From
Russia with love…
Russia’s
annual CTT Show, held at the old Moscow Central Aerodrome this May 25 –
29, is now in its fifth year, and is the largest exhibition of
construction and demolition equipment in Eastern Europe.
Richard
High reports:
Reprinted
from Construction International (September 2004) with official permission
of KHL
www.khl.com
According
to the World Bank’s Russian Economic Report 2004 No 7, overall 2003 was
“another very good year for Russia’s economy”. Growth of +7.3%,
compared to +4.7% in 2002, brought cumulative expansion since the depths
of 1998’s economic crisis to about +38%. But, said the report, “even
more rapid growth is needed” – difficult when the economy remains
highly dependent on oil.
However,
the construction sector has benefited enormously from the current economic
boom. According to European Construction Research it contributed 7.5% of
Russia’s GDP in 2002, the last year figures were available, and should
continue to rise.
“Russia
is witnessing a construction explosion, the likes of which have never been
seen before. It is one of the fastest growing construction markets in the
world. There is strong demand for infrastructure, ports, roads, and public
works of all kinds,” said a (UK) Construction Equipment Association (CEA)
spokesperson at the CTT show.
This
feeling is backed up by the World Bank’s latest figures for growth rates
in construction materials production.
Rising +10% in 2000 it dipped to +3% in 2002 before rising again in
2003 (+6.4%). (Current estimates from the World Bank show a +6.8% rise for
the first five months of 2004.)
Imports
rising
International
trade in 2003 was characterised by substantial increases in exports and
imports. Monthly exports grew by +25%, to US$ 11.2 billion from US$ 9.0
billion in 2002, and imports by +23%, from US$ 5.1 billion to US$ 6.2
billion.
According
to the US Association of Equipment Manufacturers (AEM), construction
machinery imports to Russia from the US alone totaled US$ 77.8 million in
2002, the majority of which was road-building equipment. Although Russia
has approximately 952000 km of roads there is a dire need for more
throughout the country but particularly in the Russian Far East (RFE).
Almost
all of the RFE’s northern territories lack roads due to permafrost. In
summer the land is slushy, so only in winter are temporary roads made. It
was therefore no surprise to find most of the major road building and
earthmoving equipment manufacturers – Caterpillar, Daewoo, Gomaco,
Volvo, Wirtgen, etc. – exhibiting at the CTT Show.
According
to Gomaco’s Rory Keogh, director of sales and marketing, the market
potential for its machines is enormous. “We have at least 35 machines
working here that we know of. Major applications for us include airports,
highways and railways. One of our new Commander III units, which belongs
to CK MOCT, is being used
for
bridge parapets on new roads in and around Moscow, for example, and we see
the potential of the region as a whole
as very promising.”
Another
sector with huge potential for equipment manufacturers is earthmoving.
Demand is currently high at the heavier end of the sector.
According to Dimitry Sivokon, sales manager at Daewoo dealer Amkodor,
heavy tracked excavators (20 to 25 and +40 tones) are currently the most
popular machines being bought due to Russia’s particular ground
conditions.
“There
is enormous demand from Siberia where they want large capacity buckets
coupled with power. This is because of the ground conditions and the
weather. When you have winter six months of the year you definitely need a
strong, tracked machine”, he said. He added that demand for wheeled and
long reach excavators was starting to pick up, particularly in Moscow.
However, he stressed that it was more difficult to sell wheeled loaders
given the domestic competition.
Local
competition
“When
a Daewoo machine costs US$ 120000 and the locally manufactured machine
costs US$ 40000 competition is tough. But, city contractors and the
demolition sector, which is mainly found in Moscow and some of the other
large cities, are starting to ask for these machines and I think the
future will see demand grow. Overall we have been growth of over +200% on
last year throughout our range and what will tell in the end is quality of
build and machine lifespan,” said Mr Sivokon.
Aleksey
V. Zaitsev, marketing manager at Russian excavator manufacturer Kraneks,
echoed Mr Sivokon’s feelings. He told that the company’s four models
– EK220-06, EK 270-05, EK 300 and EK400-05 (22 to 43 tones) – were
also in high demand, particularly in east Russia and the NIS (Newly
Independent States).
“Our
main market is in the oil infrastructure, road-building and earthmoving
markets. High-reach demand is rising, particularly in Moscow and Volgograd.
Two years ago we produced 300 machines, last year 150 and this year we
expect to produce 200, so demand is definitely rising.
“However,
steel prices are affecting sales. We could produce more but supplies of
steel and components [from outside Russia] are also a problem. Payment on
the sales we have is also a problem; the chain is sometimes slow to pay.
But on price comparison we are very good,” he said.
High
risers
Yuri
Praushkin, general director of LonMADI, Russian dealers for JCB,
Sennebogen, Grove and Potain, told that the market for cranes in the
region is rising fast with St Petersburg and Moscow having the greatest
potential.
“In
the St Petersburg region we estimate the market to be 600 units. Most of
the cranes currently in operation are old Russian models, 20 to 30 years
old. One particular problem is getting the spare parts for them. Companies
are now looking at new machines. For special applications – high
buildings – people buy from the West with most buying either Potain or
Liebherr,” he said.
Mr
Praushkin added that, “Most contractors prefer to rent tower cranes
because you need a qualified driver and mechanic. However, there is also
potential for self-erecting cranes for low rise, semi-detached houses, for
example, where this type of machine is better. But the market isn’t very
sophisticated so the potential is there, but it’s a case of educating
the market.”
Another
area with huge growth potential is the access market. According to Markku
Tuliniemi, district manager Finland, Sweden, Russia and the Baltic States
for UpRight International, the market is mostly for smaller machines.
“Our
two lines [scissor lifts and mast climbers] are doing well here. Also
doing well is our new ATS [aluminium tower system]. What is also
interesting is the second hand market. It is growing but we haven’t sold
an enormous amount of equipment.”
However,
before we all get carried away thinking about all the sales prospects the
region presents, Mr Tuliniemi voiced a familiar complaint amongst foreign
exhibitors; “Import duties are a problem. It’s not a transparent
system. It’s very important to get the right contacts to get your
product into the country!”
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