Russian BOPP market on the verge of consolidation

The Russian market for BOPP (biaxially oriented polypropylene) film is on the verge of consolidation as one of the country’s largest producers has commissioned a new large production line. What are the effects of this USD 70 million investment, especially against the background of the current political situation? PackagingFilms Russian correspondent Eugene Gerden analyses the current situation of the Russian film market and gives an outlook.

According to the official statement of Sibur, the new line was commissioned at the capacities of Biaxplen, a subsidiary of Sibur Group and the leading biaxially-oriented polypropylene (BOPP) film producer in Russia, which is located in the Samara region.

The new line has the capacity to produce 30,000 tonnes of film per year. The launch of the line allows the total capacity of the Samara plant to be increased by up to 55,500 tonnes and to make it Russia’s largest facility for the production of BOPP, which can meet up to 20% of domestic BOPP demand.

The equipment for the new line was supplied by the German company Brückner Maschinenbau, while the amount of investments exceeded 1.9 billion roubles (USD 70 million). The new project will create more than 100 new jobs.

So far, Biaxplen has already produced total BOPP capacities in Russia of 150,000 tonnes per year. In addition to the Samara plant, the company operates plants in the city of Balachna (Nizhny Novgorod region), Kursk, the city of Zheleznodorozny (Moscow Region) and the Tomsk region.

The Russian market

The Russian industry for BOPP films started to develop as far back as the Soviet times, when the first enterprise, known as Polymercontainer, was established near Moscow in 1989.

Despite the poor level of equipment and lack of advanced technologies, the new plant had the capacity to produce 10,000 tonnes of film per year.

The development of the domestic market significantly accelerated after the collapse of the USSR and the end of the number of political and economical crisis in Russia.

At that time the expansion of foreign tobacco manufacturers in Russia became one of the main drivers for market growth. By 2005 up to 85% of the domestic BOPP demand was met by imports. In 2004, the share of domestic production, (which was mainly supplied by Polymercontainer) accounted for only 2% of the domestic market, with another 8% accounted for supplies from Belarus, from the Mogilev Plant of Artificial Fiber.

The boom of domestic production started in 2003. At that time several companies announced their plans for the establishment of large-scale BOPP productions in Russia.

For example, Novatek, one of Russia’s largest privately-owned gas producers, announced plans for building a plant for the production of BOPP with the capacity of 24,000 tonnes per year in the city of Novokuybishevsk (Samara region). Building of another plant with the capacity of 24,000 tonnes, was also announced by local Euromet company. The plant was built in the city of Kashira of the Moscow region.

In addition, GriNN Corporation, another Russian producer of BOPP film, established a plant in the city of Kursk. The capacity of the plant was 17,000 tonnes per year. Finally Mosimpex Service, one of Russia’s largest building and engineering companies, announced its plans to build a plant with similar capacities in the city of Balachna (Nizhny Novgorod region).

Due to saving on transport and customs’ costs, Russian production became cheaper by almost 20-30% than imports and has the same quality level. This has the result that by 2006 the share of domestic BOPP production increased up to 64% and continued to rise during the next few years.

By 2007 the Russian BOPP film market, for the first time faced with the process of consolidation, when Biaxplen started to acquire its local rivals in order to increase its share of the market. In December 2007, it acquired the Kursk plant of the GriNN corporation, and in September 2008, the BOPP film plant of RosEvroPlast, one of Russia’s largest plastics producers, which is located in the Zheleznodorozhny, a city in Moscow Oblast, located 21 kilometers (13 miles) east of Moscow.

In addition to the acquisition of local competitors, Biaxplen was also able to significantly increase its own production capacities, which during the period of 2006-2010 were increased by almost five times, up to 87,000 tonnes per year, which allowed the company to became an absolute leader of the market.

In 2009 Sibur, one of Russia’s largest petrochemical producers and the country’s largest producer of polypropylene, expressed an interest in the acquisition of Biaxplen. During the same year Sibur signed a deal with the owners of Biaxplen for the acquisition of the 50% stake in the company and acquired the remaining half of the company three years later, in 2012.

The acquisition of Biaxplen became a strategically important decision for Sibur, as it provided an opportunity to expand in the segment of high value added products and diversified its business, which, so far, had been mostly focused on the production of polypropylene.

This has also provided additional markets for Sibur. According to various estimates, BOPP accounts for 17 %-25 % of the total volume of polypropylene, consumed in Russia.

At present the Russian BOPP market is estimated at 130,000 tonnes in volume terms, which makes it one of the largest in the world. According to predictions of local analysts, the market will continue to grow during the next few years, to meet the ever growing demand and supply. There is a possibility that the volume of the market may reach 200,000 tonnes in 2015.