Our petrochemical business is the leading polymer player in CEE and among the top ten players in the European polymer market supplying polymers mainly to European plastic processing companies. Our production facilities are located in Tiszaújváros (Tisza Chemical Group Plc., TVK) and Bratislava (Slovnaft Petrochemicals, s.r.o., SPC). They are integrated with MOL Group refineries and support the Downstream segment as captive market.Beyond the naphtha processing to ethylene and propylene, the Petrochemical segment produces polymers in competitive quality, which are fundamental for a wide range of industrial applications and for the production of a vast number of consumer goods that are essential to everyday life. The polyethylene product range includes low density polyethylene (LDPE), high density unimodal and bimodal polyethylene (HDPE). The polypropylene (PP) product range includes homopolymers, random copolymers and impact copolymers. TVK and SPC are operated in integrated manner, selling the majority of products through TVK sales subsidiaries under the brands of Tipelin, Tipolen, Bralen (polyethylene) and Tipplen, Tatren (polypropylenes).

In Hungary and Slovakia we serve our customers directly from TVK and SPC. Our sales subsidiaries are operating in five countries – Germany, Poland, Italy, France and Ukraine. Above all, our sales activity is also conducted through MOL subsidiaries in Austria and Romania, where we exploit synergies from the presence of other MOL businesses. Sales as well as customer support in technical issues to the key accounts and on other markets are managed from TVK and SPC. We supply feedstock especially to European plastic converters – more than 97% of our polymer production has been placed in European markets in 2010. Proximity to rapid growth regions of Central and Eastern Europe provides firm basis to fully satisfy customer needs, supported by tailor made sales services and product quality, which is strategically important in keeping position as leading regional polymer player. Based on its long time experience in the petrochemical industry, MOL Petrochemical segment’s main internal strengths are the skilled sales and engineering staff.

 

Competitive advantages

Our competitive strength is supported by our geographical position and competitive asset base with a well-balanced product and customer portfolio, as well as refinery integration.

Integrated operation: According to our ‘crude to plastic’ philosophy we optimize our refining and petrochemical production through the whole hydrocarbon value chain, which not only maximizes our profitability, but also reduces the risk at group level. Integration between petrochemical plants and refineries improves the competitive position for both sides. This segment represents captive-market for MOL Downstream segment by purchasing 13% or 2.3 Million tons of MOL Downstream sales as petrochemical feedstock. MOL Petrochemicals sales to MOL refineries amounting to 30% of the total petrochemical feedstock. The majority of these co-products produced by olefin plants are sold as components to the fuel production.

Good geographical location: Our sales and marketing strategy focuses on increasing sales in the fast growing CEE region, where we can benefit from central position in the landlocked markets and our special understanding of customer requirements. Shorter sales radius can reduce transportation and other logistics costs. Value added services in logistics and technical support are the key factors to differentiate MOL Petrochemicals. These services together with regional expertise represent the main advantages in MOL’s core region.

 

 

 

 

 

Key Developments in 2010

Our Petrochemical segment hit the best ever net sales figure by achieving 35% improvement in 2010, compared to the preceding year. This development was moderated by the significant increase in raw material cost that raised by approximately 43%.
Although the annual average of integrated petrochemical margin has improved by 6% increased to 323 EUR/t in 2010, it was still lower by 21% than in 2008 (406 EUR/t). So, we paid particular attention to keep strict control on costs and working capital as well in 2010.

Olefin sales - improves steam cracker utilization

Our Petrochemical segment is an active player in the regional olefin business - through increasing olefin and olefin by-products sales of the olefin plants. Due to this, we can improve the capacity utilization of the olefin plants, which are strategic assets in our petrochemical business.

  • Borsodchem, our strategic partner in the olefin business in Hungary has stabilized its positions and increased the volume of ethylene purchases in 2010.
  • Passing over the first year of the crude C4 sales contract with our Polish partner, Synthos - we gain positive experiences in the cooperation.
  • Pyrolysis oil sales to the third party’s carbon black unit in Tiszaújváros improved significantly in 2010, due to the upturn in the tyre industry.

Continuation of the sales and marketing strategy implementation – focusing and differentiation

Sales and marketing strategy can be characterized by two major goals – geographical focusing and differentiation in customer services. Exploiting our favourable geographic location we have amended our sales strategy, at the field of logistics, product development and tight customer relations, aiming higher focus on markets in Central Europe.
Plastics demand in Europe has considerably recovered in 2010. The global economic recovery brought steady demand in the LDPE and PP markets and quoted prices raised by 43-45%. However HDPE products were not able to keep up with this trend.
In 2010 we improved our sales performance by achieving higher price levels and we kept polymer inventories at low level. By improving our customer portfolio, the ratio of sales to non-core destinations reduced from 8% in the previous year to 6% in 2010.

Successful general overhaul and planned maintenance

In April we carried out a general overhaul at TVK Olefin-2. The good operation rates that we achieved have compensated the effect of the downtime. Both olefin and polymer production have slightly increased in 2010. General overhauls were successfully completed covering the planned technical content and within the budget planned. These well-managed turnarounds give good basis for excellent operational reliability as well as for exploiting business opportunities.

Focus on safe operation

As an answer to the increasing importance of production safety in industrial processes and in line with MOL Group requirements, we introduced Process Safety Management (PSM) system to reveal and investigate operational risks, events and to monitor the corrective actions. By PSM approach in the operation and through PSM audits conducted at production units we intend to increase operational safety in our petrochemical processes. The PSM system, which we introduced, is based on Dupont PSM methodology.

Improvements in energy efficiency

Commitment to improve energy efficiency is deeply rooted in strategic thinking at the Petrochemical segment. In response to the thriving importance of environmental protection and increasing energy prices, action plans were developed in connection with technologies and a new operational model was introduced for energy management. This will further improve the cost efficiency of the overall energy process to the benefit of environment.
We are consequently implementing our energy strategy formulated in 2008. In the 2008-2010 period we spared 48 kt of CO2 via sustainable improvement actions and individual energy projects.

Outlook

In the future petrochemical industry remains increasingly competitive, setting further challenges in the business. To keep and further strengthen competitive advantages, the Petrochemical segment is committed to continue its strategic development programs and seeking for new business opportunities.
We keep EBIT improvement as priority target for 2011. Coherent implementation of cost-cutting initiatives and acquiring attractive customer segments in sales could provide firm basis to make good progress with this aim.
In order to firm LDPE market position, MOL Petrochemicals has launched the SPC modernization program in 2007. By the continuation of SPC development, MOL Petrochemicals will keep leading position in the regional petrochemical industry.

annual report 2010