Raw materials Ukraine, or How Russia earns from Ukrainian glass

18-09-2017

Source: epravda.com.ua.

Ukraine exports 98% of raw materials for glass production to Russia and Belarus, and then imports the finished glass from these countries. That’s why, it is not surprisingly that Ukraine still plays a raw-exports role in the global market.

Ukraine ranks second in Eastern Europe in terms of available glass raw materials.

Most of the deposits, the number of which is about 100, have proven reserves of 5 million tons in each of them. And sometimes this figure is much larger. For example, in the Novoselovskoye deposit near Kharkiv, the estimated reserves are 18.03 million tons.

3541e63-1

However, these impressive resources are used in a quite strange manner. Every year, 2% of extracted raw materials are processed into low-quality products that can not be used in our construction industry due to the outdated technology, which has not changed since the beginning of the 19th century.

Another 18% are bought by Belarus. But other 80% are exported to Russia. Last year, exports to this country amounted to 300 thousand tons with the value of $6 million.

55a9a89-2

And this is at a time when there is a demand for about 3.4 billion square meters of modern building glass in the domestic market. When there are 245 million tons of explored reserves of raw materials. When the reserves will be sufficient for 130 years and even more.

Instead, the import of quality glass only to produce double-glazed windows amounted to 314 thousand tons last year. And those 673 tons of glass, which we have produced last year (by using a method of pulling and casting with grinding), gather dust in warehouses.

The reason is simple – they can not be used in modern construction according to technical standards of the European Union, which the country has committed to start using within the framework of the Association with the EU.

Ukrainian construction companies and windows manufacturers have long adapted to this situation, and they simply import the glass from the same Russia and Belarus, pumping nearly 80 million dollars annually to the economies of these countries.

However, sooner or later, such a model presses heavily on citizens. After all, they cover all currency fluctuations and rising prices for modern windows.

And what about the world

The annual growth of the world sheet glass production is 7%. The average level of glass consumption per capita in the world is differentiated depending on the level of economic development.

For example, the consumption level for transitional or emerging economies is from 3 to 5 kg per capita. In developed Europe, this is 18-28 kg depending on the country.

Ukraine is among outsiders: it produces approximately 3.5 kg per person and consumes less than 5 kg per citizen. Moreover, these 3.5 kg produced do not include the modern float glass. That is, the demand for modern glass is 100% met due to the import.

Why so

The lack of modern glass production in Ukraine is associated with the business logic of producers – allegedly, plant are built where there is a market, raw materials and profits. But the figures analyzed above and the fact we will discuss below refute these arguments.

For example, in Belarus, there is a number of modern glass factories while reserves of raw materials are 100% of Ukrainian ones. Belarus imports almost 80% of raw materials for glass, and this does not stop foreign investors who work there.

Another example is Kazakhstan, the reserves of which are estimated at 13-28 million tons. Well, this country plans to build a plant with a capacity of 140 thousand tons a year by using the investors’ funds in two years. Investors are the UAE, Kuwait, China and the United Kingdom.

These projects are the results of the implementation of state policy on domestic demand and industrial development.

Ukraine, which had 30 glass factories at different times, did not succeed in providing such support. None of these plants produced nothing more than the “gray” glass of poor quality. And the four factories that produced the sheet glass and one factory in Luhansk that produced the glass by using a modern method couldn’t operate for a long time without support.

Actually, this is a reason Why Ukraine still plays a raw-exports role on the global market. The country gives a lion’s share of added value and a large number of jobs to economies of other countries.

Exporting raw materials, we receive $ 6 million, and then import finished glass products possibly made from our own raw materials in the amount of $ 80-90 million.

What comes next?

Today, the world practice demonstrates that it is necessary to have one glass tempering line with a capacity of 200 square meters per hour for every 1 million people to provide a stable supply of domestic glass within the country.

That is, Ukraine needs at least 40 such lines. In the country, There are all the conditions, with the exception of a comfortable business climate for investors and clear and effective regulatory rules of business operation in this segment, to construct them.

We are talking about a chronic “Soviet school” of rules and standards, which make Ukrainian producers dependent on imports. This is especially true for the segment of modern energy-efficient window systems. It is possible to solve their problem, as well as the problem of the market as a whole – by attracting regular investors and introducing transparent and friendly rules for businesses.

With such a purpose, we need to take some simple regulatory and organizational steps.

First, it is necessary to provide the transparent and non-corruption access to the development of glass quarries. To eliminate the corruption, which is a common practice for government officials in this area, and create incentive conditions for real producers.

Secondly, it is necessary to provide special conditions to allocate land plots and connect to engineering networks for investors in this sector, who are critical for the development of Ukraine.

Thirdly, to guarantee the security of investments by using the effective regulatory framework.

Fourthly, to create the preconditions for a profitable operation in the market. For example, to direct the state energy efficiency program to the domestic production: use “warm loans” to compensate not for all products, but for only those produced from Ukrainian glass and in Ukrainian enterprises.

Fifthly, to start negotiations with investors at the state level with a preliminary analysis of the top glass producers in the world. For example, we shouldn’t conduct the first negotiations with the ATEC Holding (operates in Belarus), Asahi Glass, Saint-Gobain, Pilkington, Guardian (which run the manufacturing in Russia and are not interested in losing the Ukrainian market) among TOP-10 world sheet glass manufacturers.

The Turkish Sisecam and Taiwan Glass, which have joint interstate projects with Poland and the Baltic States, are among the promising investors.

And then, perhaps, we will be able to return at least 70 million in other currencies, which Ukraine pays to other countries for glass imports, in the Ukrainian economy annually. If we make a little effort, we can also receive 200 million euros of direct investments, which an investor will spend on the construction of a modern glass factory.

Partners