Ukraine. PE market. 3Q 2006.

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1 Market Report Company (MRC) cooperates with the largest world-wide petrochemical companies. We specialize in developing of professional marketing reviews of Russian and Ukrainian markets of polymers (polyethylene, polypropylene, polystyrene, PET and PVC), packaging, pigments, plastic pipes, profiles, tires, P&C, fillers and several consumer goods. Tel , , , Fax info@market-cis.com Ukraine. PE market. 3Q 26. Quarterly report Editor: Sergey Karaichentsev (skaraichentsev@market-cis.com) This report is made up on the basis of statistic information of Ukrainian State Committee of Statistics and may contain certain inaccuracies that connected with false diversity of data by polymer types based on custom codes. Quarterly report introduces also the adjusted data based on Market Report's methods. Our Annual report includes maximum detailed market analysis by consumers, producers and brands. Growth rates of PE consumption decrease in Ukrainian market. If during 2-25 mid-annual consumption growth made up 25% but this year we predicted increase at the level of 16%. Actually, according to results of nine months 26 total PE consumption grew only by 1%. We can explain this by LDPE shortage in Eastern Europe and also capacities shortage for pipe HDPE in Russia. Deliveries of Kalush HDPE still come back to Ukraine by import, moreover, volumes increase with each quarter. And, as many market experts expected, coming of the new government didn't change the situation. As before, we will analyze import dynamics for the objective analysis of PE consumption in Ukrainian market. Total consumption: HDPE, LDPE, LLDPE, EVA Import % 2% Export % 42% Production % 64% Consumption % 2% PE import into Ukraine, MT Q 4 4Q 4 1Q 5 2Q 5 3Q 5 4Q 5 1Q 6 2Q 6 3Q 6 The largest volumes of PE consumption are in films market. The given sector is the biggest one with share in general consumption structure 54%. In 3Q6 PE consumption in this market made up about 38.3 KT. According to 9 month 26 PE consumption made up more than 11 KT - growth was 14% compared to the similar period of 25. In 26 the most dynamical is pipes market. Analysts of MRC estimated growth of the given market at the level of 17% in 26. During 9 months, 26 PE consumption of pipes brands in Ukraine increased by 17% compared to the similar period of 25. PE of pipes brands is traditionally imported to Ukraine from Europe and Russia (every year this or that region is in the lead). Probably according to results of 26 deliveries volume of Russian polyethylene into Ukrainian market will be lower than the last year as sharp HDPE deficiency was pointed out in Russian market in 26. Today this led to discontinuance of export programs of Russian factories. LLDPE share makes up 9% of total PE consumption volume. Consumption structure* LDPE % -8% HDPE % 1% LLDPE % 73% Others % -1% Consumption % 1% Page 1

2 PE import into Ukraine, 3Q 25, MT PE import into Ukraine, 3Q 26, MT HDPE 5% LLDPE 5% Others 2% HDPE* 5% LLDPE 9% Others 2% LDPE 43% LDPE 39% Today Ukrainian PE market repeats the trend of Western European market. There is gradual replacement LDPE on LLDPE. HDPE share remains practically constant. LDPE Import % -11% Export Production - - Consumption % -11% LDPE consumption in Ukraine, MT Q 4 4Q 4 1Q 5 2Q 5 3Q 5 4Q 5 1Q 6 2Q 6 3Q 6 During 9 months 26 the LDPE deliveries increased compared to the similar period of 25 by 1% and made up nearby 86.7 KT. PE deliveries from Novopolotsk remain the most demanded in the market. Within three quarters 26 deliveries volumes reduced by 11% compared to the similar period of 25. Deliveries volumes of Tomsk (according to results of 9 months 26 made up more than 16 KT) continue to grow. Compared to the last year LDPE volumes from Eastern Europe are at low level (TVK). Price* LDPE (brands 18, 158) Price*, USD 3Q 25 4Q 25 1Q 26 2Q 26 3Q 26 LDPE % 19% Price* LDPE, brands 18, 158, Ukraine, UAH including VAT Sep-6 Aug-6 Jul-6 Jun-6 May-6 Apr-6 Mar-6 Feb-6 Jan-6 Dec-5 Nov-5 Oct-5 Sep-5 Aug-5 Jul-5 Jun-5 May-5 Apr-5 Mar-5 Feb-5 Jan-5 * domestic price including VAT In Ukraine in 3Q6 rise in prices at LDPE begun in April continued. In July LDPE price in domestic market changed within the limits of UAH/MT. In September LDPE price jumped up to the level of 95 UAH/MT. Buoyant tendency was also observed in Europe. Spot price at LDPE (G-P) in Western Europe increased from 11 Euro/MT in the beginning of July up to 125 Euro/MT in the end of September (FD NWE). Page 2

