Small but Precious. Interview with Irina Vendilo for the journal «Chemical Industry Today» (5/2020).

The «Roshimreaktiv» Association includes 24 enterprises – manufacturers and suppliers of reagents and high-purity chemical substances. This is the very low-tonnage chemistry that is now under close scrutiny. We spoke with the Association’s General Director, Irina Vendilo, about the state of the “low-tonnage” sub-sector, growth points, and how producers weathered the pandemic.

In 2017, the Government of the Russian Federation approved a roadmap for the development of low-tonnage chemistry. How has the state of the industry changed over the past three years?

If we take the segments monitored by our association, we cannot speak of any significant breakthroughs. For example, imports of low-tonnage chemical products, including those used in industrial water treatment, in physical terms decreased from 63 thousand tons in 2017 to 58 thousand tons in 2019. Seemingly good news. But, if we consider import figures in monetary terms, then in 2019 compared to 2017, it increased by $26 million. That is, the tonnage of substances for water treatment imported decreased, but they started paying more for them. In the segment of low-tonnage chemistry for textile production over the same period, the import volume in physical terms remained approximately at the same level (38 thousand tons), but in monetary terms in 2019 compared to 2017, it increased by $19 million. Imports of low-tonnage chemical products used in electronics sharply increased in value – by almost $70 million. Imports of chemical reagents in tonnage increased by 4 thousand tons, but in value, reagents even surpassed low-tonnage chemicals for electronics – from 2017 to 2019, the volume of reagent imports in monetary terms increased by $100 million. Imports of low-tonnage chemicals for oil production and oil transportation in 2019 compared to 2017 in monetary terms increased by $13 million. Thus, roughly speaking, it turns out that Russian consumers continued to purchase foreign low-tonnage chemistry, at least in these three segments, in more or less the same quantities, while its cost in some segments increased significantly.

Not the most rosy picture. Are there any low-tonnage chemical products from domestic manufacturers that demonstrate high export potential?

In this regard, low-tonnage chemistry for oil production and oil transportation can boast good indicators. From 2017 to 2019, export volume in this segment increased by 103 thousand tons in physical terms, and by $86 million – in monetary terms. It should be added that of those listed, this is the only segment where the trade balance, although negative, is insignificant compared to other segments. Thus, in 2019, the volume of imports of low-tonnage chemical products for oil production and oil transportation in monetary terms amounted to $292 million, and the volume of exports – $277 million. For comparison: for such an important industry in terms of international competition as electronics production, low-tonnage chemicals were imported in 2019 for $138 million, while exports amounted to about $6 million.

During the COVID-19 pandemic, the Russian chemical industry became the only heavy industry sector that managed to achieve production growth, amounting to 4.9% for the first half of 2020. How did the pandemic affect the low-tonnage chemistry sector?

This spring was a test for our low-tonnage producers, as well as for many other Russian manufacturers. The main headache for us was that due to the closure of borders in the EU, India, and China, disruptions began in the import of some types of medium-tonnage raw materials. Those intermediates that could still be purchased were mostly lying in warehouses of foreign and Russian intermediary companies and were sold at higher prices. As a result, due to a shortage or increased cost of raw materials, Russian LTCH producers had to raise prices for their consumers by an average of 20%. Russian low-tonnage producers once again acutely felt their vulnerability due to high dependence on imported medium-tonnage component base.

At the same time, demand for low-tonnage products during the quarantine measures fell by about 25%. Areas related to sectors most affected by the measures introduced to combat the pandemic “dipped” – for example, sales of cleaning agents for laundries and dry cleaners serving a wide range of consumers decreased, as they completely suspended their operations (it should be noted, however, that demand from laundries working in hospitals, on the contrary, increased). On the other hand, even if in some areas consumer companies of low-tonnage products continued their work during the quarantine measures, they could significantly reduce production volumes and, accordingly, reduced the volumes of purchases of the low-tonnage chemistry they used.

The most difficult situation was for those Russian low-tonnage chemical enterprises that specialize in the production of a certain type of product. Those companies that produce a sufficiently wide range of low-tonnage chemical substances and have equipment that allows them to quickly reconfigure production to produce the most in-demand products were able to adapt more quickly and successfully to existence under quarantine conditions. Thus, losses from the “dipping” segments were compensated by increased demand for disinfectants and antiseptics, for reagents and high-purity chemical substances used in pharmaceutical production, as well as for textile auxiliaries used in the production of protective equipment and suits.

I feel particular pride in the fact that the member companies of our association not only managed to continue working during the coronacrisis but, moreover, in a very difficult current situation, managed through their own efforts to establish the production of a fairly large number of new products, some of which went towards combating the pandemic. The «EKOS-1» Group of Companies, «Promkhimperm» LLC, «Reaktiv» ZAO, «Ekroskhim» LLC – these enterprises managed in a short time to start producing products such as thickeners based on acrylic acid, methyl acetate of special purity, technical boron ester. They also established the production of a wide range of antiseptic preparations, including the latest generation.

If we try to look into the future, in your opinion, how will the low-tonnage chemical industry change after the pandemic ends? Will the state somehow change the strategy for LTCH development?

The Russian Ministry of Industry and Trade has already announced the development of an updated program for the import substitution of chemical products, which will take into account the experience of the pandemic. And I very much hope that this will give an additional impetus for establishing domestic productions of technical raw materials necessary for our low-tonnage producers. Now import dependence on medium-tonnage intermediates is one of the main obstacles to our development.

Furthermore, the coronacrisis provoked closer cooperation between Russian LTCH enterprises and pharmaceutical companies. Just like low-tonnage producers, Russian pharma manufacturers suffered from lockdowns, which led to a shortage of imported reagents, reactants, and intermediates used, among other things, in the production of active pharmaceutical ingredients. And now the question is being discussed about including in the «Pharma-2030» strategy a program for establishing productions of Russian low-tonnage chemical products of strategic importance for domestic pharma. As they say, every cloud has a silver lining. I hope this topic does not “fizzle out” after the pandemic ends. The pharmaceutical industry requires high-tech chemistry, products of multi-stage synthesis. This means that cooperation between Russian LTCH and pharma producers can serve as a serious impetus for the further development of our industry: this includes serious scientific research, improvement of chemical technologies, and the development of innovative chemical products. I am confident that Russian low-tonnage chemistry has a serious foundation, both in terms of scientific personnel and technologies, to meet the demands of our pharmaceutical producers.