MRC: Caustic & Chlorine Outlook in Russia /Eastern Europe, Kiev, 4 th Russia / CEE ChlorVinyls - 2008

1. Caustic & Chlorine Outlook in Russia /Eastern Europe
4 th Russia / CEE ChlorVinyls
3-4 June 2008, Kiev, Radisson SAS Hotel
Sergey Yaremenko,
MRC (Market Report Company)

2. Market Report Company
We cooperate with 50 biggest
worldwide chemical and
petrochemical companies from
TOP-100
2

3. Caustic & Chlorine Outlook in Russia /Eastern Europe
4 th Russia / CEE ChlorVinyls
3-4 June 2008, Kiev, Radisson SAS Hotel
Sergey Yaremenko,
MRC (Market Report Company)

4. Agenda
General figures for CEE & CIS (macroeconomics, PVC, caustic soda)
World Caustic Soda Market
Caustic Soda Market in CEE & Russia
Biggest Russian consumers of Caustic Soda
Current Russian Caustic Soda Production
Outlook of Russian production till 2012
4

5. Agenda
General figures for CEE & CIS (macroeconomics, PVC, caustic soda)
5

6. Population, 000 people
Country 2 000 2 001 2 002 2 003 2 004 2 005 2 006 2 007 e 2 008 f 2 009 f 2 010 f
Belarus' 9 990 9 951 9 899 9 849 9 800 9 750 9 750 9 681 9 638 9 594 9 550
Bulgaria 8 170 7 913 7 868 7 823 7 787 7 764 7 741 7 629 7 569 7 510 7 450
Bosnia and Herzegovina 3 781 3 798 3 828 3 832 3 836 3 858 3 873 3 887 3 901 3 916 3 930
Hungary 10 211 10 188 10 159 10 130 10 107 10 085 10 063 10 034 10 009 9 984 9 959
Latvia 2 373 2 355 2 339 2 325 2 313 2 308 2 304 2 284 2 273 2 261 2 249
Lithuania 3 500 3 481 3 469 3 454 3 436 3 419 3 412 3 393 3 378 3 363 3 348
Macedonia 2 026 2 035 2 038 2 049 2 062 2 068 2 076 2 085 2 094 2 102 2 111
Poland 38 256 38 251 38 232 38 195 38 180 38 142 38 104 38 091 38 065 38 039 38 013
Russia 147 000 146 300 145 600 145 000 144 200 143 500 142 827 142 124 141 425 140 726 140 027
Romania 22 435 22 408 21 795 21 734 21 686 21 643 21 553 21 281 21 128 20 975 20 822
Serbia and Montenegro 10 637 10 651 8 130 8 136 8 152 8 161 8 172 8 183 8 194 8 205 8 220
Slovakia 5 401 5 403 5 391 5 380 5 382 5 385 5 388 5 378 5 375 5 372 5 369
Slovenia 1 989 1 992 1 994 1 995 1 995 1 998 1 999 2 001 2 002 2 004 2 005
Turkey 66 400 65 667 68 700 70 700 71 152 72 065 72 929 74 635 75 880 77 124 78 368
Ukraine 48 923 48 457 48 003 47 622 47 280 46 929 46 481 46 184 45 688 45 391 44 194
Croatia 4 380 4 440 4 440 4 445 4 508 4 521 4 547 4 573 4 599 4 625 4 651
Czech Republic 10 273 10 224 10 201 10 202 10 207 10 222 10 232 10 206 10 201 10 197 10 193
Estonia 1 372 1 367 1 361 1 356 1 356 1 352 1 348 1 344 1 340 1 336 1 332
Total in EE 183 717 182 914 179 147 178 527 178 087 177 605 177 043 176 234 175 454 174 873 174 397
Increase, % -0,44% -2,06% -0,35% -0,25% -0,27% -0,32% -0,46% -0,44% -0,33% -0,27%
Source: World Bank, MRC
6

7. Eastern Europe: GDP (PPP) in 2007, bln. USD
GDP per capita (PPP),
'000 USD
30
Slovenia
51 Czech Rep
253
25
Hungary
208
20
Russia
Slovakia Poland
1 908
104 604
15
Bulgaria Romania
81
230
10
Belarus' Kazahstan Ukraine Turkey
92 154 374 723
5
0
0 30 60 90 120 150
Population, mln.
Source: IMF, World Bank
7