3 LDPE consumption markets Market Jul.6 Aug.6 Sep.6 Total 3Q 26 Market share, % Films % Coatings % Cable % EBM % IM % Others % Total % LDPE producers rating Producer Jul.6 Aug.6 Sep.6 Total 3Q 26 Market share, % Polymir % TNHZ % Dow % Petrohemija % Kazanorgsintez % Exxon Mobil % MPB % TVK % Borealis % Basell % Burgas (Lukoil) % Dioki % REPSOL QUIMICA % Salavatnefteorgsintez % Basell Orlen % Others % Total % LDPE deliveries of Russian Salavatnefteorgsintez and Exxon Mobil (due to consumption increase in films sector) have essentially grown. Import volumes into Ukraine compared to the similar period of 25 increased by 13% and 294% accordingly during nine months 26. HDPE Import % 3% Export % 41% Production % 64% Consumption* % 3% * according to import index HDPE consumption in Ukraine, MT Q 4 4Q 4 1Q 5 2Q 5 3Q 5 4Q 5 1Q 6 2Q 6 3Q 6 Because of absence of the precise, considered development strategy for Russian petrochemical companies both in Russia and in Ukraine, there was a situation when demand for polymer considerably exceeds the level of existing capacities. The similar situation developed in the last year in PVC market in Russia. And this year it repeats in PE market. Shortage of HDPE production capacities in Russia, especially pipes brands, has led to reduction of export deliveries (first of all into Ukraine). Page 3

4 Price* HDPE (brands 276, 277) Price*, USD 3Q 25 4Q 25 1Q 26 2Q 26 3Q 26 HDPE % 3% Price* HDPE brands 276, 277, Ukraine, UAH not including VAT Sep-6 Aug-6 Jul-6 Jun-6 May-6 Apr-6 Mar-6 Feb-6 Jan-6 Dec-5 Nov-5 Oct-5 Sep-5 Aug-5 Jul-5 Jun-5 May-5 Apr-5 Mar-5 Feb-5 Jan-5 * domestic price including VAT HDPE prices started to grow in February, 26 in Ukraine. In 2Q and 3Q growth has continued. And by September HDPE price (brands 277,276) made up nearby 9 for MT because of HDPE shortage in Ukrainian market (Russian PE was absent in the market). In the beginning of July in Western Europe HDPE spot price of IM brands made up 114 EUR/MT (FD NWE). By September HDPE prices stabilized a little. The monthly average HDPE price of IM brands made up 125 EUR/MT. HDPE consumption markets Market Jul.6 Aug.6 Sep.6 Total 3Q 26 Market share, % films % pipes % IM % EBM % Coatings % Cable % Others % Total % The leader in HDPE consumption is films market in Ukraine. Its share in general consumption structure made up 42% according to results of 9 months 26. HDPE share of pipes brands increased up to 25%. EBM sector dynamically developed. HDPE consumption in the given sector grew by 2% during nine months 26 compared to the similar period and made up nearby 18 KT. HDPE producers rating Producer Jul.6 Aug.6 Sep.6 Total 3Q 26 Market share, % Karpatneftechim % Chemopetrol % Shurtan GCC % TVK % Borealis % Korea Petrochemical % Basell % Kazanorgsintez % Samsung % Petrokimia Nusantara Interindo % Stavrolen % Petrohemija % BP Solvay Polyethylene % LG % SK Corporation % Others % Total % As we already mentioned in 26 re-export HDPE volumes of Karpatneftechem (group Lukoil-Neftechem) increased. For nine months 26 re-export volumes made up almost 4 KT - growth was 4% compared to the similar period of 25. PE deliveries of Basell (import volumes made up 2.7 KT), Shurtan GCC (import KT), Korean Samsung (import volume KT) have essentially grown. Page 4

5 LLDPE Import % 75% Export - - Production - - Consumption % 75% LLDPE market is the most dynamical in Ukraine according to results of nine months 26. Growth of consumption volumes compared to the similar period of 25 made up 28%. For three quarters deliveries exceeded 2.2 KT. LLDPE consumption in Ukraine, MT Q 4 4Q 4 1Q 5 2Q 5 3Q 5 4Q 5 1Q 6 2Q 6 3Q 6 Still, Dow is in the lead according to LLDPE consumption volumes. Thus during nine months 26 LLDPE deliveries of Hyundai Petrochemical and Sabic increased in times. Growth compared to the similar period of 25 made up two and five times accordingly. LLDPE deliveries of Shurtan GCC reduced almost in twice, First of all this is connected with increase in price at Uzbek production. LLDPE producers rating Producer Jul.6 Aug.6 Sep.6 Total 3Q 26 Market share, % Dow % Shurtan GCC % Sabic % Hyundai Petrochemical % Exxon Mobil % Borealis % Polimeri Europa % BP % Mitsui % Others % Total % EVA Others Import % -5% Export - - Production - - Consumption % -5% Import % 1% Export Production - - Consumption % 1% During 9 months 26 EVA import made up about 76 MT - growth was 4% compared to the similar period of 25. Consumption of other PE types in Ukraine made up more than 2.2 KT according to results of three quarters. Page 5

