Despite geopolitical tensions, Russian private companies keep working and exporting their products to different countries. Andrey Frolov, CEO of SIBUR International " the global trading arm of Russia's largest petrochemical producer SIBUR " spoke about the challenges and opportunities for the company's business.
What is happening now with SIBUR's business?
As you may know, last year SIBUR acquired petrochemical plants in Russia's Tatarstan region, including NKMK which produces a wide assortment of synthetic rubbers. This deal strengthened our market position. We are now completing the integration of the acquired assets and optimizing the business processes inside the group.
As much as 60% of our sales accounts for the domestic market, and the rest is exported. Our export trade has been historically balanced between Europe and Asia. We've been working with China for more than a decade. We sell polypropylene and polyethylene fr om our flagship $9 billion ZapSib production facility to Chinese customers. China's SINOPEC holds a minority stake in SIBUR and helps us to market some of our products in the country.
We have a long-standing history of cooperation with India, wh ere we have a joint venture with Reliance Industries. Out JV in Jamnagar started production of butyl rubber in 2019 and halogenated butyl rubber in 2021.
Now, because of geopolitical tensions, our exports to Europe are declining, and we are increasing exports to Asian markets. We already had plans to expand sales to Southeast Asia, but recent events have accelerated their implementation.
How have the European sanctions against Russia affected you?
SIBUR itself is a non-state company and has no political role. But the European Union has indeed imposed restrictions against several chemical products that we used to export there. This is an unfortunate development. It's painful both for us and our European customers to break supply chains that have evolved over many years and to incur higher costs.
But we are flexible. As I said, we are increasing shipments to China, Southeast Asia, and Turkey. As for polymers, we increased the share of domestic sales. This reflects the fact that Russian producers, including our own units, advanced production of certain value-added plastics that were previously imported fr om Europe.
What are you doing to increase sales to Asia? Any marketing tricks?
We are trying to fulfill demand and to provide quality and convenience for our Asian clients. We offered Chinese customers to pay for products in yuan, which quickly became the most popular payment method. We also provide customs clearance in China and delivery inside the country to the point of the buyer's choice.
We are planning to roll out the same options in Vietnam later this year. We started sales to Vietnam in 2021 and consider it a very promising market, wh ere polymers consumption is rising rapidly.
We are also considering Bangladesh, Malaysia, Cambodia, and Indonesia, but our sales volumes to these countries are still very low.
What about India?
This year, we started production and exports of maleic anhydride, a chemical compound which is used for production of fiberglass, artificial stone, and pharmaceuticals. We shipped the first batches and have high hopes for the sales of this product in India.
As I mentioned, we established a $450 million joint venture with Reliance Industries and to date, the total investments of the two partners amounted to $ 600 million. It produces butyl rubber and halogenated butyl rubber in Jamnagar. These rubbers can be used in automotive inner tubes, cable insulation, roofing membranes and many other applications. Reliance's oil refinery supplies feedstock for these facilities. We own 25% of this JV.
Does SIBUR continue to carry its ambitious investment program, or was it put on hold because of political situation?
We keep investing. We have a long-term plan for upgrading production facilities in the Tatarstan region that we acquired last year. We are also committed to completing the Amur Gas Chemical Complex in Russia's Far East, which is set to become one of the world's largest facilities for production of polypropylene and polyethylene.
Have you been able to receive the necessary equipment for the Amur facility?
Our German contractor halted involvement in the project because of sanctions. We would also need to find a substitution for some of the European equipment, which we initially planned to deploy there. Together with our partner, we are working to complete this Amur Gas Chemical Complex.
Polymers that you produce are great for packaging, construction, medical equipment, and many other things. But they also generate plastic waste, which has become a big problem for our planet. How do you cope with this?
The answer to this problem is recycling. Plastic can and should be recycled just like steel, copper, and paper. For example, we produce PET granules, a type of polymers used to make plastic bottles. These bottles are being collected and recycled. In September, we started production of the so called "recycled PET" granules, where as much as 30% of recycled material is added to the feedstock.
Source: Economic Times (India)