Import substitution is now an important to-pic for discussion and first decisions. But in one of the industries this issue was raised even before the aggravation of the international situation. We are talking about medium- and low-tonnage chemistry, where we are highly dependent on imports. Preliminary work was carried out for a long time, and just at the beginning of February, Deputy Prime Minister Yuri Borisov announced specific plans: almost 500 billion rubles of investment, very significant money, 73 projects that were selected on the principle of further benefit for the maximum number of sectors of the economy.
What has changed in two months? On the one hand, the relevance of this decision is only increasing. But, on the other hand, it is clear that the implementation of all projects in any case will take several years. At the same time, in those cases where the use of Western technologies, equipment, licenses was supposed to be used, it will already be necessary to look for some alternative ways. Plus, perhaps it is now more important to redirect some of the efforts to simpler, but urg-ent tasks. That is, changes in the declared plan are more than likely. There are many chemical products, and each case is individual, we will inform readers as news becomes available.
Why are we behind here? By and large, the causes are hardly different from similar problems in other areas. Something was forgotten and missed in the 90s, some of the new products were ignored on the basis of the principle “we will sell oil and buy what we need.” But there are also objective limitations.
You can’t import everything. Nobody canceled the international division of labor. To begin with, there simply will not be enough people, primarily engineering and technical personnel, especially in the case of independent creation of new industries from scratch. Secondly, and most importantly, in any complex production, economies of scale are needed. If we are talking about our own developments, then both research and development work (R&D) should pay off. That is, either we must have our own huge market, but it is far from enough for all products. Or you need an exit for export, where you have to compete with other suppliers. Again, import substitution can be done in different ways. For example, in a number of cases, they still purchase equipment and technologies. Although license holders often do not sell technology in principle. And you can – creating everything from scratch, but it is unrealistic to do this for the entire nomenclature, all because of the same division of labor. Therefore, ideally, even creating your own technological processes, it is advisable to do this only for a part of the necessary products, then exchanging high-tech chemistry products with manufacturers from other countries.
From the foregoing, it s-hould be clear that the pro-blem is complex and characteristic, we repeat, for many industries. There are no simple and ideal solutions here. But specifically for petrochemistry, another aspect appears here.
The higher the tonnage of chemical production, the stronger the impact of the cost of raw materials on the final product, and vice versa. That is, complex low-tonnage chemistry is produced in volumes that are orders of magnitude less than large-scale production, but, accordingly, it costs an order of magnitude or two more. At the same time, in the cost structure, the main contribution is no longer the cost of raw materials, but all the same R&D.
Against this background, relatively recently, we were partially dependent on imports for basic polymers – polyethylene and polypropylene, therefore, these areas were developed in the first place. In polymer production, the contribution of foreign technical solutions and equipment is also large, but due to the factor of their relatively cheap raw materials, such projects turned out to be profitable. And it is not at all certain that we would have achieved the same financial result (that is, changes in the balance of foreign trade in the chemical sector: a decrease in imports, an increase in exports), if we had initially concentrated on complex chemistry. But, on the other hand, complex chemistry means high added value and the development of internal scientific and engineering potential.
One way or another, the logic of the solution is clear – with all its pluses and minuses. In any case, having closed the problem with polymers, the companies gradually moved on. We have already written about some of Sibur ‘s new production facilities in the medium- and low-tonnage segment. Then the problems were also discussed – access to technologies, market volumes. And recently the company launched the production of maleic anhydride, which belongs to the segment of medium-tonnage chemistry. Previously, the product was imported to Russia.
Now the positive effect of import substitution in the segment of large-tonnage polymers is already noticeable in the domestic market. Global prices are rising again, but in the context of the crisis, Russian producers are holding back domestic prices for the main polymers, although earlier pricing was carried out on the basis of equal profitability with exports.
And here you can see the contrast with another polymer, which is not fully substituted for imports. We are talking about polyethylene terephthalate (PET or PE-T): a raw material primarily for plastic beverage bottles, but also for polyester fiber or thread. Russia consumes about 600 thousand tons of bottled PET, while about a third depends on imports. As a result, according to the sum of factors (exchange rate, the contribution of imports, global price growth), prices for this polymer increased by a quarter in the first quarter.
In addition, part of the Russian production of this polymer resembles a “screwdriver assembly”. Ecopet, the largest PET plant, is located in Kaliningrad. But only the final stage is carried out at this plant – the polycondensation of ethylene glycol and terephthalic acid. And these components, which in themselves make a significant contribution to the final price of the product, have to be imported. True, it is convenient to do this due to the coastal geographical location. But here, too, there are positive developments. In June last year, Ecopet acquired Tatneft. And not just like that, but to create the entire production chain. At the TANECO oil refineryTatneft will launch a unit with paraxylene as one of its products in December 2022. From it it is planned to establish the production of terephthalic acid and the closure of the chain in the same PET. In this case, the key component for the synthesis will not be imported, but of Russian origin. Although you will have to spend money on logistics for delivery to Kaliningrad, this approach is still justified.
But is it necessary to continue to close the remaining current deficit in bottled PET with new production? Rather, no – it is better to focus on the recycling of bottles. Now in Russia recycled bottle-quality PET is produced by the Plarus plant (about 20,000 tons per year), and Sibur’s production will soon be launched with a recycling capacity of 30,000 tons per year. In total, this is about eight percent of the total consumption. But several more similar projects can close the issue of PET imports, while solving the problem of waste disposal.
It should be noted that we still recycle about a quarter of all plastic bottles. But most of them turn into polyester fiber and other non-food products. The purity standards are lower, it is easier and cheaper.
It is curious that the other day, to support the economy, the import duties on fiber-forming PET were zeroed. The primary product in our country is not produced, but imported. Of course, not all articles can be obtained from recycled materials, but in any case, non-food processing is also in demand.
Food-grade recycled PET is, of course, more expensive than non-food-grade PET. In Europe, by the way, such a recycled polymer is often already more expensive than the primary one – it is in short supply, more and more of it is needed, as the standards require increasing the share of the recycled product in packaging under the threat of fines.
In any case, in both types of industries (food and non-food applications), the purity of raw materials directly and strongly affects the cost of the final product. Now the main part of raw materials still comes from landfills or waste sorting plants, the quality of raw materials leaves much to be desired. By the way, until recently some of the bottles for recycling were even imported from Europe. The reasons are clear: in this region, separate waste collection has been a priority for a long time and is carried out correctly, so the output is very clean raw materials.
That is, the cleaner the recycled material, the higher the profitability. The more such productions, the less polymer imports and less household waste. And a plastic bottle is one of the few products that most residents are easily willing to donate separately, since due to their volume it is convenient for everyone.
So import substitution of petrochemical products can be done in different ways. From complex low-tonnage chemistry projects, where specialists should work, to the banal, but no less useful separate collection of plastics, where everyone can make a contribution. Of course, you want to be sure that recyclables will go to their intended purpose, and will not end up later in a common garbage truck. The garbage reform is already underway, and I want to believe that we will get a working and transparent waste collection system as a result.