Ukraine auto production plummets, chemicals hit

Chemical producers in the Ukraine and exporters of polymers to the country's auto industry must be facing a devastating drop in demand according to new figures out today.

According to a new report by Companiesandmarkets.com, it is still suffering from the effects of the global recession, with signs of a recovery still few and far between in autumn-2009. New car sales fell 78% y-o-y to 15,760 in October 2009, a contraction of 17% from the previous month.

"With such figures being posted it is not yet clear whether the market has bottomed out. Oleh Nazarenko, the director general of the All-Ukrainian Association of Automobile Importers and Dealers (VAAID), estimates November sales will be roughly the same as October. However, the director general of Auto International (importer of Mazda Motor and Suzuki Motor), Olena Dunina, expects car sales to increase 10-15% in December.

We believe reports earlier in the year claiming the market had reached the bottom have proved optimistic, and serious downside risks remain. One problem in Q409 has been an influenza outbreak which has discouraged customers from visiting showrooms, although this will not be a long-term impediment to autos sales in the country. Industry insiders say the sector can grow in 2010 only if the right conditions are in place. Nazarenko has forecast that – with the current legal and taxation environment – new car sales will reach only 165,000-170,000 units, around the level that VAAID is expecting for 2009, or could even fall another 5% from 2009, which is likely to be a bad year itself.

Nazarenko is hopeful that an economic recovery and greater availability of consumer credit will help the market revive somewhat. He also expects car makers to offer credit at almost 0% interest with the aim of stimulating demand. If these schemes are successful, and there are no further legal and tax burdens put on dealers, Nazarenko estimates that sales could grow by 20-30%. However, this would still be from 2009’s very low base."

Billionaire Kulczyk bids for Poland fertilizer firms

Poland's billionaire businessman, Jan Kulczyk, is in talks to acquire the country’s two largest fertilizer firms, a source at the ministry told ICIS news this week.

The entrepreneur, owner of Warsaw-based Kulczyk Holding and international investment house Kulczyk Investments has had behind-the-scenes talks with senior Polish treasury ministry officials, said the source.

The report says he is looking at acquiring Poland’s largest nitrogen fertilizer producer, Zaklady Azotowe Pulawy (ZAP), and the country’s largest nitrogen phosphorus potassium (NPK) fertilizer producer, Zaklady Chemiczne Police (ZChP).

A quick search shows that Kulczyk may be trying to build a large fertilizer manufacturing base. According to Ukranian News, he is also interested in taking part on the privatisation of the Odessa Portside Factory, a huge ammonia producer.

Kulczyk Investments already owns Poland's solvent producer, POCH, located at Gliwice.

IMF bailout good news for Ukraine

Ukraine is to receive a $3.4bn International Monetary Fund payment in November. This will help shore up the country's ailing finances, including a huge budget deficit. Ukraine has been hit hard by collapsing demand for export such as steel. Its chemical sector has also suffered as domestic and regional sales collapsed in the wake of the financial crisis.

Here's a report from local news agency. "Ukraine expects the International Monetary Fund to release a $3.4 billion payment under the agency’s $16.4 billion lending program to the country, Economy Minister Bohdan Danylyshyn said, according to Bloomberg.

“This will help sustain the economy and, to a certain extent, help cover the budget deficit,” Danylyshyn said today in an interview at Ukraine’s Consulate in New York. “It’s a pretty complicated situation in Ukraine, that’s why we expect (a) budget deficit this year and next.”

Ukraine is relying on the IMF loan program to stay afloat after the credit crisis undermined demand for its raw materials, including steel exports. The country has received $10.6 billion in loans to date.

The IMF team, led by Ceyla Pazarbasioglu, arrived in Kiev earlier this week to assess whether Ukraine meets the terms of the loans. Ukraine is at “serious risk” of veering off track ahead of the country’s next review in November, Fitch Ratings said in a statement on Oct. 14.

“It would be politically right to support the government’s measures aimed at stabilizing the situation,” Danylyshyn said. “That would also be a very good signal for investors.”

