Product quality is a priority in a business success of a company in any market. Without it all advertising and PR campaigns are doomed to a failure. However, having organized release of high-quality production, each manager reflects on minimization of industrial costs that directly influence profitability of a business. And in this respect we would like to dwell on additives for window PVC - structure.

In conditions when the window market is growing steadily all the companies make optimistic plans of development. Traditionally, the market starts to develop with the enterprises which let out production for end consumers - " the window companies ". They form demand for PVC -profile  after which the companies operating in the system business-to-business appear in the market. First, they are engaged in import, and then invest in factory construction to manufacture necessary components. Large corporations enter the market at the next stage of development. Firstly, they stake on import of components and raw materials in order to meet the needs of the market, and then on manufacture.

 The article deals with the subject relevant for the future window market. We are talking about PVC-structure profile manufacturers’ dependence on the situation in the additives market. In the situation of soaring competition, minimization of expenses in PVC-structure manufacturing has become an important issue of the future success as it directly influences the product price and profitability of the company. Still, what is the cost reduction limit that would not influence the quality? Each CEO of the company should predict or foresee it as surpassing this limit will affect the quality fall-off and reputation of the company.

The role of additives as production

Price and, which is more important, availability of high-quality additives for PVC - structure manufacturing are the basic issues for the given segment development. There is not such a problem in Europe, as the majority of plants manufacturing additives are located there.  Additives in the home market of EU are considerably cheaper than in Russia, which allows the local PVC – structure manufacturers to work a structure in more stable and predicted conditions. 

The raw material known as PVC-raw takes the lion share (65 %) in the PVC-profile cost. Presently there are  exists three basic manufacturers of PVC-C in Russia (Sayanskhimplast Sayansk, Plastcard Volgograd, Caustik Sterlitamak) the quality of their products is satisfactory and meets the requirements of both domestic and foreign markets.

 The following components are used as additives for a window structure: impact resistance modifier, complex stabilizers, titanium dioxide and hydrophobic (waterproof) chalk. These components are indispensable part of a PVC-profile and are required by State Standard: impact resistance. They are necessary for giving PVC - for a structure of those properties which demand standards STATE THAT: crashworthiness, moisture resistance, whiteness. On top of that they are essential for a manufacturing process itself. Their share in a PVC-profile cost makes up 35%, which is rather impressive. Presently, in Russia there are practically no manufacturers producing necessary additives.

Impact resistance modifier takes the largest share in the PVC-structure cost (~16%). It crucially influences the properties of finished goods as it gives plasticity, impact and frost resistance to a structure. The major manufacturers presented in Russia are: Kaneka (Japan), Rohm and Haas (USA), Atofina (France), Baerlocher (Germany), DuPont (USA), LG Chem (South Korea). It is not only in PVC-profile manufacturing that the impact resistance modifier is used. About 60 % of this product is used in other markets of chemical production, construction, motor industry, pharmaceutics, etc. 

Complex stabilizers - is impossible to extrude PVC – profile without them. They take the second largest share in the PVC-profile cost (~12 %). The main manufacturers of complex stabilizers presented in the Russian market are: Chemson (Austria), Baerlocher (Germany), Riagins (Germany-Italy), IKA (Germany) and Akdeniz (Turkey). Stabilizers proper come to be of two basic kinds. The first kind - additives on the  lead (Pb) basis. In Russia their share makes ~ 90 %. The second kind - additives on calcium and zinc basis (Ca-Zn) ~ 10 % (consumption in Russia). Popularity of additives on the lead basis is attributed to the price, which is  15 % - 30 % cheaper, than the calcium zinc ones.

Titanium dioxide (TiO2) gives whiteness to a structure, reflects sun rays, and preserves the color. Titanic minerals serve as a source for manufacturing of these additives (titanium ores: rutiles, anatases, ilmenites and so on). The basic brands presented in the Russian market are: Kronos (Germany), DuPont and Millennium Inorganic Chemicals (USA), Kerr-McGee or Cristal Arabia (Saudi Arabia), Huntsman (Great Britain), Kemira Pigments (Finland), Sichuan Lomon Corporation (China), KEMOX (India). The Ukrainian manufacturers (the HOOK the Titan, SumChimprom) are also involved into this production, but almost do not work in the market of PVC - profile.

