Future market Russia needs to modernise

Around 26 billion dollars have been budgeted in 2010 to expand the power supply system in Russia. Major investment is also imminent to expand the water supply system and to construct wastewater treatment plants. The projects provide manufacturers and suppliers in the plastics and rubber processing industry with new business opportunities.

Efficiency technologies and lower energy consumption are also playing an increasingly important role in the Russian construction industry. In January 2010 the Russian Environment Ministry approved the criteria for the ecological certification of buildings. Due to the international awareness of construction projects in the Olympic city of Sochi and due to the new energy law, the subject is now higher up the agenda. The projects in the Olympics region will set new standards for ecological and sustainable construction, which will then have an effect nationwide. Most of the technologies and materials for "green buildings" would have to be imported, because they are not produced in Russia. This trend reveals new business opportunities for western technology providers in the Russian sales market.

Despite the difficult conditions, Russia’s polyethylene manufacturers have increased production by one-tenth. Thanks to massive investment in expanding capacity and targeted quality improvements, Russia is now playing in the first division. A range of further investments is planned. In 2009 the production of, and demand for, high-density polyethylene was greater than the output and sales of low-density polyethylene for the first time. The hard polymer was responsible for over 50.5 per cent of Russian PE output in 2009. The polyolefin, with which drinks bottles, packaging and household goods are manufactured, is now responsible for around 55 per cent of the demand for polyethylene in Russia. Despite massive investment in new plants, Russia is not able to cover its demand for linear low-density polyethylene itself and continues to be reliant on imports.

The chemical industry has suffered in the past year, in particular from weak demand from the construction sector and automotive manufacturers. Investment continues to be made in the chemical industry, though foreshortened. The Ministry of Economy is expecting chemical production to grow by up to 4 per cent by 2012. The industry is preparing for the future by expanding capacity, impetus being provided by the strong demand for nitrogen fertilisers and high-quality lubricants. By 2014 the Gremyachinski potash mine will be opened in the Volgograd region. In order to realise this project, 1.9 billion euros will be required, and an additional investment of 220 million euros is planned to develop the infrastructure around the storage site (housing, schools, hospitals and roads).

The financing of the investment project remains a key issue. However, credit lending is picking up again in Russia and trust in the ruble is growing. From 2010, the government only wants to issue state guarantees for new investment projects. In order to stimulate lending, the central bank has lowered the refinancing rate several times during the year, most recently in February, to 8.5 per cent. The base rate has never been so low in Russia.