Renewed development in Russia

By Alex Dahm29 August 2008

Russia's First Deputy Prime Minister Igor Shuvalov says the country will become the world's sixth largest economy by the end of 2008, according to Russian news agencies.

"For the past eight years, Russia has been developing. By the end of this year, we will become the world's sixth largest economy," Shuvalov was quoted by the RIA Novosti news agency at the 12th St. Petersburg International Economic Forum.

Russia, which joined the G8 in 1998, has now "become a fully-fledged member of the world's largest economies," the deputy prime minister says.

One of the potential stumbling blocks to economic growth in the country is the shortage of skilled workers. Speaking at the same forum, Russia's economics minister Elvira Nabiullina said investment and greater labour productivity were vital.

In addition Deputy Prime Minister Sergei Ivanov says Russia must raise spending on infrastructure development from the current level of 2.5% of GDP to 4%.

According to the local reports, Ivanov told the forum that the problem of poor transport links, in particular roads, cannot be overcome in a short period of time.

On the move

Truck cranes, typically with 25 tonne capacity, are the machine of choice in Russia, and account for a vast majority of domestic crane production. A lack of technological know-how and production facilities means that the maximum capacity mobile crane to come from the domestic market is 100 tonnes, and is only available from one company.

The all terrain KC-8973 is manufactured by Autokran, a subsidiary of Ivanovskaya Marka, which is the trading company for the NAMS group. Four have been manufactured since its launch five year ago.

Apart from the KC-8973, the factory in Ivanovo, some 280km outside Moscow, constructs a range of truck cranes with 16, 17 and 25 tonne lifting capacities. This year the company says it will produce some 3,200 truck cranes, making it the biggest single manufacturer in Russia.

New in 2008 is the 25 tonne capacity KC-54712 with a four-section boom, which the company says has the same workability as a 32 tonne model. It is the first crane in Russia, adds the company, to have a hydraulic cab.

Ivanovskaya Marka is also the biggest supplier of truck cranes to the Russian Army, it says. Its sister company Giazprom Kran, based near Volgograd, manufactures 32 and 50 tonne truck cranes, about 350 of which will exit the production line this year.

Alexander Volinkin, Ivanovskaya Marka marketing director, says the company is developing its technological capabilities. "All 100 tonne plus capacity cranes are imported because we do not have the technology here. We are starting to buy the technology. To construct such mobile cranes you have to have partnerships with those that develop higher capacity cranes. It's a step-by-step process."

Volinkin hopes to develop a 150 tonne all terrain in the next three years, but says production the production of higher capacity mobiles are unlikely in the foreseeable future. However, the company says it will soon produce its largest capacity truck crane, a 70 tonne model.

Quick delivery

Ivanovskaya Marka puts the delivery time at about two months for 25 tonne and under machines, increasing to between three and six months for 32 to 50 tonne models. This, says Volinkin, is down from six months and eight months respectively following factory expansions to accommodate increased orders. Despite this, Alexander is cautious about the future.

He forecasts that the truck crane market, standing at about 8,000 per year, will rise 5 to 10% in 2009, but will be hindered by high real estate prices.

"There are many people in Moscow, particularly, who wish to buy but are put off by the cost of houses and loans."

Volinkin adds that this will change if government measures to make mortgages more affordable are given the go-ahead next year. On the other hand, he says, infrastructure is developing quickly thanks to the healthy economy.

Russia's second biggest truck crane manufacturer is Kudesnik. It has two plants Galich, based in central Russia, some 500 km from Moscow and Klintsy, located in Bryansk.

In 2007, Galich produced 1,324 cranes, while Klintsy produced another 1,003. Together, Autokran and Kudesnik manufacturer 75% of Russia's truck cranes, which are the road-going crane of choice in the country, says Andrey Smolyanov, Kudesnik head of sales.

There are a further 10 truck crane manufacturers in Russia, adds Smolyanov, which make up the balance of the market.

Kudesnik's new 40 tonne KC-65719-1K was on show at CTT for the first time. It fills the range between the company's 32 and 50 tonne models and fulfils customer requirements for higher capacities, said the company.