8. Forecast: consumption of PVC in 2010, KT
PVC per capita, kg
15 Western Europe
Poland
472
Hungary
119
12
Turkey
894
43 Lithuania Russia
9 Slovakia
Ex-Yugoslavia 26 996
100 World
6
Czech Rep China
60
Estonia
Ukraine
5
Azerbaijan 156
3 Romania
24
89
Belarus'
12 Kazahstan
21
0
0% 5% 10% 15%
Market increase 06-10,%
Source: Harriman Chemsult, MRC
8

9. Agenda
The World Caustic Soda Market
9

10. The world market
Source: Harriman Chemsult
World Caustic Soda market, m m
n t
60
40
20
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Others NA EE & CIS WE Asia
CMAI: Asia will continue to add a lot of chlor-alkali capacities.
There are no major capacity additions scheduled in the European and American regions until 2008.
The continued acceleration of chlor-alkali capacity expansion in China to support the vinyls industry is expected to
result in a caustic surplus in this region.
10

11. Major Caustic Soda flows, 1996,2000,2006 (000 mt)
Source: Harriman Chemsult
11

12. The biggest world importers & exporters
Source: Harriman Chemsult
12

13. Agenda
Caustic Soda Market in CEE & Russia
13

14. Forecast: Caustic Soda consumption in 2010, KT
Caustic Soda per capita, kg
15 74
Slovakia
12 Czech Rep
127
Poland
Romania
305
9 172
World
Turkey Belarus'
Russia
6 293 56
1168
Bulgaria Serbia
41 32
Estonia
Ukraine
5
3 193 Lithuania
8
0
0% 1% 2% 3% 4% 5%
Market increase, 06-10,%
Source: Harriman Chemsult, MRC
14

15. Poland
Consumption of Chlorine, 2007, % Consumption of Caustic Soda, 2007, %
Others
4%
Others
Inorganic 31%
chemicals Inorganic
24% chemicals
32%
Vinyls Organic
Other organic 46% chemicals
chemicals Textiles/Rayon 6%
10% 7% Soaps and
Chlorinated Pulp and paper detergents
Isocyanates Propylene oxide aromatics 17% 7%
6% 6% 4%
Source: Harriman Chemsult, MRC
The major caustic consumers are sodium silicate and STPP producers (one of the biggest are ZC Alwernia and Wizow).
15

16. Hungary
Consumption of Chlorine, 2007, % Consumption of Caustic Soda, 2007, %
Others
Others 3%
Inorganic
12%
chemicals
Organic chemicals
Phosgene 3% Textiles/Rayon
17%
derivatives 4%
4%
Vinyls Pulp and paper
Other organic Inorganic
47% 2%
chemicals chemicals
2% 14%
Soaps and
detergents
Alumina
Isocyanates 7%
44%
41%
Source: Harriman Chemsult, MRC
One of the biggest consumers: Alumina ( Ajka Aluminipari 305,000mt; MOTIM - 75,000mt), Pulp & Paper (Dunapack)
16

17. Romania
Consumption of Chlorine, 2007, % Consumption of Caustic Soda, 2007, %
Others
Others
11%
13% Organic
Textiles/Rayon chemicals
Inorganic
2% 23%
chemicals
14% Vinyls Pulp and paper
41% 7%
Propylene oxide Alumina
7% 14%
Inorganic
Chlorinated Soaps &
chemicals
aromatics ED for export
C detergents
3% Other C2 C1 32%
3% 9%
Chloroethanes Chloromethanes
15% 3%
Source: Harriman Chemsult, MRC
One of the biggest consumers is alumina producer BBG Alum, Tulcea (600,000mt/year)
17

18. Russia
Consumption of Chlorine, 2007, % Consumption of Caustic Soda, 2007, %
Others 16% Iron 1% Others 4%
Refinery
Other organic
6%
chemicals
8% VCM/EDC Textiles
35% 5%
Isocyanates
1%
Chemicals
Energetics
Chlorinated 35%
9%
aromatics
1% Non-ferrous
Hydrochloric
Non -ferrous acid 5% 12%
3%
Epichlorhydrin
Pulp & Paper
Methylene 7%
7% Chloroform Pulp & Papers
4% chloride 28%
5%
Source: MRC
We have completed TOP-100 of Russian Caustic Soda Consumers
18

