Boston, MA -- (SBWIRE) -- 08/01/2012 -- The Ukraine Petrochemicals Report examines the impact of trends in external markets on Ukraine's expanding chemicals industry, but raises concerns over weakness in feedstock supply - with the industry's profitability tied to oil price negotiations with Russia, its main supplier.

The report also examines potential areas for growth, exploring the impact of the recovery in the car industry on thermoplastics. Furthermore, it analyses the expansion plans outlined by the leading players in the petrochemicals industry as they seek to boost their share of the Russian market.

In Q112, chemicals and petrochemicals production grew 9.2% year-on-year (y-o-y). However, basic chemicals output fell 8.9%, rubber production declined 9.0% and plastic output rose 1.7% as domestic and external demand fell. On the upside, monthly primary plastic output appeared to reach its low-point in January, but recovered over the rest of the quarter, with growth of 44.5% y-o-y registered in March. The opening of a new suspension polyvinyl chloride (PVC) plant by petrochemicals manufacturer Karpatneftekhim in Kalush in August 2011 has further raised capacity in the petrochemicals sector. The plant's capacity is 300,000 tonnes per annum (tpa), which is twice the volume of PVC imported by Ukraine. In 2011, the Ukrainian PVC market amounted to 125,000 tonnes, with the majority supplied via imports from the US and the EU countries. As such, bringing the plant up to full production will require demand from export markets, particularly the Russian construction sector. In 2012, the company plans to start building further capacity for emulsion PVC and PVC profiles.

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Over the last quarter BMI has revised the following forecasts/views:

- A weakening global growth picture bodes ill for Ukraine's export-dependent economy, which will weigh on chemicals and petrochemicals production. In all, we expect growth in chemicals and petrochemicals output to decline to around 5% in 2012 from 25% in 2011.
- Ukraine remains in eighth place in BMI's Central and Eastern Europe (CEE) Petrochemicals Risk/Reward Ratings matrix, although its score has declined by 0.2 points to 40.7 points. This puts Ukraine 1.4 points ahead of Bulgaria and 4.4 points behind Romania.
- The relative competitiveness enjoyed by Ukrainian petrochemicals exporters will be eroded by rising domestic gas prices as government subsidies are withdrawn under Kiev's IMF Stand-By Arrangement (SBA), as well as the rise in oil prices, which will spur growth in naphtha feedstock.

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