According to the Russian State Static Service (Rosstat) and Federal Customs Service (FTS), 12,500 chemical pumps were sold in 2013, a rise of 14 % on 2012. While that is still lower than the level of most European countries, the market is continuing to display double digit growth year on year. About 5,000 units were produced by Russia - about 40 % of the total market share. The country’s pump producers in recent years have been trying to push out importers from the market, but are unlikely to succeed.
Representatives of the Russian Union of Pumps Producers estimated that this year 41 % of chemical pumps will be imported – 1 % higher than last year which suggests domestic manufacturers are losing ground and market growth will be serviced by imports. The leaders in terms of the production of chemical pumps in Russia are OJSC HMS Pumps, JSC Volgogradneftemash, JSC Kataysk pump plant, Baker Hughes and Prominent Dosiertechnik GMBH.
Experts of RBK have estimated Russian-made pumps were mostly accounted for by the membrane (diaphragm) chemical pumps and horizontal chemical pumps which occupy about 50 % and 30 % of the total market share respectively. Russia mostly imported pumps from the United States, China and Germany – which in total accounted for 86 % of all import supplies.
Biggest share
Russia is also exporting its chemical pumps. The biggest share belongs to horizontal chemical pumps - about 66 % - and membrane (diaphragm) chemical pumps - about 28 %. But the export potential of the Russian producers is uncertain as about quarter of all export until today has been supplied to Ukraine. With the political conflict continuing to gain momentum and all trade between the two countries likely to be stopped until the end of the year, Russian companies may lose their largest purchasers.
Columbia is also a major market with about 16 % of exports going there while other countries include Nicaragua and Venezuela. The remainder is made up of former Soviet Union countries.
According to industry experts RBK, during 2014-2015 the size of the market of chemical pumps will continue to grow on average by 10-15 % a year. At the same time, experts say growth will be particularly large in the horizontal and membrane (diaphragm) segment, due to the number and ease of use of these types of pumps.
Russian producers of chemical and petrochemical pumps are usually are more competitive in price, compared with foreign competitors. The difference in price can be as much as 15 %.“This is mostly accounted for by the cost of logistics and the payment of customs duties,” said Russian chemical industry analyst Vladimir Shemenev. “Medium sized producers of pumps usually have their own customer base and customers have learnt how to service and repair certain models of pumps, so will continue to work on the same equipment.”
Many Russian companies also don’t trust imports, preferring instead to use home-based suppliers. Consolidation in the Russian market of chemical pumps usually takes place via the creation of associations, designed to resolve the most common problems. Today there are several such organizations in the country.
Last year an association of industrial enterprises, Talnah, united 11 companies specializing in the development, design and manufacture of pumping equipment, spare parts for pumps, chemical water treatment systems, hydrodynamic cleaning and some other equipment. Among them are JSC Talnah, NPO Hydraulic Technology and NPO Centrifugal Pumps.
“The idea is to join the scientific and economical potential of all the companies and so become more effective,” a Talnah spokesman said. “Working as a single player, the Talnah Association now can provide various services to its customers. The creation of the association has already boosted the average margin of our companies and we will expand as a number of other companies are expressing interest in participating.”
Dealer network
Another example is the scientific production enterprise, Rimos. The company was created about 20 years ago, but today involves pumps, electric motors, pumping equipment and spare parts producers of more than 45 plants in Russia and the Commonwealth of Independent States (CIS). It involves companies such as JSC Pumping Plant, JSC Kataysky Pumping Plant, JSC Uralhydromash, JSC Rigahimmash and JSC Tselingidromash, selling about a product lines. SPE Rimos has an established dealer network in Russia and the association accounts for up to 25 % of all chemical pumps production in Russia.
Analysts agree consolidation of the market will only grow as producers search for ways of standing up against the growing strength of imports. Most experts believe Russia still has great potential as the chemical industry grows, increasing demand for equipment. The country currently accounts for only about 1 % of the global production of chemicals while industry's share in GDP is only 1.7 %. Also, the low price of raw materials is a key factor in the competitiveness of the chemical industry.
There is no doubt the chemical industry is growing. According to official statistics, in 2013 it showed an increase in production of about 4 % year on year. In 2012, year on year growth was only 1.3 %. As a result, the chemical industry has become one of the few in the whole Russian economy to show dynamic development in 2013.
The level of investment in the industry is also growing. According to analysts at the Russian Business Consulting Agency, the total investment in 2013 grew by 20 % compared to 2012. Now a forecast by the Russian Informative Agency says the prospects are bright.
“Investment activity in the country should be increased due to new large-scale state projects. As a result, it will raise the demand for all structural materials, including polymers. Against this background there is good potential for all related industries including producers of raw materials and equipment,” stated the report.
Russia is launching several new large-scale projects and several dozen medium sized projects in the area of chemical production. In particular, in Nizhny Novgorod Oblast Sibur is going to launch JV "RusVinyl" for PVC production with a capacity of 300 thousand tonnes per year. Also Gazprom at the end of this year will open the Novourengoysky chemical complex, which will produce about 400,000 tonnes of polyethylene a year.
In general the Russian market for chemical pumps will rise up to 18,000 units by 2020, according to experts. And based on new projects the market may grow by up to 50 % within the next seven years. But there are also concerns that the current political tension between Russia and Western countries and capital outflow from the country, may negatively affect the sector’s prospects.
Ecological disaster
At the end of last year Russian Parliament adopted the new law, Technical Regulations in the Area of ??Environmental Protection, featuring a large number of innovations aimed at limiting emissions by chemical firms. According to reports, the lack of proper legislation and the total absence of control in this area since the collapse of the Soviet Union have put Russia and certain regions in particular, on the brink of ecological disaster.
The government has significantly increased the size of fines and penalties for violating environmental rules meaning chemical producers will turn to more environmental friendly equipment in years to come.
It is not actually clear how this will have an impact on the market. According to JSC Volgogradneftemash and JSC Kataysk pump plant, chemical pump sales have not been affected.
But they acknowledge the industry will have to be modernized to keep pace with green developments in imports.
“In general I don’t think the rising of ecological standards will play a crucial role for Russian chemical pumps producers,” said Pavel Shirokov of pumps company Mir Nasosov.
“At the same time, we have to admit, that the implementation of such standards may have an important psychological effect and become another factor that will contribute to Russian producers slowly and steadily losing the fight to importers. “The recent joining of the country to the WTO and increasing interest of foreign brands in the Russian market create really bad forecasts for domestic Russian chemical pumps production,” he added.
