Russia’s Nonwovens Market on the Verge of Big Changes

By Eugene Gerden, Contributor | May 8, 2013

Major new players in the market have emerged amid reports about the planned acquisition of Polymatiz, one of Russia’s largest producers of nonwovens, by the local petrochemical giant Nizhnekamskneftekhim.

The Russian Federal Antimonopoly Service (FAS) recently granted permission to Nizhnekamskneftekhim (NKNK), Russia’s and one of the world’s leading petrochemical producers, to acquire 100% of the shares of JSC Polymatiz, according to Irina Kashunina, an official spokesperson for the FAS.
Financial details of the deal were not disclosed, however, according to some Russian analysts, they could be in the range of 1.1 to 1.5 billion rubles (USD$33-49.5 million).
Established in 2006, Polymatiz is located in the Alabuga special economic zone in Tatarstan, one of Russia’s most economically developed regions. Among the major sales markets for the company are the Russian market, as well as Poland, Ukraine and Kazakhstan.
There is a possibility that the new owner will make Polymatiz Russia's largest producer of nonwoven materials and create conditions for the expansion of its range, paying a particular focus on the increase of production of a new generation of nonwovens, the demand for which in Russia in recent years has significantly increased.
Nizhnekamskneftekhim’s large financial base, according to some analysts, should allow Polymatiz to overtake the recognized leaders of the market and in particular Regent Neoteks, Avgol Ros and Geksa nonwoven materials, the largest players in the spunbond market.
Currently Polymatiz’s capacities are estimated at 3500 tons of staple fiber, 1800 tons of nonwoven fabrics, as well as 560,000 sets of carpets for cars. Production capacities are running only at 48%, however there is a possibility that they will be fully loaded in the coming years.
According to analysts of the Russian Association of Nonwovens Producers, the Association of Russia’s leading producers of nonwovens, Nizhnekamskneftekhim is diversifying its activities and expanding in those markets that have the biggest growth potential in the near future.
One of them is the growth segments is nonwovens, which is steadily growing amid the stagnation of the domestic textile market, which current growth rates do not exceed 1-2% per year. This is significantly lower than in case of nonwovens market, whose volume over the last several years increased by 74%. 
Despite good market prospects, at present the Russian nonwovens producers cover only 60% of the domestic market, with the remaining coming from imports. At the same time, currently the country lacks the production of certain products. For example, in the case of polyester fiber at present almost 100% of the local needs for the material is met by imports. However there is a possibility that much can change in the near future, as Nizhnekamskneftekhim has plans to become the sole producer and supplier of polyester fiber in Russia, which is expected to be produced by the capacities of Polymatiz.
The forthcoming acquisition of Polymatiz by Nizhnekamskneftekhim is the second significant event in the Russian market for nonwoven materials since the beginning of 2013. Earlier this year, the JSC Kotovsky plant of nonwovens, another leading Russian producer of nonwovens, announced its plans to build a plant for the production of polyester fiber with the capacity of 210,000 tons per year and implement an investment project for the production of a new generation of multi-layer nonwoven materials. The total value of investments in both projects is estimated at more than 2 billion rubles (USD$60 million). The new facilities are to be built in Central Russia’s Tambov region.
Analysts at the Russian Association of Nonwovens Producers believe that the investors have chosen the right time to expand into the Russian market for nonwovens, which is steadily growing.
According to a recent study conducted by the analysts of Discovery Research Group, one of Russia’s leading analyst agencies in the field of textiles and nonwovens, the total production of nonwoven materials in Russia in 2011 grew by 35% to 2.1 billion square meters. At the same time the market reached 20 billion rubles (USD$600 million) in value terms.
Official data for 2012 have not yet been published, but according to analysts at the Russian Association of Nonwovens Producers, growth in 2012 was comparable with the figures for 2011.
Overall, for the last 3 years the production of nonwoven materials in Russia has grown by 74%. Analysts at Discovery Research Group say rapid growth was achieved because of the adoption of new and modern production technologies among local manufacturers.
In 2011, the production of nonwovens with low surface density—less than 25 g/m2—accounted for 53% of all nonwovens produced in Russia. This market segment is almost fully controlled by domestic producers, which met up to 97% of local needs in such types of nonwovens in Russia. However, according to analysts at the Russian Association of Nonwovens Producers, this segment has almost fully used up its opportunities for further growth. The most intense competition is expected to take place in the segment of nonwovens with surface density of more than 150 g/m2, where domestic production accounts meets only 61% of the demand, with imports filling in the rest.
Currently the majority of nonwovens production in Russia takes place in the Tula region and the Komi Republic, which share in the overall production estimated at 33.5% and 18.5% respectively. At the same time, the greatest increase in output, by 2.5 times, over the last several years is occurring in the Tatarstan Republic, where the government is planning to establish a cluster for nonwovens production, which is expected to be the largest in Russia. It is planned that the new cluster will be located in the territory of the Alabuga economic zone. 
At the same time the production of nonwoven products in Russia in 2011 amounted to 51,000 tons. The growth of production in the spunbond segment amounted to 26% over the same period last year.
The gradual growth of domestic production, which has been observed in recent years, has resulted in the decline of imports in total market structure. In 2011 imports decreased from 18 to 14%. The majority of imports accounted for fabrics for the production of sanitary and hygienic production, as well as roofing membranes and geotextiles.
Local analysts believe that prospects for the domestic nonwovens industry has a bright future as the demand for nonwovens will continue to grow mainly from the automotive industry as well as agriculture and the medical industry.
According to Andrew Alpatov, head of the Federal Agency for Management of Special Economic Zones (SEZ), currently imports still account for big share of the local market of nonwovens, however, the implementation of new projects will enable Russia to significantly increase and expand production and exports of nonwoven materials.

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