Chemical industry holds a high position in Ukraine's economy. Thus, in 2012, it provided 7.4% of the total export currency supply - almost $4.7 billion. In total, recession made only 3.8% against the figures of 2011, while in several sectors export increased: export of fertilizers increased by 1%, polymeric materials - by 10.5%, soap and tension-active organic substances - by 16.8%. As for production figures, they showed 9% growth despite complicated economic situation in 2012.
What drives the domestic chemistry chemical industry? What are its development prospects? ForUm tried to answer these and other questions.
Main parameters
The main segments of Ukrainian chemical industry are mining and chemical, production of fertilizers and organic synthesis, as well as coke and by-product process, which is traditionally included into mining and metals production sector, but is widely used at chemical plants.
Fertilizing sector includes nitrogenous, potassic, phosphate and combined granular manures. The main centers of nitrogenous fertilizers production (ammonia water, ammonium nitrate, ammonium sulphate) are in Donbass and the Dnieper region. The second group of enterprises producing fertilizers is located closer to the gas mining sites and as pipelines (Cherkassy, Rivne, Odessa).
Organic synthesis is varnish-and-paint, petrochemical, rubber-asbestos and others sub-industries. Our country has high oil and gas potential, as it inherited six refineries, including the biggest in Europe Kremenchug oil refinery plant. Due to post-perestroika chaos and current economic situation the majority of plants no longer work. However, experts believe that with relatively small investments it is possible not only to resume production, but also to upgrade equipment.
Economist Vitaly Kulik notes that national chemical industry is in good condition. Thus, four out of six biggest enterprises of industry are united within DF Group holding and its division OstChem - "Rivneazot", "Stirol", "Azot" of Severodonetsk complex and "Azot" of Cherkassy. "Crimean titan" and Odessa portside plant may soon complete the list. In spring of 2011 OstChem agreed with the Cabinet to provide the agro-industrial complex with fertilizers until spring of 2014, setting prices by 20-25% lower than the average world price.
However, it does not mean that everything is ok. As any other industry of Ukraine, chemical industry needs modernization. The number of relevant projects and programs to upgrade the sector is insufficient, analyst Ruslan Pavlenko says. At the same time but he reminds that in years to come OstChem will invest $2.5-2.7 billion into petrochemical production, making "Azot" of Severodonetsk complex the basic platform for development of petroleum technology. Moreover, it is planned to invest UAH 1-1.3 billion into production of nitrogenous manure already in 2013.
What is in the future?
According to Kulik, chemical industry of Ukraine has all chances to reach $6-7 billion of annual export commodity and 9-10% of share in export currency supply. "The production must meet all modern standards of quality. The economic crisis has toughened the competition, and our industry needs urgent modernization. Several years ago the European Union introduced REACH regulations, which deal with the Registration, Evaluation, Authorisation and Restriction of Chemical substances and which limit the access to the European market. We cannot rely only on CIS or Third World markets," the specialist says.
Experts also expect that modernization of industry and improvement of quality will minimize the role of import at the domestic market. For example, import of fertilizers increased by 8% last year, though Ukrainian chemists are able to produce various kinds of fertilizers by themselves. Import of products Ukraine can produce itself also depends on international agreements. Thus, according to Pavlenko, "Ukraine continues to import fertilizers from Russia, in exchange for customs free export of steel pipes in Russia. This is the matter of international agreements, but in general, Ukraine can provide itself with fertilizers and develop its export already today. This industry must reach at least $2-2.5 billion of annual revenues."
If Ukraine manages to modernize its chemical industry, the state will become economically effective. First of all, chemical industry is the main consumer of natural gas, and 5-7% reduction of its consumption due to modernization of projects will allow to reduce import expenses. Secondly, chemical industry is one of the basic industrial sectors providing raw materials and components to all other industries. Finally, it is one of the main sources of export revenues. The state plans on modernization and development include upgrading of raw material processing, development of light flexible production, production of new structural and functional materials (accelerants, electrical insulation, composites). These and others promising direction will enable Ukrainian chemical industry to reach new level of quality.
