Alliance of plastics processors in favour of the establishment of the state subsidies for the purchase of polymers

In July, the prices for basic polymers in Russia continued to grow against the background of seasonal demand and the beginning of a series of plant stops for routine maintenance. The exception to the General background was polyethylene terephthalate (PET), which, according to Plastinfo.ru, for three months jumped in price by 63% and finally became cheaper. In the face of such volatility, plastic processors are under great stress and make great efforts to fulfill contracts to buyers and not to generate a loss. Publisher Plastinfo.ru asked for comment to the General Director of the Union of plastic processors (BUT “APP”, www.rusopp.ru) P. V. Bazunov.

Petr Valerievich, the Russian plastics processing industry continues to develop, as well as the conditions for its raw materials supply. But still in the processing of plastics there are problems with the pace of its development — they are relatively low. What is the reason, in Your opinion?

If we talk about the entire chain of production of plastic products, in Russia it is mainly the synthesis of polymers is the part where the main profit is earned. For some items, raw material producers, taking into account the deficit, have the opportunity to make almost a 100% trade mark-up in terms of cheap carbon raw materials. At the same time, the business for the production of plastic products is characterized by low margin, due to the low trade margin, as the supply, including the import of products, exceeds demand, and therefore the margin is in the range of 5 to 25% of the cost of the main raw materials. With such a yield it is difficult to develop.

Why is this happening, in Your opinion?

The plastic processing industry is characterized by a large number of small businesses, small firms, of which thousands. This mark-up, again, is the result of fierce intra-industry competition. Enterprises have to compete on price and on factors such as production efficiency and reduced overhead. The situation is similar in Western Europe. At the same time, the Russian processor is in a situation where it does not have price advantages from the use of Russian raw materials and is crowded by the same Asian producers in our market.

How are the prices for Russian large-capacity plastics formed?

For example, in the field of metal processing, the cost of basic raw materials is determined on the London metal exchange. There is no such exchange in the field of petrochemicals, and large-tonnage plastics are sold at prices that are set, as a rule, individually for each buyer, but nevertheless by the General formula. The price formula includes the values of foreign market indicators published by various news agencies, for example, ICIS (UK, www.icis.com), Tecnon (UK), Kunststoff Information (Germany) with their Russian partner Plastinfo.ru et al. It turns out that the internal pricing is formed taking into account the “import parity”, when the price of Russian brands is set just below the import analogues, taking into account the delivery and customs clearance of the latter minus a certain amount, which is enough to encourage processors to buy Russian raw materials. That is, Russian petrochemists in this regard go in the price channel of their European and Arab competitors, regulating their margins for them. This is also a result of competition, and our petrochemical companies do not want to miss their market opportunities in the current situation of the ruble. According to some Russian polymer manufacturers, the Russian market is premium for them.

In addition, the supply of Russian polymers is carried out almost 100% of the time in advance, which further sucks Finance from processing in favor of the synthesis or production of raw materials. The maximum duration of price fixing for processors of raw materials purchased by them is 30 days, while abroad-90 days. At the same time, processors serving consumer markets (and most of them) are faced with the need to enter into long-term contracts with large retail operators or manufacturers of goods for retail, such as food, furniture, household appliances, etc.a Mandatory condition of such contracts is the fixing of prices for a period of six months to a year, and in rubles. Therefore, the Russian plastics processor is in an extremely tough economic framework. There is a lack of systemic, regulatory measures to support small business in this area by the state.

Why support small business in the industrial sector?

Small business, as a rule, does not create innovations. That’s not his purpose. But it creates a large number of jobs and makes a significant contribution to local budgets. In turn, the development of small business in processing stimulates innovation in engineering and the growth of competencies. Therefore, it is necessary to develop not only innovative exports, as is happening now, but the export of any industrial goods (as once developed, for example, the export of Chinese toys).

For comparison, in the United Kingdom of great Britain SMEs generate 50% of GDP, which is more than 2 times higher than the same indicator in the Russian Federation, calculated by the Ministry of economic development (economy.gov.ru) and presented In the strategy of development of small and medium-sized businesses until 2030. At the same time, the share of SMEs in the export structure of the most industrialized countries reaches from 25 to 50% (in China — up to 50%, data for 2014). In Russia, the same figure did not exceed 6% for the same period.

On the one hand, you say that the increasing competition does not allow companies to increase the trade mark — up, on the other-it forces companies to monitor the efficiency of their work. Is efficiency and productivity improvement a bad thing?

Efficiency is good. But the fact is that the increase in labor productivity in the fields of processing largely depends on the possibility of updating fixed assets, which is hampered by low margins and high cost of commercial loans and the need for enterprises to actually pour all the free funds into the primary raw material synthesis industry. With the release of the same funds, the enterprises themselves will be happy to increase productivity by buying more new and high-tech equipment. In General, in my opinion, the issue of labor productivity is somewhat overheated in our country. Labor productivity is not raised EN masse, while the level of wages is not so great, and investment in new equipment is barely enough money, including for the above reasons.

What can the state do and what should help for plastic processors?

In a market environment, the state cannot interfere in the pricing of polymer raw materials and tell the companies that produce them what prices they should set. The workers pay huge taxes. But at the same time, the state can offer support measures for the purchase of raw materials. The basis for such measures is likely to be mechanisms for subsidizing or concessional lending for the purchase of basic raw materials. Something similar introduces the Russian export centre (www.exportcenter.ru), but in relation to exports.

By applying for support under such a program, the processing company can obtain guarantees offered, for example, by the Federal Corporation for the development of small and medium-sized enterprises and operating within the framework of the relevant Bank credit product. The loan can be targeted and apply only to organizations registered in the GISP (state information system of industry. — Primas’. ed.) and having existing contracts with suppliers of raw materials. The interest rate on this loan may be subsidized by the industry development Fund (www.frprf.ru), can also be considered and any special product Roseximbank (www.eximbank.ru).

The point of lending on preferential terms for the purchase of raw materials is that it allows you to buy more, fixing the price in rubles, even if this volume is not immediately selected. Companies can contract for the main volume and only buy more on the spot market at competitive prices the amount that was not enough for them due to the inaccuracy in the calculations. This will create stability for the processor and protect its economic interests. We have already announced this At the II forum of the Union of plastic processors in may this year and we are going to work out this initiative with the state authorities. Not the fact that it will turn out, but it is necessary to try. And let everyone who considers this topic interesting join the Union and make their own contribution.

Processing of raw materials in the country, the state should be encouraged, and this applies not only to plastics, but also to other manufacturing industries. Otherwise, we will not overtake the advanced countries in development. And I believe that our goal should not be to catch up with someone, but to create the most efficient economy in our own unique geographical, social and political conditions. Time will show whether we catch up or overtake someone…