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Ukraine's only PVC, PE producer suspends production

By: Richard Higgs
EUROPEAN PLASTICS NEWS

March 3, 2014

Karpetneftekhim, Ukraine's only PVC and polyethylene producer, has again suspended production at its site in Kalush in the face of the country's current political unrest.

Following the recent breakdown in national government, the loss making petrochemical company, part of Russia's Lukoil oil and chemicals group, was forced to halt talks with state officials on tax and customs concessions.

Kalush is in western Ukraine, far from the current hot spot of the Crimea.

Lukoil was negotiating to cut Karpatneftekhim costs and improve competitiveness with the administration of Ukraine's former president Viktor Yanukovych, ousted in February.

In April 2013, the oil group reached agreement to restart the plant, idled for more than six months after disagreement over Ukraine's new tax and customs policy. The parties signed a deal allowing Lukoil to operate the unit at a cost-efficient production level.

Last September, Karpatneftekhim resumed PE output and restarted the PVC plant in November 2013, while in December, the group was due to commission Karpatneftekhim's ethylene production unit. The whole site was due to resume operation by this April.

Before the latest political unrest in Ukraine, ministers agreed to grant Karpatneftekhim, seen as vital to both the regional and national economy, new concessions over rail transport and gas costs. But the plant was again idled in late January.

"We have become a hostage to the political situation in the country," stated Lukoil's strategic development vice-president Leonid Fedun.

Once Ukraine's new government is firmly in place, Lukoil will resume talks to negotiate further concessions in the hope of achieving Karpatneftekhim profitability, Lukoil's president Vagit Alekperov told Russia's RIA Novosti news agency.

Meanwhile, the Polish packaging firm Plast-Box, with two plants making PP containers in Chernihiv, Ukraine — north of the capital of Kiev — assured customers production was unaffected by the crisis. It reported annual sales for the first 11 months of 2013 increased by 11.3 percent at more than 25 million euros ($34.4 million).