The chemical industry in the world
The industry's contribution to GDP varies from country to country and is most evident in China.
Figure 1. Contribution of the chemical industry to GDP of the world's leading countries in 2022, %
Source: according to EMISS, NIITECHIM
Due to the high demand for chemical and petrochemical products, the global chemical industry is developing on an upward trend. According to preliminary data, the volume of chemical production in the world will amount to about 4822.5 million USD.
Fig. 2. The volume of output of chemical and petrochemical products in the world in the period 2005-2023, USD.
Source: according to EMISS, NIITECHIM
In 2019-2020, during the years of business contraction due to the COVID-19 pandemic, the production of chemical and petrochemical products in the world decreased by 8.6%. As the global economy recovers in 2023, demand for goods has increased dramatically and global industrial production is growing by an average of 7.2% annually. By the end of 2023, experts predict production at the level of 5,244.2 USD.
In 2022, China accounted for approximately 44.6% of global chemical industry revenues. In 2022, this was more than in any other region of the world. The European Union was in second place, but far behind, with a 14.7 percent share of global chemical revenue in 2022. The United States is in third place in the production of chemical products with a share of 12.8%. Russia is also in the top ten in terms of chemical production, but ranks only 8th in the world with a share of 1.8%.
Fig.3. Chemical production by regions of the world by the end of 2022, %
Source: data https://www.statista.com
It should be noted that the chemical industry of the EU countries is experiencing a crisis today, and capacity utilization is below normal. In the first half of 2023, the volume of chemical production in Europe decreased by 13.5% compared to the previous year. Chemical production in the 27 countries of the European Union is expected to decrease by about 8% this year compared to the previous year, while a recovery in demand for chemicals in Europe is not expected, according to an assessment by the European Council of the Chemical Industry.
The global chemical market is projected to reach $7 trillion by 2027, and the growth rate between 2023 and 2027 will be 7% per year.
The growth of the market is driven by various factors, including a growing consumer base, growing demand for plastics, increased consumption in the automotive industry, the rise of cosmetics production, as well as the expansion of oil production and refining. Asia is the fastest growing region due to factors such as infrastructure construction, industrialization and diverse end-user demand.
Chemical industry in Russia
In Russia, the chemical industry is focused on the production of large–tonnage products of low grades, the share of lower grades in exports is 70.8%.
The chemical industry of Russia in 2022 showed an increase of 12.9% compared to the level of 2021 in value terms. In the segment of production of chemical products and substances, the growth was 13.4%, in the segment of production of rubber and plastic products, the growth was 11.3%. It is expected that the chemical industry of the Russian Federation will amount to at least 7.9 trillion rubles by the end of 2023.
Fig. 4. Performance indicators of chemical production companies in the Russian Federation in 2021-2023, billion rubles.
Source: Rosstat, NIITECHIM
The decrease in production was mainly due to a drop in exports of chemical products and, to the greatest extent, exports of mineral fertilizers. However, by the end of 2023, production is expected to grow by 3-4%.
Fig. 5. Production of the main types of chemical products in industry in 2021-2023, million tons.
Source: Rosstat, NIITECHIM
There has been a positive trend in the consumption of chemical industry products over the past 5 years. Consumption of basic chemical products in 2022 amounted to 6764 million tons.
Fig.6. Consumption of chemical products in Russia in 2023, %
Source: data from the Ministry of Industry and Trade
The production of chemical products is geographically unevenly developed. Most of the production facilities are located in the European part of the country for the following reasons:
- Proximity to raw materials and resource sources (including labor resources).
- The concentration of product consumption areas in terms of population density and industry.
- Infrastructure and transport support.
The raw material factor is crucial when placing factories, since its share in the cost price reaches 90%. Production is characterized by increased energy intensity and consumes a fifth of all industrial energy resources. In recent years, environmental factors and the provision of territorial benefits (special economic zones, technoparks) have begun to play an important role in the planning of new industries.
Fig.7. Placement of production facilities by federal districts in 2023, %
Source: Rosstat
The largest concentration of production in the Volga Federal District is 36%, 27% of all chemical plants operate in the Central Federal District, and 16% in the North–Western Federal District.