While 25 tonne models are the mainstay of the industry, Smolyanov explains that the market is now full of them and the future lies with 32 to 50 tonne cranes.

Unsurprisingly, Russian crane manufacturers do not export many units. Kudesnik has only sent about 50 models abroad. "It is very difficult to sell in foreign countries, for technology reasons," says Smolyanov

Imports

For mobile cranes above 100 tonnes the market has been left open to the likes of Liebherr, Grove and Terex, although Chinese manufacturers, such as XCMG, are getting in on the act. Raskov Dmitry, commercial director with one-year-old XCMG dealer PycTpahc, has sold 100 cranes into the market, about 60% of them being 25 tonne truck cranes. But he says higher capacity cranes, in the 100 tonne capacity and above range, are becoming more popular for oil refineries and heavy construction work. XCMGs are an obvious choice, he says, because they cost about half the price of established manufacturers, including Liebherr and Tadano.

Manitowoc was exhibiting the new Grove GMK5170 for the first time at CTT, since its launch at ConExpo 2008, US, where the prototype was on display. Visitors to CTT were able to view the ninth production model.

Michael Preikschas, the company's senior product manager for all terrain cranes, says the decision to show the five-axle, 170 tonne crane was a sign of the growing Russian market for such cranes.

Another all terrain, the 130 tonne 5130-1 was introduced into the market two years ago, where it has been successful, says Preikschas.

Both cranes are equipped with -30 degree centigrade packages for the country's northern areas and a new -40 degree centigrade package is under development to meet the icy terrain of Siberia. At the time of writing, in late June, the package was due to become available at the beginning of July.

Oil rich

Preikschas expects 55 to 80 tonne capacity all terrain sales to increase as users become convinced of their usefulness, against the perennial truck crane, thanks to better capacities and longer booms.

Russia's oil rich community is likely to include many potential customers. "Oil development in Russia is totally contrary to Europe. In Europe, if the price of oil goes up then crane rental will stop. If it goes up here [Russia] then they will need more cranes and that's the trend at the moment."

Vitaliy Potapov, general director of Nika group, Manitowoc's dealer in Russia forecasts sales of all terrains, with capacities from 80 to 300 tonnes, will reach 37 in 2008. In 2009, he says, about 50 will be sold, along with one or two 450 tonne machines. One of the reasons for this increase in capacity is the requirement for ever larger buildings, adds Vitaliy.

One problem for foreign manufacturers is the lack of rental companies in Russia. Most cranes are sold directly to the end user in industrial plants and engineering companies, for example. This, however, will change in the next five to 10 years, says Preikschas, as the rental industry develops.

Starting along the rental road this year is crane dealer Technokran, based near Leningrad. The company's general director Timofey Karymov decided to register his unsold cranes for rental until he found a buyer them.

The company's rental fleet now comprises 11 cranes, including eight 25 tonne truck cranes and a 130 tonne XCM QAY130 all terrain. Next on the shopping list is a 70 tonne XCMG truck crane. The reasons for choosing XCMGs, says Karymov, is their low cost and basic construction, meaning they can be repaired at Technokran's in-house repair shop, rather than being sent back to the manufacturer.

A 130 tonne all terrain from a western manufacturer can cost about €1.2million (US$ million), while an XCMG, with the same lifting capacity, is 2.5 times cheaper, says Karymov.

Ukraine

The company is also importing two 50 tonne capacity Krayan KC-6473 truck cranes from the Ukraine, to be added to Technokran's sales fleet.

"They are cheaper than Russian cranes. In the former Soviet Union, Ukraine was the centre for heavy crane manufacturing. It's only since 1997 that Russia started manufacturing 50 tonne plus cranes. Before that it was just 16, 20, 25 and 25 tonnes," explains Karymov.

"Salaries in Ukraine are lower and production is cheaper. The production facilities are there because they made a partnership with Liebherr in 1988. The joint venture ended in 1993 when the market dropped. But they have all the facilities," adds Karymov.