Yara takes part in Odessa, Ukraine privatisation

Odessa port

Norway's Yara has applied for tender documents in Ukrainian privatisation. Brave western chemical companies are keen to enter fast-expanding eastern markets even if they are volatile. Yara is teaming up with the Libyan Government!

According to chemie.de, "Yara International ASA has, through a subsidiary, applied to the State Property Fund of Ukraine (SPFU) for receiving the documents for the tender announced by SPFU for the privatisation of Odessa Port Plant (OPP) to be held on September 29.

Yara has filed this application as a member of a consortium also comprising Kulczyk Holding S.A., representing a privately owned investment group, and the Libyan Investment Authority (LIA), an investment fund being 100% owned by the Libyan Government. The filing is only to pre-qualify the consortium for a possible participation in the tender and implies no binding obligations on any of the parties to the consortium. Should the consortium decide to participate in the tender, Yara will hold a minority position in the possible buyer of OPP.

OPP owns and operates two ammonia and two urea plants in Yuchny, Ukraine, with combined annual capacities of approx. 1.1 million tonnes of ammonia and 0.9 million tonnes of urea. In addition OPP owns and operates a major terminal for ammonia and urea, exporting products produced by other Ukrainian plants as well as by some Russian plants.

Ukraine chemicals, economy, contracts in Q2

Ukraine's chemical industry is in a state of collapse with output slumping 31.1% in the second quarter, according to Bloomberg quoted in the Tehran Times.


Ships at port in Odessa, Ukraine Photo by Uriel Sinai/Getty Images


Here is the text: "Ukraine’s economy shrank an annual 18 percent last quarter, the second-deepest slump on record, after industrial production and retail spending plunged.

The fall in output followed a record 20.3 percent contraction in the first three months of the year, the Kiev- based state statistics committee said in a statement on its Web site today, citing preliminary figures. The office is due to publish details when it releases the final report on Sept. 30.

The commodity-driven economy slumped after demand for steel, Ukraine’s biggest export, faltered and its related industries sagged. Reliance on foreign-currency borrowing pushed Ukraine’s banks into decline, with 17 lenders now under central bank control. The former Soviet state is relying on a $16.4 billion International Monetary Fund bailout to avert default. Gross domestic product will slump 14 percent this year, the IMF estimates.

“An ‘improvement’ from minus 20.3 percent to minus 18 percent is still a huge negative in anyone’s books,” said Timothy Ash, head of Europe, the Middle East and Africa research at Royal Bank of Scotland Plc in London. “The third quarter will probably also show a steep decline, but favorable base effects might ease the year-on-year decline in the fourth quarter.”

Ukraine’s industrial production has declined through the past year and sank an annual 26.7 percent in July, the state statistics office said today in a separate release. Steel production fell 30.4 percent in July, chemicals output slumped 31.1 percent and machine building dropped 52.9 percent. The three industries produce Ukraine’s main exports, which account for more than 50 percent of total output.

Metals, chemicals

Metals and chemicals producers including VAT Odeskyi Pryportovyi Zavod, Ukraine’s second-biggest ammonia producer, have posted record losses. VAT Azovstal Iron & Steel Works said on Aug. 4 it cut steel output by 37.5 percent from January through July to adapt to shrinking markets."

Ukraine ammonium producer Stirol: you learn something every day!

The blog has just met a new colleague at ICIS who told me about Stirol, a company I'd never heard of which may be one of Ukraine's biggest chemical groups. I can't find any financial information on the site to back up this claim.

Stirol was the first company in the Soviet Union to produce ammonia from coke oven gas, according to its chairman NA Yankovski.



I am about to start compiling the ICIS Top 10 list of chemical companies in central and eastern Europe and Russia. Any suggestions, please contact me: it is very difficult getting correct information from this region.

