International Construction reports from Moscow's CTT Show
By Richard High30 July 2008
Confidence at Moscow's CTT Show (June 17 to 21) was high thanks to a booming economy and a planned US$ 570 billion investment in infrastructure. Richard High reports.
Russia's GDP grew +8.1% in 2007 and the World Bank expects that growth rate to continue. "Russia's GDP is most probably expected to grow +6 to +7% - closer to 7%, we believe," said Zeljko Bogetic, the World Bank's chief economist for Russia.
The country will become the world's sixth largest economy in 2008, while infrastructure spending should also rise from the current level of 2.5% of GDP to 4% thanks to a seven-year, US$ 570 billion programme to overhaul and expand the country's transportation infrastructure - 17000 km of new roads, 3000 km of railways, over 100 airport runways and an extra 400 million tonnes of cargo capacity.
Speaking to iC at CTT, Dmitry B. Karelin, Volvo's divisional director, road building equipment, said the company was experiencing "exciting times", with "lots of [infrastructure] projects happening and in the pipeline."
Showing its new Volvo branded road building machines for the first time at the show, it is expecting a good market for its pavers. (In 2000 Russia imported just 50, in 2007 it was about 500.) It has kept the ABG and Titan names on its machines alongside the Volvo name. "These machines were very popular and our Russian customers prefer to deal with German companies because they consider the technology to be better," said Mr Karelin.
China's Shantui is another company making good progress in the country. According to Yang Hailiang, sales manager for Russia and the CIS, it is now number three in the country for dozers, just behind Komatsu and Caterpillar. "We sold 330 units in 2007 because our technology is like Komatsu's but our price is very low," said Mr Yang.
For many Chinese companies after sales service has been a problem, said Mr Yang. Shantui now has a spare parts centre in the country, along with an eight strong dealer network. Future plans include growing this network and providing more training and support, he added.
Domestic manufacturers are also investing in manufacturing and after sales support. Konstantin Bessonov, development manager at the country's only foundation rig manufacturer, General Hammers, told iC that while the quality of its first hammers drew complaints from some customers it has "worked hard" to overcome these issues, investing in its manufacturing facilities and after sales support and dealer networks.
"In 2005, when we first started, we sold just nine units. We now make three models, sold 70 units in 2007 and expect to sell over 90 this year," he said.
Access rental company LTECH is also enjoying considerable success. It opened its newest depot in Novgorod in 2007 and signed new deals with Maeda (mini cranes), Secalt (building maintenance systems), Nostolift (telescopic booms) and Thomas Equipment (skid steer loaders).
Expansion has quickly brought rewards, prompting LTECH to expand quicker than it had originally planned. "That success, through all three channels - rental, lease and sales - means we're now planning to open a small spare parts and service centre in the six biggest cities in the region," said Dimtriy Pankin, manager of the depot.
With so much infrastructure investment planned the future for Russia's construction equipment market looks buoyant. However, there are some problems left to overcome. "The key issue was always financing, now it's qualified people and up-to-date machines," said Mr Karelin.
The fall of Communism opened up the labour market meaning people could move around more easily, added Mr Karelin. "The downside is that the majority of Russian people don't want to do manual work."
There is also increasing competition to Western manufacturers thanks to the growth in domestic manufacturers and the influx of cheap, and, as far as many Russian contractors are concerned, not so technically inferior products.
And while after sales used to be a problem for many, as Shantui's Mr Yang told iC, "that's because we weren't selling many machines. However, as we've sold more so we've invested in that side of the business."
This kind of investment, coupled to the government's commitment to increasing its infrastructure budget is all good news for contractors active in the country.