Market Facts

Russian Metal Industry
The current economic and financial crisis has considerably
impacted Russia – far more, for instance, than the other BRIC countries.

For the first time, however, mid-year figures in 2009 are hopeful and appear to be indicating that the economic downturn has bottomed out and the Russian economy will be moving ahead again by the end of the year. Compared with the previous month, the gross domestic product in June was up 0.1 per cent, the Rouble had continued its stabilisation and there was a slight increase in oil prices and production volumes.

Experts are therefore expecting a slight upturn in 2010 again, although the World Bank is warning that Russia will not reach its pre-crisis level any earlier.All hopes are resting on a rapid increase in
demand for Russian raw materials and on the Russian government’s anti-crisis package.

The latter has been designed, in particular, to develop the country’s infrastructure and its materials and chemical industries. This will certainly be of benefi t to plant and equipment manufacturers.
Together with oil and gas production, the metalworking industry will continue to be one of Russia’s key industries. Russia is the global leader in the production of nickel, comes second in aluminium
(after China) and fourth in steel production (after China, Japan and the United States). Nevertheless, Russia continues to have an enormous backlog in demand. Manufacturing equipment is still subject to immense wear and tear, with a huge technology
gap and a low level of productivity.

The anti-crisis package of the Russian government is based on the understanding that its ambitious development plans can only be achieved by importing state-of-the-art machinery and equipment: since July 2009 nearly 200 machine types that are produced outside Russia have been exempt from the country’s 18 per cent import tax. This also includes foundry machines, blast furnaces and rolling machines.

Benefiting from the prices on the world’s raw materials markets, Russia’s gross domestic product (GDP) will grow by at least 6% annually until 2010 according to forecasts of the Ministry for Economic Development and Trade. But Russia’s companies need to invest more to satisfy the rising domestic demand.

In addition, the rapid growth in real incomes of over 10% per annum is forcing them to increase productivity. On top of that comes the ever stronger rouble in comparison with the US Dollar, which makes imports cheaper and exports more expensive.
To protect their competitiveness, businesses need new machinery and plant. Experts estimate the current market volume for mechanical engineering products at EUR 35 to 40 billion per year.

Source: bfai report 18.05.2007