6 News Large chemical complex will be created on the Polimir basis By 211 on the basis of "Polimir" (Novopolotsk, Belarus) is planned to create a number of new chemical manufactures. A complex will have ethylene and propylene production installation with capacity 4 KT per year and also capacities for production 15 KT of HDPE, 15 KT of PP and 15 KT of MEG. Now documentation preparation for tenders announcement for carrying out technical and economic assessment and development works comes to the end at the enterprise. In 27 "Polimir" plans to invest into construction of new petrochemical complex nearby 127 bln Belarus RUB (nearby USD 6 mln). Funds will be directed to setting-up to complex construction, license purchase and designing. According to preliminary data, budget cost of complex construction makes up more than bln Belarus RUB (more USD 85 million). Basell is going to restore HDPE factory in Munchmunster On Friday, July, 28th, Basell has declared intention to construct new factory Hostalen cascade gas-cycle HDPE production in a Munchmunster (Germany). Factory Hostalen existed up to this moment was destroyed as a result of fire in December, 25. After receiving of corresponding sanctions polymerization division with capacity 12 KT will be completely restored (production will be conducted by means of new cascade technology) and also new extrusion division.production start is planned for 29. In further it is supposed to increase factory capacity up to 15 KT. Company Basell also produces makes HDPE at factories Wesseling (Germany) and joint venture Basell Orlen Polyolefins (Poland). Hi-tech multimodal HDPE made by means of cascade technology in Hostalen can be used in IM, production of high pressure pipes and films. «UZBEKNEFTEGAS» AND «KOGAS» ARE GOING TO CONSTRUCT THE COMPLEX FOR PE AND PP PRODUCTION In Ustjurtsk region the National holding company (NHC) "Uzbekneftegas" is going to construct gas and chemical complex. They plan to involve in this important construction South-Korean corporation "Kogas". It will be the second similar complex. In 21 Shurtan GCC launched in the republic designed for production of 15 types of polyethylene of high, middle and low pressure with designed capacity KT per year. Project cost - USD 1,1 bln. It is supposed that direct investments of South-Korean party will make up about USD 96 mln of total funds volume. The project is planned to realize for Now the project is at the stage of preparation; it is provided for creation of joint venture and organization of PE and PP production with calculated capacity 15 KT/year. In March "Uzbekneftegas" and "Kogas" have signed the cooperation agreement in the field of investigation and development of natural gas deposits in Uzbekistan. Gas and chemical complex is planned to construct on the basis of gaseous-condensate deposit Surgil. According to the agreement, the parties will carry out also development of deposits in Uzunkui-Tuaruksk investment block. Probable resources of natural gas there make up 19 mln MT. It is supposed, that the project will be realized within the limits of the joint venture or on conditions JDV. The area of developed resources makes up 15,1 thousand sq.km. Perspective resources of gas are estimated in 1,685 bln. cube. m, of liquid hydrocarbons in 1,72 bln MT. «Polivtor» (Krasnoperekopsk, Crimea) has established 2 new Chinese production lines. Investments into the project made up about 1 mln UAH. Extrusionline for pipes with diameter mm is 25 kg/hours; and line for pipes with diameter 16-5 mm, - 5 kg/hours. Earlier 6 lines produced by "Bolshevik" factory (Kiev) with general productivity 3 MT of pipes in a month were established at the enterprise. With input of these two lines productivity will increase up to 6-65 MT. After work beginning of 2 new lines capacities loading of the enterprise will make up 1%. «Polivtor» makes PE pipes for gas-, water supply and drainage. The investments into processing of polyethylene in 3Q of 26: Films: Vesta-Pack (Dnepropetrovsk), Stella Pack Ukraine (Lutsk), Dneproplastavtomat (Dnepropetrovsk), Zolotoy Vek (Kharkov) PE-pipes: Kiber-plast (Kremenchug), Ukrpromsouz (Lugansk) Coatings: Khartsyzsk Tube Factory (Khartsyzsk) ЕВМ: Terra Plast (Kiev), Plasttara (Sevastopol) Tube production: Foc Tuba (Kharkov) Page 6