Business news

Meeting results in the Ministry of Industry and Trade on increase of prices of polymer raw materials

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On April 6, meeting protocol of consultations held in the Ministry of Industry and Trade of the Russian Federation on sharp rise in prices of polymer raw materials has been signed. Participants of the meeting exchanged opinions on the existing situation and made several suggestions to stabilize it.

The meeting itself took place on March 29. Among its participants were representatives of Minenergo of Russia, Federal Anti-Monopoly Service, SIBUR, Lukoil, Rosneft, Russian Association of Pipeline Systems Producers and Association of Plastics Processors.  

As a priority measure Ministry of Industry and Trade recommended producers of base polymers and bulk plastics to use long-term direct supply contracts with plastics processors and scale up best practices of formular pricing. According to the institution, this will allow polymer prices to become more predictable and will provide processors a wider planning horizon.     

 “Formula pricing will allow to reduce financial burden by predetermining prices of raw materials based on market and other indicatives”, noted Mikhail Katsevman, Chairman of the Association of Plastics Processors and Head of R&D of R&P POLYPLASTIC – That is why we in turn suggested to enhance the use of market indicatives of petrochemical raw materials for production of plastics where there was much less price movements during the last year”.

Аccording to figures provided by the Association of Plastic Processors up to 13 thousand industry players may suffer from this sharp price increase. This particularly concerns small sized companies, which don’t have enough time to adapt to current dynamics: most often contractual obligations do not allow processors to alter prices every 2-3 months in order to keep pace with raw materials costs. The Association of Plastic Processors has already reported several stoppages in production related to price negotiations. Otherwise, these companies would be forced to operate at a loss. In some cases, this situation may even lead to termination of operations for enterprises with high loan debt burden.

Participants of the meeting noted that today complexities in operation of the polymer industry are typical for countries with developed plastics procession. Deficit of polymers caused by a number of emergency shutdowns of producers of base raw materials, lack of containers for delivery of polymers and rapid growth of demand for polymers in China led to a sharp rise in prices throughout the world.   

The situation in Russia causes concern not only to the business community but also to the Ministry of Industry and Trade: everyone understands that unintentional growth of prices for base polymers in Q1 2021 deprives Russian compounders and plastics processors of the opportunity to continue their profitable operations within the following months. Further increase of raw materials prices shall be a driver for consumer inflation for goods made of plastics or containing it in packaging. Therefore, the Association of Plastic Processors encourages to take regulatory actions, which may become fast track support for the industry.  

Following the meeting Ministry of Industry and Trade requested detailed information about the situation in the industry concerning prices for base raw materials and its influence on the financial situation of the companies from the Association of Plastics Processors. It was also recommended for the Association of Plastic Processors to present its vision for the possible settlement of the situation.