19. Agenda
Biggest Russian consumers of Caustic Soda
19

20. Top-10 Russian consumers: whole marke
# Company Sector Location Main Supplier Product Volume, MT Market share, %
1 Ust-Ulimskiy pulp&paper plant pulp and paper Irkutsk oblast' Ilimchemprom LCS 102 333 9,20%
2 Siberian-Ural aluminium company non-ferrous Sverdlovsk oblast' Sayanskchemplast LCS 72 594 6,60%
3 Arkhangelsk pulp&paper plant pulp and paper Arhangelsk oblast' Usolyechemprom LCS 56 257 5,10%
4 Mondi Business Syktyvkarskiy LPK pulp and paper Komy Usolyechemprom LCS 55 928 5,00%
5 Volzhskiy Orgsintez chemicals Volgograd oblast' Caustic, Sterlitamak LCS 53 566 4,80%
6 Kuybyshevazot chemicals Samara oblast' Caustic, Sterlitamak LCS 44 858 4,00%
7 Azot, Kemerovo chemicals Kemerovo oblast' Chemprom, Kemerovo LCS 44 510 4,00%
8 Fosforit chemicals Leningrad oblast' Azot, Novomoskovsk LCS 43 791 4,00%
9 Balkovskiy plant of fibre materials textiles Saratov oblast' Chemprom, Volgograd LCS 29 879 2,70%
10 Bogoslovskiy aluminium plant non-ferrous Sverdlovsk oblast' Sayanskchemplast LCS 25 286 2,30%
Total 529 002 47,70%
Source: MRC
20

21. Top-10 Russian consumers in Pulp & Paper
# Company Location Main Supplier Product Volume, MT Market share, %
1 Ust-Ulimskiy pulp&paper plant Irkutsk oblast' Ilimchemprom LCS 102 333 9,20%
2 Arkhangelsk pulp&paper plant Arhangelsk oblast' Usolyechemprom LCS 56 257 5,10%
3 Mondi Business Syktyvkarskiy LPK Komy Usolyechemprom LCS 55 928 5,00%
4 Kotlasskiy pulp&paper plant Arhangelsk oblast' Sibur-Neftechem LCS 21 023 1,90%
5 Nemansk pulp&paper plant Kaliningrad oblast' Caustic, Sterlitamak LCS 19 030 1,70%
6 Baykalskiy pulp&paper plant Irkutsk oblast' Usolyechemprom LCS 18 681 1,70%
7 Segezhskiy pulp&paper plant Karelia Sibur-Neftechem LCS 12 292 1,10%
8 Cepruss Kaliningrad oblast' Sibur-Neftechem LCS 6 783 0,60%
9 Turinskaya paper plant Sverdlovsk oblast' Chemprom, Novocheboksarsk LCS 6 435 0,60%
10 Kama paper plant Perm' oblast' Soda-Chlorat LCS 6 200 0,60%
Total 304 962 27,50%
Source: MRC
21

22. Top-10 Russian consumers in Chemicals
# Company Location Main Supplier Product Volume, MT Market share, %
1 Kuybyshevazot Samara oblast' Caustic, Sterlitamak LCS 44 858 4,00%
2 Azot, Kemerovo Kemerovo oblast' Chemprom, Kemerovo LCS 44 510 4,00%
3 Fosforit Leningrad oblast' Azot, Novomoskovsk LCS 43 791 4,00%
4 Nizhnekamskneftechem Tatarstan Caustic, Sterlitamak LCS 24 444 2,20%
5 Procter end Gamble, Novomoskovsk Tula oblast' Caustic, Sterlitamak LCS 20 057 1,80%
6 Tolyattiazot Samara oblast' Chemprom, Novocheboksarsk LCS 19 275 1,70%
7 Metafraks Perm' oblast' Kirovo-Chepetskiy chemical plant LCS 18 142 1,60%
8 Kazan factory of synthetic rubber Tatarstan Caustic, Sterlitamak LCS 15 359 1,40%
9 Schekinoazot Tula oblast' Chemprom, Volgograd LCS 14 086 1,30%
10 Salavatnefteorgsintez Baskortostan Caustic, Sterlitamak LCS 11 342 1,00%
Total 255 864 23,10%
Source: MRC
22

23. Top-10 Russian consumers in Non-ferrous
# Company Location Main Supplier Product Volume, MT Market share, %
1 Siberian-Ural aluminium company Sverdlovsk oblast' Sayanskchemplast LCS 72 594 6,60%
2 Bogoslovskiy aluminium plant Sverdlovsk oblast' Sayanskchemplast LCS 25 286 2,30%
3 Sredneuralskiy copper factory Sverdlovsk oblast' Sayanskchemplast LCS 22 528 2,00%
4 Ufaleynikel' Chelyabinsk' oblast' Caustic, Sterlitamak LCS 8 116 0,70%
5 Rusal Bratsk Irkutsk oblast' Sayanskchemplast LCS 6 093 0,60%
6 Apatit Murmansk oblast' Kirovo-Chepetskiy chemical plant LCS 5 110 0,50%
7 Gidrometallurg Kabardino-Balkaria Chemprom, Volgograd LCS 2 558 0,20%
Total 142 285 12,90%
Source: MRC
23

