12 reasons to use Annual Reports

(Polyethylene in Russia Report as an example)

1. The Report includes general data on PE imports from Belarus. The common error of many researchers is that overall PE consumption in Russia is often calculated without LDPE imports from Belarus. Indeed, Russian customs authorities do not register imports-exports of PE from/to Belarus recording them as domestic transportation.

2. If you take statistics of production of finished goods made of PE as a basis, then, unfortunately, your assessments of individual processing sectors are going to be incorrect in principle. The Federal State Statistics Service of the Russian Federationdoes not take into account production of PE films by many large producers. There is a similar situation with production of polymer pipes. The Federal State Statistics Service takes into account processing volumes of only 128 film producers and 42 polymer pipes producers.

At the same time, the Federal State Statistics Service does not take account of production figures of the largest producers (particularly, there are no data on production of PE pipes by Eurotrubplast Holding in 2007; official statistics do not provide any information on production of packaging at P&G or WBD, either; and there is a long list of such examples). The situation with official statistics on the injection molding market is simply catastrophic. They record output volumes of only one tenth of producers. Taking into account the aforesaid, our data on PE consumption by processing sectors essentially differ from all those published on the market.

3. Indeed, in accordance with commonly used reports, about 24% in the structure of overall PE supply belong to the packaging sector, 22% refer to the sector of films, and nearly 21% are covered by the mysterious sector of cultural and house hold goods. Can this structure be used to define PE processing technologies applied in the market? No, inasmuch as films can equally be includedin to the sector “Packaging and Wrapping Materials” as well as into the sector “Cultural and Household Goods”.Thesame, forexample, refers to molded boxes or caps for PET bottles or to cosmetic bottles made with the help of EBM technology. Can this classification be used to tell PE suppliers which grades and for which sectors (or, at least, with which MFR) should be offered to the market? No, since according to the old classification nearly 670 KT of consumedpolyethylene cannot be unambiguously referred to either one or another PE processing technology generally accepted in the world.

4. Not to delude players in the Russian polyethylene market, we collected detailed statistics on PE supplies by all producers, operating in the Russian market, by each PE grade. We analyzed sales of all 976 PE grades available in the Russian market over the course of the recent nine years. If data on imported grades can theoretically be collected, then the product mix of Russian polyethylene producers can be found only in our Report.

5. Having collected summarized data on sales of specific PE grades, we were able to assess PE consumption volumes in each processing sector with greater accuracy. The data we obtained on production of films in Russia differ nearly two times from official statistics.

6. Our estimations of the PE pipes market turned out to be higher than had been considered to be the case before our Report. Indeed, very often analysts of the pipe market didnottakeaccountoftheundyed 273-83 HDPE grade produced in Kazan and Budennovsk, since in accordance with operating State Standards this grade cannot be used in production of water-, gas- and heat supply pipes at all. However, according to our data, all the same Russian producers use this grade (about 50 kt in overall consumption): they other dye it by means of masterbatches, or add it as blends, or use it as an inner layer in multi-layer pipes.

7. We studied PE traders’ sales and focused on end polyethylene converters. For that we used more than a dozen of different sources of information, including detailed statistics on foreign-economic activity, production, financial indicators and inland transportation in the Russian Federation.

8. Major difficulties arose when we analyzed supply of equipment to each PE processing sector. It was especially difficult to distribute molding machines since they can also be used to process PP, PVC, HIPS, GPPS, ABS, etc. Distributing molding machines by polymers, we adhered to several criteria: converter’s sphere of business, brand of a molding machine and producers’ application instructions. As a result, each molding machine was identified to each producer related to either one or another processing sector, which, in its turn, was related to either one or another PE grade.

Separately, wemadeuptheratingof the most significant investments made by converters. Accordingly, dynamics of capita linvestments into equipment demonstrate possibilities of further growth of each PE processing sector in the Russian Federation.

9. Each processing sector contains ratings of converters, made up on the basis of our own assessments of PE consumption, as well as ratings ofsales of each PE grade by each technology, and, when needed, by processing sectors. That was done to define, which PE grades are in great demand in the Russian market in each business segment today, as well as to understand how to form your grade mix in each segment in the most efficient way.

10. Reasoning from data on investments into PE processing, as well as using statistics on inland transportation in Russia, we made up a complex picture of PE processing development in eachregion of the Russian Federation.

11. We also described general PE market development trends both in the world and in each region using assessments of the leading world analytical companies such as CMAI, Nexant and Townsend. Furthermore, weanalyzed price dynamics over the course of 2004-2008, using data of ICIS and Platts, as well as our own data from Price Reports.

12. One of the results of the unbiased analysis is our own forecast of potential projects on expansion of PE production capacities in Russia till 2012, as well as assessment of projects that are most likely to remain on paper.