MOSCOW (Jan. 6, 12 p.m. ET) — The Russian polymers market is on the verge of big changes, due to the long-awaited accession of Russia into the World Trade Organization (WTO).
As part of the agreement, within two to three years of accession Russia will reduce import duties on basic polymers from the existing 10 percent to 6.5 percent. However, duties on basic polymers including polyethylene, polypropylene and PVC in 2012 will remain at the current level. PET import duties will be reduced from 5 percent to 4 percent in 2013.
The duty on plasticized and unplasticized PVC will be reduced from 10 percent to 6.5 percent in 2013. In 2015, the same duty cut will apply to polyvinylacetate, copolymers of vinyl acetate and polyurethanes, and in 2016 it will apply to fluoropolymers.
Duties Reduced
Also, between 2014 and 2018 duties on imports of such polymeric products as pipe, film, plates, sheet and packaging are expected to be reduced from the current 10 percent to 6.5 percent.
Russian polymer market experts have divided opinions about the future impact of WTO accession.
Some say a sharp increase in imports will not lead to lower prices, as might be expected, but will instead benefit the profits of sellers. This is what has happened in Georgia and Ukraine, they say.
In addition, it will have a negative impact on domestic production of polymers, the operating costs of which are still high and the quality of which are generally low in comparison with international standards.
Sergei Arbuzov, CEO of Europlastic, one of the largest producers of polymers in Russia and the wider region, says: “At present, only a few Russian polymer producers operate modern and energy efficient production facilities. However the accession into the WTO and the increase of competition will force domestic producers to think about their future. Joining the WTO is a very serious test for both producers and processors.”
But Vsevolod Abramov, chairman of the Russian Association of Plastics Processors, says the reduction of custom duties will not have a negative impact on the market, as illegal imports or currency fluctuations have a much stronger effect on the competitiveness of producers.
According to him, there will not be any significant changes in the market for the next two to three years after the WTO accession. But later, the competitiveness of Russian producers may decline. This will be not only due to an increase of imports, but because of a further increase of production costs, through rises in wages and electricity prices.
On the other hand, the WTO accession is seen by some observers to have benefits for the Russian polymer market, such as increased competition and an improvement in the quality of domestic production.
It might also help accelerate the solution of traditional problems of the industry. Among these are: low levels of per capita consumption of plastic products in Russia (which is three to four times lower than in developed countries); the absence of relevant regulatory and technical documentation, which can stimulate the use of advanced technologies and materials; and a lack of consistent pricing policy between processors and producers of raw materials.
Tamara Khazova, director of Alliance Analyst, a leading Russian consultancy in the field of polymers, says domestic processors have started to diversify into production of siding, roofing, geogrids, non-woven materials, and other products not previously manufactured in Russia.
Some Russian processors have strong positions in market niches, for example BOPP film where domestic production is significantly higher than imports.
Russia's accession to the WTO is expected to contribute to the further expansion of the domestic range of polymer products and will speed the development of the polymer processing sector. Along with this, it will accelerate the adoption of certain international standards, which regulate the use of polymeric materials in different segments of the Russian production industry.
A complete version of this story is available at www.europeanplasticsnews.com.