Russia demand stronger than expected in Q1 – SIBUR

First-quarter Russian demand was stronger than expected for local petrochemicals producer SIBUR, despite higher buying by some end users the previous quarter on the back of the sharp devaluation of the rouble, CEO Dmitry Konov said on Thursday.

Despite the pick-up in purchasing activity in the fourth quarter as buyers sought to fill inventory requirements on fears of stronger fluctuations in the rouble on the back of the Ukraine crisis, international economic sanctions and a falling oil price, demand in the first three months of 2015 was normal, according to Konov.

“Because devaluation was picking up [in Q4], people [were] buying more than they would buy, and we thought that would correspond to lower Q1 demand, [but it] didn’t happen. Q1 was entirely normal,” he said, speaking at a press conference in London.

While the lower oil price may have had an impact on some of the company’s operations, diversified revenue and strong US dollar-denominated sales meant that SIBUR has not been as hard-hit by the weaker rouble as some companies.

“We have quite a diverse cost base [and] most of our revenues are dollar-linked. Only part of revenue streams are directly linked to oil prices,” he added.

SIBUR specialises in the production of basic polymers, synthetic rubbers, plastics and organic synthesis. Plastics demand is often linked to the speed of macroeconomic growth in a country, but other drivers in Russia mean that this rule may not hold as true in Russia as in many developed economies, according to SIBUR CFO Pavel Malyi.

“If you think about trends for plastic consumption in Russia… two factors contribute to it, one is a cyclical development that is similar to other countries where demand for plastics moves in line with GDP growth,” he said.

“[The other factor is that] Russia comes from years of under-utilising modern materials, so even during periods of weaker growth, demand for more modern materials turns out to be stronger than expected. That was one of the experiences of 2014, when the Russian economy was already slowing down,” he added.