So far the rental side of the business has been strong, especially in the 70 to 130 tonne market, says Karymov, mainly because there are so few cranes of this capacity in Russia. Alexander, from truck crane manufacturer Ivanovskaya Marka, believes there may be as few as 300 to 400 mobile cranes above 100 tonnes capacity in the country.

Most of the Technokran cranes are being rented to the heavy construction sector, but not housing as real estate building companies tend to own their own cranes, adds Karymov. The 8% annual rise in the Russian economy is feeding the crane industry he adds, although that figure is probably higher as it is unknown how many deals are not declared.

Another crane rental company SOP&G, based in Moscow, claims to have the largest capacity mobile cranes in Russia, with its two 800 tonne Liebherr LTM 11200 mobile cranes.

There are 20 cranes in the fleet, which also boasts a significant range of specialized transport. All of the cranes are Liebherrs, except for one Terex-Demag.

Giant on order

The company has also ordered a 1,200 tonne Liebherr LTM 11200-9.1, the strongest telescopic crane on the market, which is due for delivery in 2010. Two crawler cranes are also on order from Liebherr: an LR 1350/1 and LR 1750.

The 17-year-old company specialises in the oil and gas industry and the new machines are destined to be used at 10 or more oil refineries that are under construction or at planning stage in Russia. It will also be sending machines to construction sites preparing for the 2014 Winter Olympics in Sochi, which are due to get under way in the coming months.

SOP&G was born out of the former the Soviet Union's ministry for construction equipment. When the Union broke up, some leading figures in the industry started their own companies, including SOP&G.

The company is also in partnership with Germany-based crane rental firm Eisele AG, from which it leases equipment.

High capacity mobile cranes are relatively new phenomena in Russia, says SOP&G manager Chopaeva Yulia. Historically crawler cranes have been used. "They are very suitable for job sites where you have work over long time periods. But it is much easier to transport a mobile crane. Russia is a difficult market because it is difficult to innovate. People are used to doing work in a certain way. Sometimes it is more expensive but they don't want to change."

New partnerships

Nevertheless, lower capacity crawler cranes are a popular purchase in Russia. The country's largest manufacturer Chelyabinsk Mechanical Plant, based near the Asian border, makes 300 units a year, with capacities of 25, 32, 36, 40 and 63 tonnes. Marketing director Slava Pozdnyak claims the company sells 90% of all 25 to 63 tonne crawler cranes sold in Russia.

It also aims to increase its export market and is seeking "partners" in the Middle East.

Pozdnyak says most of the high capacity crawler cranes in Russia, above 63 tonnes are manufactured by Liebherr, with a few coming from Hitachi.

The company also produces some 500 truck cranes a year, including the new 25 tonne capacity KC-45721-08. Like all Chelyabinsk Mechanical Plant's products, it is designed for -40 degree centigrade conditions, found in Siberia. The company also produces 32 and 40 tonne capacity truck cranes.

Starting its surge into Russia is FKR Machinery, the new Russian dealer for crawler crane manufacturer Kobelco. Alexander Proskurin, deputy general director of the company, which already sells machinery for New Holland and Astra in the country, says Kobelco arrived slightly late into the market, but will still benefit from the booming construction industry.

So far the dealer has sold one Kobelco CKE800 into Russia during the CTT show - the first time the manufacturer's cranes had been exhibited in the country. Apart from the construction boom in Moscow, Proskurin expects eastern Russia to benefit from the likes of the Pacific Ocean Forum. The committee is made up from several countries in the area, including Korea and Japan, and seeks infrastructure investment for the region.

By the end of 2008, Proskurin hopes to sell three to five Kobelco crawlers in Russia and a further 10 to 15 in 2009. "There are a lot of old cranes in Russia. The old Soviet Union government bought in many crawler cranes. But when that became the new federation and registered companies were formed, they carried on using the old cranes. Now they realise they must replace the machines with more productive and efficient cranes."

See a future issue for a report on Tower cranes in Russia.

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