24. Agenda
Current Russian Caustic Soda Production
24

25. Russian caustic market, 00-10
Consumption, 000 DMT Production, 000 DMT
2100
2100
1400 1400
700 700
0 0
1990 2002 2003 2004 2005 2006 2007 2008 f 2009 f 2010 f 1990 2002 2003 2004 2005 2006 2007 2008 f 2009 f 2010 f
Export, 000 DMT
Import, 000 DMT
400
60
300
40
200
20
100
0 0
1990 2002 2003 2004 2005 2006 2007 2008 f 2009 f 2010 f 1990 2002 2003 2004 2005 2006 2007 2008 f 2009 f 2010 f
Source: MRC
25

26. Production of Caustic Soda in Russia, 000 dm
Producer 2000 2001 2002 2003 2004 2005 2006 2007
Caustic, Sterlitamak 238 227 222 213 224 239 249 250
Caustic, Volgograd 194 180 177 195 203 210 216 232
Sayanskchemplast 101 113 114 115 119 129 111 162
Usolyechemprom 105 100 93 62 65 84 96 98
Sibur-Neftechem, Dzerzhynsk 96 83 85 86 89 86 92 87
Kirovo-Chepetsky Plant 81 70 60 46 68 80 79 81
Azot, Novomoskovsk 74 72 75 76 81 73 61 42
Chemprom, Novocheboksarsk 67 68 69 76 81 99 92 95
Chemprom, Kemerovo 40 37 36 35 37 42 44 43
Total 1 238 1 190 1 145 1 061 1 153 1 229 1 266 129
Increase, % - -3,9% -3,8% -7,3% 8,7% 6,6% 3,0% 2,3%
Source: MRC
26

27. Russian caustic market in 2007
Consumption, 000 DMT
Production, 000 DMT
100
120
75
90
50
60
25
30
0
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Export, 000 DMT Import, 000 DMT
28 4
21 3
14 2
7 1
0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: MRC
27

28. Russian caustic market in 2007
Export to Production,% Import to Consumption,%
30% 5%
24% 4%
18% 3%
12% 2%
6% 1%
0% 0%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
08 08
Production in 2007, %
Kirovo-Chepetsk
Export in 2007, %
Sibur-Neftechem 6%
others Georgia 2% others 5%
7%
16%
Chemprom,
Volgograd Finland 2%
7% Azerbaijan
Chemprom,
9% Ukraine
Novocheboksarsk
7% Caustic, Sterlitamak 38%
Usolyechemprom 18% Kazakhstan
8% 14%
Sayanskchemplast Caustic.
13% Volgograd
Turkey
17%
30%
Source: MRC
28

29. Russian Production in 2007
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Producer 2007
07 07 07 07 07 07 07 07 07 07 07 07
Caustic, Sterlitamak 21.40 20.00 22.10 21.10 21.90 21.10 21.00 13.50 19.60 23.10 21.90 23.00 249.70
Caustic, Volgograd 20.00 17.80 19.90 17.70 19.30 19.70 20.30 18.10 15.40 21.10 20.90 21.30 231.50
Sayanskchemplast 14.60 13.30 14.40 14.30 13.70 14.10 14.60 8.90 11.60 14.20 14.10 14.50 162.30
Usolyechemprom 9.60 5.50 7.10 8.30 6.00 9.00 8.40 6.60 9.30 8.40 9.70 9.90 97.80
Chemprom,
8.00 7.40 8.20 8.00 8.20 7.50 8.10 7.60 7.80 7.80 7.90 8.10 94.60
Novocheboksarsk
Chemprom, Volgograd 7.60 7.70 7.20 6.50 7.40 7.80 7.90 7.10 7.60 6.10 6.80 7.50 87.20
Sibur-Neftechem,
8.00 7.40 8.50 7.90 6.00 7.00 6.80 7.70 6.60 6.10 7.30 7.40 86.70
Dzerzhynsk
Kirovo-Chepetsky Plant 7.30 6.30 5.80 6.70 5.80 5.70 6.50 7.50 7.40 6.40 6.50 8.80 80.70
Ilimchemprom 5.40 4.30 6.30 6.40 5.60 5.70 6.50 6.40 6.20 6.80 6.10 6.60 72.30
Chemprom, Kemerovo 3.90 3.50 3.80 3.40 3.00 3.70 3.60 3.20 2.80 3.70 3.50 4.60 42.70
Azot, Novomoskovsk 4.80 4.60 4.80 3.70 3.20 2.30 2.30 2.40 3.10 3.50 3.50 3.50 41.70
others 5.00 3.50 5.30 4.00 3.70 4.50 3.50 3.30 3.60 3.90 3.40 3.70 47.40
Total 115.60 101.30 113.40 108.00 103.80 108.10 109.50 92.30 101.00 111.10 111.60 118.90 1 294.60
Source: MRC
29

