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SITER.KZ company Polypropylene Prices: How KPI Supports Domestic Processors
1
July
2024
2024
KPI polypropylene prices for domestic processors are comparable to the cost of its sale in the domestic markets of other countries. On average, these prices are $961 per ton. However, on global markets, prices vary by region: in China — $905–960, in Europe — $1200, in Turkey — $1210-1225 per ton. These differences are due to supply and demand in the respective markets.
It is necessary to consider the annual capacity of the internal market of the Republic of Kazakhstan (50 thousand tons) and the design capacity of KPI (500 thousand tons per year). Consequently, the product's export is dictated by marketing logic. It is also important to note that the price on the internal market of Kazakhstan is formed based on market relations, considering local producers (besides KPI) and incoming imports.
Lower prices (netbacks) compared to the price of the internal market of Kazakhstan are due to transportation costs, implementation, and customs duties in the country of destination. Independent analytical agencies' indicators serve as a reference for price determination.
Meanwhile, KPI's share of the domestic market continues to grow, dynamically displacing imported volumes. In the first five months of 2024, KPI's share of polypropylene consumption in Kazakhstan increased by 30%, reaching 53% (compared to only 23% in 2023). The availability of domestic raw materials, in turn, stimulates the development of local polymer processing. Thus, the growth rate of homopolypropylene consumption (the most popular type of polypropylene) in the Republic of Kazakhstan in 2023 was 6% (while the growth of the entire processing industry of the country was 4.1%). It should also be emphasized that the price of the same homopolypropylene from the KPI plant for Kazakhstani processors is currently at one of the lowest levels among neighboring countries. In other words, the current price of KPI polypropylene, combined with its high quality, actually reflects the unconditional market attractiveness of the product for Kazakhstani processors. For example, Bal Tekstil LLP (brand "Bal Carpet") — the first carpet manufacturing factory in independent Kazakhstan, successfully exports its products to the CIS countries, Europe, and China. This year, the company completely switched to using polypropylene from KPI, consuming up to 200 tons of polypropylene per month.
Moreover, players in the polymer market of the Republic of Kazakhstan have the opportunity to ensure favorable prices (in exchange for production commitments) by using a systematic market tool from KPI such as the comprehensive processor support program "Forsazh." Participants in the program can also receive homologation assistance — setting up their production lines (selecting the necessary parameters for temperature, pressure, formulation) for using domestic polypropylene as raw material, as well as specialist consultations on improving production efficiency.
Among the participants in the "Forsazh" program are such domestic companies as KazStoneBox LLP, EGP+I LLP, and others. KazStoneBox (consuming up to 100 tons of polypropylene per month) produces unique corrugated cardboard from limestone with reinforcing polypropylene threads. EGP (consuming up to 30 tons of polypropylene per month) produces polypropylene cups for packaging dairy products, for example, for the Rodina agribusiness. Processors express gratitude to KPI, noting that support from KPI has allowed them not only to strengthen their market positions but also significantly improve the quality of their products, opening up new opportunities for growth and innovation.
In addition to targeted and systematic work with clients, there is also infrastructural support for the industry. Thus, in May 2024, the first external warehouse for storing 500 tons of finished products was launched in Almaty, reducing KPI product delivery times to customers in the south of the country from two weeks to two days. This step is primarily aimed at systematic support for small businesses that can only purchase polypropylene in small batches. The opening of a similar warehouse in Astana is planned. Thus, it can be stated that domestic polypropylene of world-class quality today fully and organically meets the needs of the internal market and is successfully promoted on the global market thanks to strategically well-structured marketing strategies.
Reference:
The comprehensive and systematic support program "Forsazh" from the KPI plant offers its Kazakhstani clients several directions, providing the opportunity to secure acceptable prices in exchange for production commitments. Thus, the export boost is aimed at increasing business competitiveness in target export markets. Special prices are provided for the processed volume of raw materials. The investment boost supports business investment projects related to the expansion of production capacities. Loan interest compensation can be either full or partial, thanks to special pricing for the additional volume of raw materials. The import-substituting boost is designed to develop import-substituting business in the Kazakhstani market. KPI provides companies with flexible raw material prices, making their products more competitive in creating import-substituting products. The industry boost allows for special raw material prices to enable businesses to transition from traditional solutions to modern ones. Within this program, KPI also helps develop a range of polymer products.
The term “homologation” comes from the Greek word “ὁμολογέω” (homologeo), which means “to agree, to accord, to ascertain conformity.” In a production context, the homologation process allows in a test mode to adapt the client’s equipment for using the proposed raw materials from the supplier.