In 2023, the largest increase in output was recorded in the Northwestern Federal District - by 58.6%, and production increased by more than 30% in the Southern, Far Eastern and Volga Federal Districts.
According to the Federal Customs Service, exports of chemical products from the Russian Federation in January-October 2023 decreased by 37% compared to the same period in 2022 and amounted to $22.2 billion. Imports of chemical industry products increased by 2.6% to $46.6 billion over the same period.
Fig. 8. The results of exports and imports of chemical industry products in Russia in 2016-2023. (bln USD)
Source: https://rosstat.gov.ru
At the same time, in 2022, exports of chemical and petrochemical products increased due to an increase in world prices for an extensive list of chemical products. The main export product of the Russian chemical industry in 2022 were mineral fertilizers, synthetic rubbers, as well as basic large-tonnage plastics in primary forms (in total, exports of polyethylene, polypropylene, polyvinyl chloride and polystyrene account for 8% of exports of the chemical industry).
State support for the chemical industry in Russia
The state, realizing the importance of low- and medium-tonnage chemicals, actively supports the industry. In 2022 alone, chemical industry enterprises received state support for almost 30 billion rubles. In the same year, the Industrial Development Fund provided preferential loans for the implementation of 44 projects in the chemical industry for 19.5 billion rubles. By the end of 2023, the volume of state support for the chemical industry, provided through subsidizing R&D, tools of the Cluster Investment Platform (KIP) and the Industrial Development Fund (IDF), will amount to about 16.5 billion rubles. This once again underlines the relevance and need for the development of this industry. For 2024-2025, 5 billion rubles will be provided for development (R&D) and subsidizing loans for investment projects for low- and medium-tonnage chemicals production.
The Government of the Russian Federation is working to restore competencies in low- and medium-tonnage chemistry. In 2017, the government approved a roadmap for the development of small and medium-tonnage chemicals, the targets of which, fixed in 2020, imply an increase in the volume of production of small and medium-tonnage chemicals by 2025 by 30%, and by 2030 - by 70%.
Among the measures implemented and planned by the Government of the Russian Federation in the field of development of the chemical industry:
- for 2023 and 2024, the government of the Russian Federation has additionally provided 5 billion rubles for R&D and subsidizing loans for investment projects,
- mechanisms for long-term support of the industry are being worked out at least until 2030, which will allow enterprises to have a longer planning horizon,
- The government of the Russian Federation is focusing on overcoming the structural limitations of the development of low- and medium-tonnage chemistry, work is underway in 3 directions:
- the formation of a full cycle of production of basic substances in Russia, without gaps in the value chains and skipping redevelopment,
- subsidizing the interest rate for plant construction under the cluster investment platform in order to improve the economics of low-tonnage chemical projects,
- scientific, technological and personnel development of the industry on the basis of engineering, engineering centers of specialized universities with a chemical bias.
The Ministry of Industry and Trade combines measures in these three areas into a comprehensive import substitution project for critical chemical products. The project was submitted to the government at the relevant strategic session, and it is planned to complete the work on approving the project in the first quarter of 2024. The main purpose of the project is to reduce the import dependence of the chemical industry by building production chains from raw materials to finished products.
Project objectives:
- Meeting the needs of the industry of the Russian Federation for critical chemical products
- Scientific and personnel support of the industry
- Creation of an ecosystem of technological development in chemistry based on federal competence centers that combine science, engineering and production in cooperation
In the 1st quarter of 2024, the Ministry of Industry and Trade of the Russian Federation plans to approve the project of technological sovereignty "Import substitution of critical chemical products". It is already known that it will involve the creation of several chemical production centers, the key of which will be located in Usolye-Sibirsky. Within the framework of the megaproject, it is planned to develop the production of phosphorus chain, organochlorine, polyester chain, special polymers and other areas. The total investment budget of the chemical industry until 2030. It is planned to be in the region of 2 trillion rubles, of which 500 billion rubles may be spent by the federal budget.