30. Russian PVC resin market: time of Import
Production Export Import PVC-S, KT
600
+80%
400
200
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
PVC-E, KT
120
+25%
80
40
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: MRC
30

31. Russian PVC resin market in 2007
Production, KT
Apparent Consumption, KT
60
80
45
60
30
40
15
20
0
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
08
08
Import to Apparent Consumption,%
Import, KT
60%
40
30 ! 45%
30%
20
15%
10
0%
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
08 08
Source: MRC
31

32. Import of PVC-S: Asia wins
Import in 2006, %
Import in 2007, %
others
others Netherlands
7%
15% 2%
Turkey Romania
5% 3%
China
Taiwan
31%
Hungary 7%
China
5% Norway 44%
Netherlands 8%
53%
5%
Hungary 72%
Finland 8%
South Korea
8% South Korea
Norway 22%
9% 21%
By Producers, 2006, %
By Producers, 2007, %
Xinjiang Tianye
14% others
others
Oltchim 12%
35%
3%
LG
Tianjin Dagu
11% Xinjiang Tianye
5%
36%
Formosa
Hanwha 7%
11%
BorsodChem BorsodChem
5% Hydro 8%
Shandong Finnplast 10% LG
Hydro
6% 8% Hanwha 11%
10%
11%
32
Source: MRC

33. Currency rate is an additional market driver
EUR/USD +16%
Additional advantage of
Asian & US producers in
Europe
EUR/RUB USD/RUB UAH/RUB
+ 6%
- 9% - 8%
Source: MRC
33

34. Agenda
Outlook of Russian production till 2012
24

35. Russian Caustic Soda Market
New
Caustic Soda market till 2012, dmt PVC
project
1 600
1 200
800
400
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Production Export Import
Source: MRC
34

36. Caustic Soda Balance till 2015: Nikochem
Source: Nikochem
Production Capacities, Kta Caustic Soda D and, 000 D T
em M Caustic Soda Production, 000 D T
M
1800
1600
1400
1200
1000
800
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Big hope on Komi Alumina project (1.4 mln. MT or 150,000 mt of Caustic Soda)
35

37. Caustic Soda Balance till 2012: MRC
P dem
VC and P production
VC Ethylene D and
em
KT
Caustic Soda Equivalent Caustic Soda Production Caustic Soda D and
em
1 600
1 200
800
400
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: MRC
37

38. Production chain of PVC
0,66 MT
Caustic and ethylene – key limitations
Chlorine Caustic for Russian PVC producers
0,57 MT
1,03 MT 1 MT
EDC VCM PVC
Ethylene
Oxychloride Hydrochloric
0,43 MT acid
Oxygen
38

39. Current PVC production balance, KT
PVC VCM Chlorine Chlorine Ethylene Ethylene
Producers Salt
capacity capacity needs production needs deliveries
Sayanskchemplast 250 270 150 103 103 variable own
Caustik Sterlitamak 150 160 89 193 72 variable own
Nikos 80 80 42 181 40 variable own
Sibur-Neftechim 42 36 20 77 15 stable supplied
Azot 47 45 25 70 - acetylene supplied
Pervomaysk 50 - 26 100 - not own
Usolechemprom 24 26 14 56 - variable own
Chemprom Volgograd 27 27 15 - - variable own
Karpatneftechem - 370 150 104 104 stable supplied
Total* 670 644 371 780 230 - -
* without Kalush
Source: MRC
39

40. Resume
• Chinese producers have to find the balance in chlorine /caustic soda
• Eastern European production balance generally will not change in future
• New PVC production in Russia will increase the supply of Caustic Soda
• Export of Caustic Soda will be correlated with Komi project performance
• We will not observe the deficit of Caustic Soda in Russia till 2012
40

41. Thank you!
Sergey Yaremenko,
Managing Director,
Market Report Company
sergey.yaremenko@mrcplast.com; www.mrcplast.com
Moscow +7 495 543 91 94; Kiev +38 044 599 29 50