consumed a reported 50,000 tons. The continuing lethargy of major PVC users like construction and auto sectors dragged the whole market down.
Finam Management’s Dmitry Baranov is still bullish. He forecasts that the country’s PVC market capacity will grow to 1.8-2 million tons by the time RusVinyl’s plant comes on line and feels that even if the company sold all of its production, it would still have only a 19% market share.
Like so many promising projects in the Niznhy Novgorod region that have been delayed, scaled down or abandoned entirely, all eyes will be on Kstovo to see whether the “if” can become reality.
 Recent features & updates |
|
« Back to homepage |
 | Welcome, , you have successfully logged in.
Continue |
 | Incorrect username or password, please try again.
Continue |
|
|
|
News
