FEATURE ARTICLE

Increasing speciality chemicals production in Russia

Published: September 11, 2017

The speciality chemicals industry in Russia is fragmented, but one company has plans to change this, with the goal of achieving 10% of a vast domestic market over the next few years. Eugene Gerden, our Russian correspondent, tracks the rise of Elektroizolit – part of Glorax Group – as that journey begins.

In recent decades, the development of the Russian speciality chemicals industry has significantly slowed. Due to a lack of modernization and investment, many enterprises ceased to exist or were re-profiled.

Denis Manturov, Russian Ministry of Industry and Trade said that during Soviet times, the USSR produced about 20,000 different types of fine and speciality chemicals, which was comparable with US figures. Currently, the total product range of Russian fine chemical producers does not exceed 300 items. As a result, many of segments of Russian industrial production continue to experience a shortage of speciality chemicals, which are used as raw materials in their production processes.

Currently, speciality chemicals make up a 5% share of the total chemicals market in Russia. However, the state plans to increase that share to 20-25% over the next several years, making the speciality chemicals share in Russia comparable to that in the EU.

The establishment of a strong local manufacturing base will fit the current state policy of import substitution, which is currently being implemented by the Russian government – mainly driven by sanctions between Russia and the West. Although Russia still imports about 80% of its speciality chemicals (100% in some categories), the introduction of sanctions against Russia limited imports of many products, which threatened the development of the country’s high-tech industrial sectors. The gaps have been filled by companies such as Elektroizoli, which currently produces a portfolio of some 300 products – set to increase to as many as 450 following imminent investment.

The Russian financial conglomerate Glorax Group, owned by a well-known local businessman Andrey Birzhin, is planning to become a leading producer of speciality chemicals in Russia. This is being achieved with an investment of US$70 million in a new manufacturing facility for speciality chemicals at its Elektroizolit plant.

Elektroizolit is already one of the leading producers of speciality chemicals in Russia, and the planned investments will allow the company to increase its output by almost 30%. As part of these plans, particular attention will be paid to the production of varnishes, laminates and unsaturated polyester resins. In addition, the company plans to increase the range of products that will be supplied for the Russian military and industrial sectors.

The goal is to allow the company to secure up to 10% of the Russian market for fine chemicals. Currently, the market remains highly fragmented, with no local producers holding more than 3-5% of total share.

Alexander Andrianov, CEO of Glorax Group, commented “We are interested in the increase of production of speciality chemicals in Russia, since we have all the possibilities for this: free capacities, as well as highly qualified personnel”.

Denis Manturov has also added Russia currently lags behind other emerging nations in terms of annual per capita consumption of speciality chemicals, despite the fact that the USSR had one of the world’s most powerful industries of fine chemicals during Soviet times.

The amount spent on R&D activities each year – by the Russian government and private investors – is also comparably low in Russia. Annual R&D investment in the country is currently estimated at just US$100-150 million per year, which is significantly less than in the US and other Western countries.

Thus, leading Russian scientists and analysts in the field of fine chemicals have welcomed Glorax’s new project.

Rostislav Okunev, a Senior Engineer of the Russian Research Institute of Feasibility Studies of the Chemical Industry (one of Russia’s leading research institutions), commented that despite attempts by the Russian government in recent years, the situation remains complex. He added that the industry is in acute need of private investments. He and his peers no doubt hope that Glorax is leading the way to a brighter future for fine and speciality chemicals in Russia.

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