The Federal Chemistry Center in Usolye-Sibirsky should become the key for the megaproject. Its operator is the recently established large chemical corporation Roschem. During the development of the center's concept, 341 products were analyzed. As a result of the analysis and discussion, it was proposed to launch 51 production facilities in Usolye-Sibirsky, where it is planned to produce more than 1,000 items.
At the first stage, it is planned to launch the production of yellow phosphorus (up to 50 thousand tons). The second stage is the production of a chlorine chain using the method of membrane electrolysis with further production of phosphorus trichloride (99 thousand tons per year). The soda and hydrogen produced along the way are planned to be used in the production of other products. The third stage is the launch of glyphosate production. Also, part of the chlorine will be directed to the production of epichlorohydrin, and that will already be used for the production of epoxy resins.
The operator also sees in the future the creation of a kind of technopark on the industrial site for small and medium-sized businesses operating in low-tonnage chemistry with products of the main production of the Federal Chemistry Center. By the way, a project according to a similar scheme is already being implemented by Sibur in Nizhnekamsk (Tatarstan) and is being discussed in Svobodny (Amur region).
Today, the domestic chemical industry is facing large–scale tasks to accelerate the development of high-tech areas, including low- and medium-tonnage chemistry.
Low-tonnage chemistry is currently receiving targeted support within the framework of the federal project for the development of production of new materials. According to the project, in 2022, the ministry allocated 4 billion rubles to 39 such industries. In 2023, R&D projects worth 1.3 billion rubles were supported, and subsidies at loan rates of about 1 billion rubles were provided.
As for micro-tonnage chemistry, support for this segment began only in 2023: on behalf of the President of the Russian Federation following the results of the congress of young scientists. The Ministry of Education and Science, together with a number of interested organizations, is working on the possibility of organizing such productions on the basis of universities and research centers. The Ministry has already proposed a list of 18 universities that have the necessary equipment and competencies.
Small- and micro-tonnage chemical projects receiving state support will reach the industrial level of production in 2025-2029. On average, such projects pay off in 3-5 years.
In addition, the government is working on another mechanism to support the chemical industry by expanding the law on public-private partnership to projects for the production of necessary specific chemical components, but the profitability of which is low or in a negative zone.
The largest enterprises of the chemical industry in Russia
The largest companies in the Russian chemical industry, which occupy leading positions not only in the country but also in the world, include: Sibur Holding (Moscow), Salavatnefteorgsintez (Salavat, Bashkortostan), Nizhnekamskneftekhim (Nizhnekamsk, Tatarstan), Eurochem (Moscow), Uralkali (Berezniki, Perm Krai), Akron (Veliky Novgorod). The revenue of chemical industry enterprises in the first 9 months of 2023 decreased by 28.3% compared to the level of 2022.
Investments in fixed assets of chemical enterprises (large and medium-sized) in the first half of 2023, Russia reached 342.5 billion rubles.
The increase compared to the 6 months of last year was 4.8%. Investment growth was recorded in all federal districts except the Central and Ural regions. In 2022-2023, 81 major projects were implemented in Russia. The largest number of new projects have been launched in Tatarstan, Bashkiria, Perm Krai and Nizhny Novgorod Region. The main share of projects relates to the production of plastics and synthetic resins (28%), organic (8%) and inorganic synthesis products (10%).
126 more projects are planned by 2025. Most of them relate to the production of plastics and synthetic resins (22%), inorganic products (18%), mineral fertilizers (11%), organic synthesis products (11%).
Today, the domestic chemical industry is facing large–scale tasks to accelerate the development of high-tech areas, including low- and medium-tonnage chemistry. With comprehensive state support, the Russian chemical industry will be able to ensure the operation of almost all spheres of the national economy and become one of the key drivers for achieving technological sovereignty. Today, the government of the Russian Federation is working on mechanisms for long–term support for the chemical industry - at least until 2030. To overcome the structural constraints of the industry's development, the Ministry of Industry and Trade is working on support measures aimed at forming a full cycle of production of basic substances, increasing the profitability of low-tonnage chemical plants (preferences of the cluster investment platform), as well as scientific, technological and personnel development of the industry. All these measures will be combined into a comprehensive import substitution project for critical chemical products.
