1. Raw materials in pricing.
Raw materials for products of organic chemistry as caprolactam, adipic acid, acetic acid, polystyrene, vinyl acetate - are oil and natural gas. The tendency to reduce the prices of raw materials has been steadily remaining in recent years. Proceeding from this fact it follows that the cost price of finished products is also decreasing that makes companies with sources of their own raw materials the most competitive on the market.
The next stage in the processing of crude oil and natural gas is methanol and benzene out of which they eventually get the products produced by the group. Despite a stable demand the price dynamics in the context of several years is negative as the cost price is decreasing year by year as well as the spread between the raw material and the finished semiproduct.
2. Pricing for ADFs.
At the cost of an enterprise to produce adipic acid for sale is not profitable. The launch of an enterprise's production is not possible.
3. Pricing of caprolactam
Due to the fact that the cost price of caprolactam produced by the group is higher than its market price at average by 65%, the production launch is not efficient at the moment. The solution can be finding the source of cheap raw materials within the country to reduce transportation cost.
4. Pricing of Acetic acid and Vinyl Acetate.
The region of world pricing for acetic acid and vinyl acetate is the Chinese market. Analyzing the trend of recent years we can conclude that prices for acetic acid directly depend on the price of methanol to a greater extent than on prices in the markets of products of processing of acetic acid. The increase in the number of methanol production sites in 2014 is due to the growing demand for this type of raw materials from processing plants producing acetic acid, vinyl acetate, etc. Regarding products made from methanol the cost price in most cases is higher than the market price which excludes the possibility of trading on the international scene.
5. Pricing and consumption of polystyrenes.
The world market of polystyrene makes 500 million tons per year. It's production is concentrated mainly in the regions of the largest consumers of polystyrene: East and South Asia (50% of the world production). At the same time about 85% of the production capacity of this region is in China. The price of polystyrene directly depends on the cost of styrene. But at the same time the consumer demand can be a fundamental factor that can both restrain price rise as well as to stimulate it.
The main consumers of adipic acid and caprolactam are the USA, Western Europe, China. This fact is due to a large number of plants for the processing of adipic acid and caprolactam are based in these regions. These regions also have facilities for the production of cyclohexane, which is a semiproduct for the production of caprolactam and adipic acid. European textile fiber manufacturers are gradually losing their market share, failing to compete with products from Asia (mainly from China, Taiwan and lately from Indonesia and Vietnam), where labor costs are much lower and the quality control is constantly growing, imitating western technologies. The Asian region with China in the lead, is a rapidly growing market for adipic acid (an average annual growth of 5.3% up to 2017). It's growth is stimulated by the ever growing consumption of this chemical in the urethane industry of China. The availability of benzene in the European region is growing, and the price is going down affected by the oil quotes decline.
Brief conclusions and recommendations of the company: