In 2014, Seyfeddin Roustamov became the beneficial owner of the chemical company Metafrax (Perm region, Russia). The majority shareholder of PJSC Metafrax is the Russian company MetaHolding, managed by Seyfeddin Roustamov. By 2017, he had consolidated 94% of the company’s assets. Today Metafrax is a group of companies with the productions placed in Russia (Perm region, Moscow region) and Europe (Krems, Austria). The Metafrax Company is the largest producer of methanol, formaldehyde and synthetic resins in Russia and Europe. The annual revenue of Metafrax Group exceeded USD 660 million. The annual volume of investments amounted to USD 80 million. In the interview, the major shareholder of Metafrax Group, Seyfeddin Roustamov told about the development strategies until 2030, short-term plans and features of market environment.
Mr Roustamov, Metafrax Group has announced start of ammonia, urea and melamine production projects in Russia worth EUR 700 million. What’s the progress status of the project? Can adverse market conditions hamper implementation of the project?
In 2016, the market conditions could not hamper start of the company’s project. development strategy of Metafrax Group until 2030 includes construction of ammonia, urea and melamine production facilities in Gubakha, Perm region. One of our key objectives is to become No 1 in the European synthetic resins market. Metafrax cannot compete with the leaders of the methanol market, since there are manufacturers producing 7 million tons of methanol per year. Therefore, we cannot influence global prices. In the meantime we remain the largest methanol manufacturer in Russia and Europe and we have adopted strategy till 2030 with constant upgrades and construction.
How exactly does ammonia, urea and melamine production facility fit into the development strategies of the company?
Considering the process of consolidation in the methanol market, it was agreed that Metafrax should focus on derivatives, mainly on production of synthetic resins. Since Soviet era there were neither high quality resins, nor production technologies in the Russian market. For this reason in 2004 Metafrax established joint venture for synthetic resins production together with Dynea Chemical Company (Finland). Subsequently, several manufacturing sites were purchased in Austria and Russia. Today Metadynea is the largest synthetic resins production company in Europe. As an example—we plan to produce one million tons of various resins on our three sites during this year.
Ammonia, urea and melamine are components for manufacturing of our products, particularly resins. Construction of production facility is an investment into our strategy. We are going to capture the resins market and maintain our leading position for the next 10-20 years.
In your opinion, what is the market share of Metadynea today?
Considering different types of resins—up to 50% and more. The main thing is that we do not simply sell resins, but we also provide post-sales support. Our competitive advantage—we manufacture customized resins adapted to requirements and technology of our customers.
So, there’s “no return” in constructing new production site in Russia?
Metafrax obtained a positive opinion from the state expertise. The project is in the process of obtaining construction permits, construction site is at the preparation stage. The point of no return has been reached.
The project is thoroughly planned. The company commissioned UK-based Jacobs Consultancy to undertake the project appraisal. It was as expensive exercise, but they confirmed we were moving in the right direction.
Is the project financing already agreed?
Negotiations are under way, but it most likely it will be one of the largest Russian banks.
Which companies do you plan to involve in the project?
There are two candidates (both—Russian companies) to become the general contractor. Two contracts to be covered: construction and supply of equipment. We have already chosen equipment and technology supplier. It is Swiss company Casale SA.
Mr Roustamov, why did you entrust the project to this particular company?
The company offered most advanced equipment and technology. Metafrax will produce ammonia using the technology, which has never been applied in Russia. The second contract is installation and commissioning of the equipment.
This is a very ambitious project: we plan to hire 2-4 thousand people to this construction site during the next 4 years and local budget will accumulate all taxes associated with this project.
What is the payback period of the project?
It is a huge investment, so our strategic plan is based on payback period of 10 years.
The most important thing is to realize that the company does not put on hold any current investments because of this construction. We continue upgrading existing sites, e.g. we built a new formaldehyde production unit in Gubakha, (abt. 17,5 mln USD investment), and continue upgrade of pentaerythritol production worth over 18 mln EUR. We develop production site of Metadynea in Moscow region, building a new formaldehyde production unit , increasing synthetic resins production capacity. Furthermore we are in discussions about three new large construction projects.
What kind of construction projects do you plan?
I am not ready to disclose all the information concerning our plans yet. The competitors copy our methods of work, so it is better to keep the secrecy of some information.
You mentioned European market. Can you tell us, if your company is present in the US market, what kind of plans do you have in this country?
Our presence at this stage on the US market is quite limited, we supply one of methanol derivatives—hexamine. In the meantime we constantly look at distribution opportunities and build contacts with a number of US consumers.
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