The crumbling remains of the russian industry have about two months left to work with plastics.
“Business has asked to level out the deficit of raw materials widely used in the production of auto parts, refrigerators and building materials. Stopping its supplies against the backdrop of sanctions could lead to bankruptcy of enterprises”
“Representatives of several industries at once - the automotive, construction and household appliance manufacturers - have appealed to the Minister of Industry Anton Alikhanov with a request to work on the issue of a shortage of raw materials widely used in” product production
“The letter, which was signed by more than 20 companies (Technonicol, Beko, Veratek, RusTA, Verakhim, etc.)”
“We are talking about polymethylene phenyl isocyanates (MDI; used, for example, in the production of polyurethane foams, sealants, self-leveling floors, pipes, refrigerator components and auto parts),…”
All the things!
“…the deficit of which has been growing on the domestic market since the introduction of the 14th package of EU sanctions at the end of June this year.”
:
“Currently, MDI is not produced in industrial quantities in Russia, the entire volume of consumed raw materials is “100% dependent on imports,” the letter states.”
Oh dear…
“The main suppliers of products from Europe, the USA and Japan (the share of these imports in the total volume of domestic consumption, even after the start of the special military operation in Ukraine, averaged over 60%) have stopped shipments, Chinese suppliers cannot meet domestic demand, and are also reducing the volume of MDI deliveries, sometimes completely stopping them due to problems with bank payments.”
Lolololololol
“The authors of the appeal point out that recently the largest supplier from China, Wanhua Chemical Group, announced a complete stop in accepting orders for the supply of raw materials to Russia and Belarus.”
: BEST FRENEMIES FOREVER!
"This decision was a shock to the industry, since given the limited stock of market participants and the limited shelf life of MDI, the continuation of this situation over the next few months will entail the risk of shutdown and bankruptcy of existing production facilities,"
“In addition, suppliers from Saudi Arabia (Sadara Chemical is cited as an example) have still not confirmed the possibility of supplying raw materials to Russia.”
: Houthi this!
This keeps happening
. Look at how big the distance is from the situation they’re in now and solving the problem.
It’s like being stabbed and saying you’re thinking about building a factory that produces some gauze.
“Market participants have already felt the first consequences of the sanctions, says Alexey Gorokhov, executive director of the NAPPAN association (which unites manufacturers of construction panels)…”
This next part is fun
“…"The cost of the remaining isocyanates that are in Russia or their unofficial delivery has already increased more than one and a half times, and the price continues to rise every week…”
“…The possibilities to use unofficial supply schemes are very limited, so panic has already begun on the market - everyone is trying to find an opportunity for some kind of delivery, and, accordingly, the price has gone up," the expert says.”
And it will continue to go up!
Remember, even if they managed to evade sanctions, the price will still be incredibly high. That still hurts!
“At the same time, speaking about the leftovers, he indicated that they would last for about two months, and “the damage from the shortfall in the supply of this component will be enormous;…”
“…in most areas of application, there is nothing to replace it with, only finished products. <...> Ultimately, these are jobs, these are people who should receive a salary, but enterprises will not be able to provide it.””
I’m going to remind people again of this analogy.
It’s like Russia is in the path of an avalanche. They may try to point out that that are running away (or might in the future). But can they run fast enough to escape it? And if they can’t, will they be able to run afterwards?
Anton Guskov points out that this is a big problem for refrigerator manufacturers. Without the polymethylene phenyl isocyanates they can’t make refrigerators.
Listen to him describe the hopeless situation
“"The only way to solve this problem is to start producing this material in Russia. We do not produce it, and if we do, then in small quantities and of unsuitable quality for household appliances…”
“…In addition, the problem is that this is a substance that cannot be stored for a long time - it crystallizes due to its chemical properties. Therefore, it will not be possible to make reserves either,"”
So…hopeless
*sigh* here they’re going to point out possible solutions. But it’s filled with problems! (Some they don’t mention)
First of all there’s the problem of the avalanche, and if they’re running out of supplies in 2 months, I doubt anything here will fix the situation in time
But if we set that aside. There are still other problems.
In order to build a factory, they need all equipment, labor, and technical know how to accomplish it. I’m not sure they have that.
But also they need funding
“In their opinion, the reason why the project launch is constantly postponed is that the payback period of such a project "may not suit private investors". "We see this as the main reason for the project's repeatedly postponed launch,"”said Sergei Kolesnikov.
You also have to consider:
1. If the private investors have enough capital available
2. If they would would be willing to invest capital into ANYTHING considered the fear of nationalization or similar (since Russia keeps doing that)
3. If they would have in confidence in supporting another project considering work in this field has been going on for 17 YEARS with no tangible results.
“"And the issue of building a plant to ensure strategic raw material security with the availability of imports was apparently not taken seriously earlier; special approaches and support measures had to be applied to solve this problem."”
Special approaches?
Ok, so…
- the project probably won’t happen without government support (which the government may not be able to afford)
AND
- “the product will have no export prospects given the sanctions,”
: WHO WANTS TO INVEST?
“With the proper level of support and investments of $300–450 million, it is possible to create an enterprise with a capacity of 100 thousand tons of MDI per year in three to four years.”
That’s about half the amount of MDI used in 2023. And they’re going to run out in 2 months!
““However, the technology will have to be obtained in difficult ways and with a significant overpayment, since Western and now Chinese contractors will not risk preparing the documentation and implementing the EPC contract,” the expert concludes.”
So…doomed to failure
Look, even if they got China to help, it doesn’t sound like they could supply as much as Russia needs.
And why would they if they’ve got Russia cornered and can just force Russian factories into bankruptcy and make them buy Chinese finished products.
I don’t see a quick solution here! Anybody still want to say the Russian economy is going great and that sanctions don’t hurt?
IT WILL GET WORSE
~ The End ~
TL;DR: the russian industry absolutely needs access to a certain
category of chemicals. They don't make it. They can't import it from the West anymore. They can't import it from China either.
They can't stockpile it because it has a short shelf life. What they have now will run out in about two months.
They can try producing it themselves, but it's a huge investment and they have zero know-how in that domain. Private investors have been spooked by nationalizations.
Now it's possible that the situation isn't entirely as bad as the letter says. After all, the only way for the domestic production project to proceed, after languishing for already 17 years with no significant progress made, is to get a sizable amount of public investment money from the russian National Wealth Fund, and there are hundreds of other urgent and necessary projects constantly clamoring for NWF money. So painting a darker picture to make their begging more convincing is to be expected.
It's still pretty funny. And even if it's not as bad as claimed, it's still one more illustration of how the russian economy is spiraling the drain entirely because little crybaby pooty-poot wanted to cosplay as Peter the Great, entirely unaware that we are now in the 21st century.