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5/2017


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DRINKS
Review of the Russian Beer Market
Research by the Company Euromonitor International

TEA & COFFEE
Review of the Russian Tea Market
Research by Company Step by Step

CONFECTIONERY
Review of the Russian Market of Chocolate Products
Research by the Company NeoAnalytics

Review of Foreign Trade Cookie Supplies in Russia
Research by Information-Analytical Company VVS

MEAT
Review of the Russian Turkey Market
Research by the Company Global Reach Consulting

DAIRY PRODUCTS
Review of the Russian Dairy Market
Research by the Company Market Analitika

Features of Branding in the Russian Cheese Market
Research by the Branding Company Labelmen

FAST FOOD
Review of the Russian Market of Snack Bars
Research by the Company Euromonitor International

CANNED/PRESERVED FOOD
Review of the Russian Market of Canned Meat
Research of the Company Step by Step

EQUIPMENT & MACHINERY
Russian Imports of Confectionery Equipment
Research by the Company ID-Marketing

PACKAGE
Review of the Russian Market of Shrink Films
Research by the Company Abercade

TRADE SHOWS
21st International Fair for Packaging Machinery, Packaging, Confectionery Machinery Interpack-2017


22nd International Specialized Exhibition of Materials and Technologies, Machinery and Equipment for Manufacturing of Packages RosUpak-2017


FINANCE & LOANS
The Russian Leasing Market
Research by the Rating Agency RAEX (Expert RA)

Review of the Russian Market of Shrink Films

Research by the Company Abercade

Shrink films are used for packing various food products as well as cans, bottles, haberdashery and household goods, newspapers, magazines, office supplies, and much more. They can be produced from crystallisable polyolefins (PO) (polyethylene (LDPE, HDPE), polypropylene (PP)), ethylene-vinyl acetate (EVA) copolymers, polyvinyl chlorides (PVC), polystyrene (PS), or rubber hydrochloride. Physicomechanical and operating properties of wrapping films are caused by the chemical nature of the polymer applied as well as the degree of its orientation.
One of the important characteristics in choosing a wrapping film for packaging is its thickness. 1050 mkm films are used for packing separate small and light items, such as bakery products, poultry carcasses, aerosol cans, souvenir sets; 20100 mkm films are used for group packaging; 100250 mkm films are suitable for packaging items on pallets (stack packaging).
The principle on which the packing (wrapping) in shrink film is based is sometimes referred to as polymer memory. The film is stretched (by heating during processing) and is then cooled in order to freeze the current molecule orientation. When the film is heated up again, it tends to return to its size in the non-stretched state. In recent years such wrapping films have had a wide field of application as transport packaging material for metal cans, glass jars, bottles, cardboard boxes and other types of cargo.

PRODUCTION
The overall Russian volume of shrink film production in 2016 is estimated at about 102.5 thousand tons, which is 5.5% lower than in 2015. According to experts, the main reason for the production volume reduction is the closure of Ekotek+ CJSC in Saint Petersburg*.
One of the features of the shrink film market development in recent years has been a gradual shift to multilayer shrink films in 2016 their share amounted to around 40% of the total market volume. Virtually all companies having started producing shrink wrapping films during the last 35 years focus on multilayer films.
If the level of competition is estimated in the long term, the market with 45 manufacturers of multilayer shrink films has low competition for Russia. Currently there are around 120 companies active in shrink film production, 45 of which produce multilayer films (mainly 3 layers). The largest among them are Biaxplen NK LLC, Nizhpolimerupak LLC, Evrofilm ST TPP LLC, Profupak LLC, Delta Pak LLC, Desnogorsky Polimerny Zavod (Desnogorsk Polymer Plant) LLC, Em-Plast LLC and Plastik OJSC.

EXPORTS
In 2013 growth in exports of shrink films from Russia was observed. Compared to 2012, the volume of exports in physical terms increased by 13.3%. In 2014 exports of shrink films declined by 7.5% against 2013 and amounted to 607.6 tons. Devaluation of the ruble in 2015 contributed to growth in exports that year its volumes increased by 53.9%, reaching 935 tons, although in 2016 a decrease in exports occurred again and equaled 8.3%, the volume amounting to 853 tons.
All in all, the share of exports in the market of shrink films is insignificant and occupies around 0.8%.
Exports of Russian shrink films grew by 53.9% in physical terms in 2015, compared to the previous year. In monetary terms exports dropped by 29.5%. In 2016, the volume of exports decreased by 8.3% in physical terms, whereas in monetary terms it increased by 1.3%.
The main countries consuming Russian shrink films are Ukraine and Mongolia, their overall share amounting to 76.8% of exports, or 733 tons, in 2016. The three leaders purchasing Russian shrink films also included Uzbekistan, the share of which in 2016 reached 6.8%. The total share of the three countries leading in Russian shrink film consumption amounted to 83.6%, or over 790 tons.
The main exporters selling Russian shrink films abroad were Polimer LLC, Zavod (Plant) Tekhnofleks LLC and Plastik OJSC their total share in the volume of exports equaled 63.2%, or over 539 tons, in 2016.

IMPORTS
In 2013, imports of shrink films into Russia increased by 15.2%, reaching 22.1 thousand tons. In 2014 imports dropped by 30.8%. In 2015, as a result of a decline in shrink film production volumes as well as Ekotek+ terminating its activity, 7.3% growth in imports was recorded, the volume reaching 16.4 thousand tons. However, in 2016 a decline in imports was observed again the decrease amounted to 5.8%.
Nevertheless, import volumes are rather low compared to domestic production, only accounting for 12%. All in all, production of Russian shrink films covers domestic demand, although in 20122013 a shortage of shrink films occurred to a degree, which was compensated for by imports.
The main exporters selling shrink films to the Russian Federation in 2016 were Berry Plastics (Germany), Quick Pack Pacific (Thailand) and Kunshan Cosmo Packaging Material (China). Their total share amounted to 17.5% of the overall import volume and equaled 2.7 thousand tons.
Other major suppliers were Shanghai Zhongda Wincome (China) and Advanced Performance Films (Germany) their share in the total volume of imports last year equaled 8%, the volume reaching 1.2 thousand tons.

FORECAST
In making a forecast for the development of the Russian market of shrink films, one should consider that up until 2015 it was developing more actively than the rest of the polymer film market. Growth rates of the shrink film market in 20122014 were exceeding average industry indicators of the market of polymer films. Said growth was reached in virtue of new production lines launched. The financing of investment plans was mainly secured by foreign currency loans. Ruble devaluation in 2015 resulted in payments on the foreign currency loans received increasing significantly, which put a number of companies in a difficult economic situation. For instance, as has already been mentioned, in 2015 "Ekotek+" was declared bankrupt the company was one of the largest enterprises producing shrink wrap in the Northwestern Federal District.
In the short term, an important factor that will affect both Russian economy on the whole and the packaging industry in particular is going to be the tightening of international sanctions against Russia. The nature of these sanctions makes forecasts for economic growth impossible in the short term.
Considering the factors listed, despite the fact that the Russian packaging industry was given a positive impetus by import substitution programmes in 2016, no growth in the shrink film market volume is expected in 2017. Provided that the situation improves in the main industries consuming shrink films, one may expect an increase of 13% in market volumes in 20182019.

* Part of Ekotek Group, Saint Petersburg.

Vladimir Manulenko,
Analyst
Research Company Abercade





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