Hydrophobic chalk (calcium carbonate) gives durability of production. The major sellers of this material in Russia are - Omya, Bang*Bonsomer, HIKA.





How urgent is the question of factories construction for releasing these additives? Presently, it turns out that none of the existing world corporations are able to answer such a question. But that situation won’t last long. Experts seem to have already started discussing this issue in the market.

Prospects of PVC-profile  market growth

According to the market research done by the Marketing Center "O.K.N.A. Marketing" the growth rates of the PVC-profile market make up ~ 27 % per year. Steady development of the Russian economy and growth of real income of the population allow presuming, that such situation will last for some more years. The Population in 140 million (6 place in the world) create a high potential of the further of the further market expanding.

There are also other factors due to which growth of the window market can reach the "boom". Firstly, deputy PM Zhukov A. declared in April, 2005, that some financial means from the stabilization fund will be allocated for mortgage credit needs of the population. If this program is brought into reality, the existing growth rates of the window market will considerably raise.

Secondly, the reform in housing and communal services. The second factor can become reform of housing and communal services. In Europe there are standards oblige contractors to install energy conserving windows only, in order not to waste valuable electricity. In Russia only 20 % of an available housing is equipped with new energy conserving windows. Consequently, 80% of the apartments would have obsolete wooden structures about 30 % of heat loose. In conditions of the cold Russian climate installation of new windows will allow to spend less energy on heating. 
   
Considering the territory of the country the amount of money wasted in vain is huge. Presently, it is the government that covers the main part of the utilities payment. But as soon as the government, as well as its population start considering the money, mass installation of new windows will become a reality. It is an open secret that the question of introducing 100 % payment for utilities is just around the corner, and is being seriously considered by the government. In these case installation of energy conserving windows looks logical and economical.  For the window manufacturer this situation will be a new powerful motivation for growing demand for energy conserving windows. 

Let’s take a look at the figures. The accessible (available) housing in Russia makes up 2.8 billion sq.m. About 80 % of all apartments have wooden windows of the old type. Under the present growth rate of the PVC windows market (taking into consideration the construction of new habitation and installation of window structures) it will take over 30 years to install new windows. By this time it will have been necessary to replace "the first wave" of plastic windows. Their life time is about 40 years.

Perspectives of PVC-profile  additives manufacturing in Russia

The marketing center "О.К.N.А. Marketing" has estimated the volume the polymeric additives market for of window market in Russia made about 45 million euros in 2004. It is too early to talk about "huge capacity". However this figure shows the volume of additives consumption for window PVC-profile only. There are still other market segments, such as window sills and etc. If we take into consideration the capacity of construction market on the whole the market as a whole including: panels, siding, etc. the volume of these additives market will increase up to several hundreds million euros.

Still, we should not forget, that the growth rates of the additives market increase simultaneously with the window market ~ by 27 % per year. Considering all the factors stated in the previous chapter manufacturing of these additives in Russia becomes absolutely obvious.

Feature of the additives market is the factor of the limited number of players, as it is a hi-tech manufacture. It will take some 2-5 years to release new additives in the market from the moment of decision-making on a factory construction. Therefore the decision on construction should not be made at the moment of growing demand for additives (when it is evident for all the market players), but 2, even 5, years earlier.

Is the European market for additives manufacturers perspective? In conditions when all available housing is equipped with energy “conserving windows”, the answer will hardly be affirmative.

As to Russia, that, certainly, the answer to a similar question is internal business of the companies that have financial resources and experience of making similar decisions. However the window market in Russia is certainly an attractive segment for investing in the nearest future. And the first company to make a decision on factory construction will receive unconditional competitive advantages over other participants of the market.