DOWNSTREAM SECTOR

Kazakhstan 2017 | INDUSTRY | B2B

Despite the economic crisis and currency devaluation, Kazakhstan's downstream players are working hard to develop their own manufacturing products, rely less on imports, and expand into regional markets.

Bolat A. Tenyzbayev
BOLAT A. TENYZBAYEV
Director
Hill Corporation
Murat Omarov
MURAT OMAROV
General Director
Kazakhstan Petrochemical Company (KNK)

What are the biggest opportunities for you at the start of 2017?

Bolat A. Tenyzbayev Opportunities are huge, export wise. China is extremely interested in buying our products and selling them, either with our own brand or through a localized brand in China. We also see opportunities in Russia, where we have had talks with potential Russian customers, as well as Central Asian countries. In terms of our overall expansion plans, we prioritize projects in Turkey and Ukraine. Iran is still just coming out of sanctions so it is a little tricky for now, but we have our eyes on the country. We originally just wanted to ship our products to Ukraine and Turkey without a physical presence, but now we want to open branches in those countries. Every market requires a special approach. In Ukraine we have established partners that we have been working with a long time; the same is true for China. In Turkey we sought businesses working in the same area as us—lubricants—and approached them either directly or through trade fairs and expos.

Murat Omarov The company was established in February 2009 and its main activity is manufacturing plastic products. Before this time, KNK had trader experience for polymer raw materials and sold about 10,000 tons of raw materials per year. Today the company is already spending this volume of raw materials for its own manufacture of plastic products. One of the important factors of the company's growth was the development of its own production capacities. In seven years the company started the manufacturing of packaging films, agriculture films, PE films for building, plastic shopping bags, PE pipes, PVC pipes, and other fittings. If we consider the share of sales of our products, then of course the pipe products take a large share, since the weight of the pipe products is more than the weight of the plastic bags and films. The share of pipe products is about 60% and 40% of sales is for PE films and plastic bags. Our pipes customers are servicing companies that use it in the water and gas supply, as well as for uranium mining.

How can you help further develop the downstream sector in Kazakhstan?

BAT We have great plans for the future. We increased our output annually through extensions to our existing blending plant, and we also plan to build another facility, a base oil plant. That is an ongoing project also in Shymkent. That will increase production capacity substantially, which is in line with our overall export and expansion plans. It will increase our production by a minimum factor of five. The crisis has definitely had an impact on the downstream sector. In terms of Hill Corporation, our customers purchase less due to the decline in demand and the overall slump in the sector. To offset this decline in sales, we approach international oil and gas companies like TCO and NCOC to get more business from them. So we are definitely making huge strides in the downstream sector in Kazakhstan.

MO The plastic market in Kazakhstan is increasing, and accordingly competition is increasing. But, to give the best growth in this industry, Kazakhstan needs its own petrochemical plant for the production of polyethylene, polypropylene, polyvinylchloride, and other raw materials. After all, Kazakhstan has the necessary raw materials (oil and gas), but still needs to develop the deeper processing of raw materials. After that, Kazakhstan will come near world exporters of polymeric raw materials. This will give a big impetus to companies like us. To produce such raw materials will be a great advantage for companies like ours. In general, the business climate in Kazakhstan is favorable, but is at an embryonic level. For business development, it is necessary to fundamentally review and simplify the government acts, both in the sphere of organization and liquidation of business, its security, as well as in the field of taxation and investment.