Andriy Boyarunets
What drives the domestic chemistry chemical industry? What are its development prospects? ForUm tried to answer these and other questions.
Main parameters
The main segments of Ukrainian chemical industry are mining and chemical, production of fertilizers and organic synthesis, as well as coke and by-product process, which is traditionally included into mining and metals production sector, but is widely used at chemical plants.
Fertilizing sector includes nitrogenous, potassic, phosphate and combined granular manures. The main centers of nitrogenous fertilizers production (ammonia water, ammonium nitrate, ammonium sulphate) are in Donbass and the Dnieper region. The second group of enterprises producing fertilizers is located closer to the gas mining sites and as pipelines (Cherkassy, Rivne, Odessa).
Organic synthesis is varnish-and-paint, petrochemical, rubber-asbestos and others sub-industries. Our country has high oil and gas potential, as it inherited six refineries, including the biggest in Europe Kremenchug oil refinery plant. Due to post-perestroika chaos and current economic situation the majority of plants no longer work. However, experts believe that with relatively small investments it is possible not only to resume production, but also to upgrade equipment.
Economist Vitaly Kulik notes that national chemical industry is in good condition. Thus, four out of six biggest enterprises of industry are united within DF Group holding and its division OstChem - "Rivneazot", "Stirol", "Azot" of Severodonetsk complex and "Azot" of Cherkassy. "Crimean titan" and Odessa portside plant may soon complete the list. In spring of 2011 OstChem agreed with the Cabinet to provide the agro-industrial complex with fertilizers until spring of 2014, setting prices by 20-25% lower than the average world price.
However, it does not mean that everything is ok. As any other industry of Ukraine, chemical industry needs modernization. The number of relevant projects and programs to upgrade the sector is insufficient, analyst Ruslan Pavlenko says. At the same time but he reminds that in years to come OstChem will invest $2.5-2.7 billion into petrochemical production, making "Azot" of Severodonetsk complex the basic platform for development of petroleum technology. Moreover, it is planned to invest UAH 1-1.3 billion into production of nitrogenous manure already in 2013.
What is in the future?
According to Kulik, chemical industry of Ukraine has all chances to reach $6-7 billion of annual export commodity and 9-10% of share in export currency supply. "The production must meet all modern standards of quality. The economic crisis has toughened the competition, and our industry needs urgent modernization. Several years ago the European Union introduced REACH regulations, which deal with the Registration, Evaluation, Authorisation and Restriction of Chemical substances and which limit the access to the European market. We cannot rely only on CIS or Third World markets," the specialist says.
Experts also expect that modernization of industry and improvement of quality will minimize the role of import at the domestic market. For example, import of fertilizers increased by 8% last year, though Ukrainian chemists are able to produce various kinds of fertilizers by themselves. Import of products Ukraine can produce itself also depends on international agreements. Thus, according to Pavlenko, "Ukraine continues to import fertilizers from Russia, in exchange for customs free export of steel pipes in Russia. This is the matter of international agreements, but in general, Ukraine can provide itself with fertilizers and develop its export already today. This industry must reach at least $2-2.5 billion of annual revenues."
If Ukraine manages to modernize its chemical industry, the state will become economically effective. First of all, chemical industry is the main consumer of natural gas, and 5-7% reduction of its consumption due to modernization of projects will allow to reduce import expenses. Secondly, chemical industry is one of the basic industrial sectors providing raw materials and components to all other industries. Finally, it is one of the main sources of export revenues. The state plans on modernization and development include upgrading of raw material processing, development of light flexible production, production of new structural and functional materials (accelerants, electrical insulation, composites). These and others promising direction will enable Ukrainian chemical industry to reach new level of quality.
Andriy Boyarunets
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