Here is the list from last year: apologies for formatting. You can see the original story by clicking here: Sibur rises in CEE/Russia Top 10

Company name Sales '07 % Change to '06* Operating profit '07 % Change to '06* Net profit '07 % Change to '06*
PKN Orlen (chems/petchems) 6,741 1.2 537 46.6 - -
Sibur 4,846 11.8 1,282 15.7 - -
Salavatnefteorgsintez 3,960 40.0 - - 1,630 50.0
MOL (petchems division) 2,300 12.0 236 75.0 - -
Agrofert 2,870 3.0 - - - -
Nizhnekamskneftekhim 2,400 24.0 287 (profit from sales) 20.0 1,670 23.0
Lukoil (petrochemicals) 2,300 26.0 - - - -
Petkim 1,860 -2.0 96 -3.0 61 23.0
BorsodChem 1,510 19.0 - - - -
Uralkali 1,190 87.0 - - - -
Note: OMV is excluded because it includes petrochemicals with refining and marketing *In local currencies
sources: company data, Accenture, CIREC

Libya closes in on Ukraine chemicals plant and farm project

Ukraine has invited Libyan companies to bid for a large fertiliser factory, Prime Minister Yulia Tymoshenko said after talks with her Libyan counterpart, Al-Baghdadi Ali al-Mahmoudi, according to interactiveinvestor.com.
"Ukraine has been trying to sell the Odessa Port chemicals plant for years and had been previously stopped by presidential decrees. This time round, President Viktor Yushchenko is expected to let the auction go ahead later this year.
Libya agreed in May to grow wheat on 100,000 hectares of Ukrainian land and export it back to the North African country, in a deal analysts said was fraught with complications including the purchase of leased lands."

Ukraine is to create a free-trade zone for Libyan investors, according to the forum www.for-ua.com. Prime Minister Yulia Tymoshenko and Secretary of the General People's Committee of Libya al-Baghdadi Ali al-Mahmudi agreed that they may have found a starting point for removing trade barriers between the states that may lead to the creation of free trade zone.

Ukraine moves to sell Odessa Port chemical plant

According to forexpro.com, Ukraine's president Viktor Yushchenko has agreed to the privatisation of one of the country's largest companies.

The government has been trying to sell the Odessa Port chemical plant for years and on Wednesday set a minimum price of 4 billion hryvnias ($525 million) for an auction on Sept. 29. It hopes to earn up to $1 billion.

Yushchenko, in a power struggle with Prime Minister Yulia Tymoshenko for 18 months, last banned the sale in May 2008 on the grounds that the plant was a strategic asset, giving the buyer exclusive access to a key pipeline and port terminal.

Odessa port: picture credit http://www.aisberg.com/en/about

Gas cuts kill Ukraine's petrochemical sector

Fascinating new petrochemicals report out, seen on pr-inside.com which shows how badly the country's industry was hit by the dispute with Russia over gas exports. It talks about a "collapse" in January. I remember someone at the ICIS team trying to get these figures at the time but we were told everything was just fine.

Here are some key excerpts: at the bottom you'll see how football offers a ray of hope!

"In Q109, sales by the chemicals and
petrochemicals industries totalled UAH8.76bn, including UAH6.62bn of chemicals and UAH2.13bn of rubber and plastics products. Output of plastics totalled 76,500 tonnes in Q109. However, the plastics industry has recovered from the January low, when the petrochemicals sector effectively ground to a halt during the Russia-Ukraine gas dispute. Plastics output rose 36.6% month-on-month (m-o-m) in March to 32,100 tonnes. However, for Q109 as a whole, output was still down 38.7% year-on-year (y-o-y)."

The country's macro-economic outlook is also bleak:

"Despite the petrochemicals industry's recovery from the January low point, Ukraine is gripped by a severe economic downturn and prospects are dire: real GDP is set to contract by 10.2% in 2009; the banking sector is on the verge of collapse; the hryvnia is week; both external demand and credit markets have deteriorated; and international risk aversion has elevated.

"The Ukrainian petrochemicals market will follow the overall economic trend, which means a deep contraction in 2009, followed by a slow upturn in 2010 when GDP is expected to grow by 2.4%. With the kind of economic growth rates seen in 2000-2007 unlikely to be repeated, the petrochemicals industry will be more heavily reliant on export markets.

"Russian economic growth is not likely to be remarkable over the forecast period and the market is at risk of over-capacity owing to additional planned capacity due to come online. Consequently, Ukrainian producers will be more reliant on the eurozone for sales. The petrochemicals industry is set to receive a temporary domestic boost from increased construction activity ahead of Ukraine's hosting of the 2012 UEFA European Football Championship."