Russian machinery falls
By Sandy Guthrie11 August 2014
Construction machinery stock in Russia has declined since 2000, particularly among large- and medium-sized enterprises, while limited productivity and high running costs have stunted the competitiveness of Russian machinery, on world markets but also at home, according to research company PMR.
PMR’s latest report, Construction Machinery Market in Russia 2014 – Development Forecasts for 2014 to 2019, has found that imported construction machinery currently dominates the market in Russia.
It said, “For many years, Russian producers of building machinery have allocated insignificant amounts for research into, and development of, new kinds of equipment and improvements to the existing product range, mostly because of the limited financial potential.”
It added that limited productivity and high running costs had stunted the competitiveness of Russian machinery – not only on the world markets but also at home.
PMR noted that with the decline in construction machinery stock since 2000, the most substantial reduction in the number of units of equipment in use at large- and medium-sized companies has been observed for scrapers (down 83%) and wheeled cranes (-66%). The numbers of crawler, mobile and tower cranes has more than halved. A smaller reduction – but still more than 40% – was seen among single-bucket excavators and motor graders.
PMR said the reduction in the number of machines in use was not because they were redundant. In fact, it said, demand for construction equipment was rising steadily, but rundown equipment was being withdrawn from use and not being replaced by new machinery at a sufficient rate.
Despite the reduction in total stock, PMR found that excavators continued to be the most widely used category of construction equipment in Russia, as the numbers of other machines machinery, such as bulldozers and mobile cranes, were also falling.
It said that in the first half of the last decade, the stock of heavy equipment continued to age and wear out, mostly because of the limited financial potential of companies to replace and expand machinery stock.
Average wear and tear levels peaked in 2005, and, from 2006 onwards, contractors began to replace their obsolete machinery with new equipment more rapidly.
The replacement process was hit by the financial crisis in 2009, but it resumed in 2010, when demand for construction services picked up again. In 2013, at large- and medium-sized companies, the amount of obsolete equipment as a proportion of total building machinery stock in Russia fell to a level not seen since 2000, said PMR.
In its report, PMR said that the productivity of Russian construction equipment typically fell short of that of its foreign counterparts even when second-hand, but that some Russian clients still chose Russian machinery for reasons of price, proximity to the manufacturers and a long-term relationship with them, along with simplicity of servicing during and after the warranty period.
Price is, however, no longer such an advantageous facet of Russian machinery, which has become more expensive in recent years, said PMR. With old and obsolete production facilities, Russian manufacturers are increasingly using Western parts in their machinery, it said.
In addition, the cost advantage from lower energy prices has narrowed significantly in recent years, as Russia has been forced to reduce the gap in energy prices as a condition of joining the World Trade Organisation. PMR said all of these factors had inevitably led to rises in the prices of the final products. Moreover, the price factor is no longer a competitive advantage for Russian models when they have to compete with Chinese equivalents.
In 2010, in the wake of the 2009 downturn, Russian manufacturers of construction equipment were seen to begin to recover and to raise production volumes, with growth rates of up to 77% in comparison with 2009 in the case of excavators.
Domestic players have not been as active as their foreign competitors and have, therefore, been losing market share, but many of them have succeeded in boosting production by more than 10%. In most equipment categories, the 2012 production volumes were still well below the record levels seen in 2007/2008.
Last year, only the numbers of motor graders and concrete mixers produced were close to the record levels observed before the crisis, said PMR.