Coatings World - April 2016

Russia
April 2016 www.coatingsworld.com Coatings World | 37

players in Russia believe that applying this strategy in the coating market may let them succeed, if the country’s authorities would support them.

“Government bodies in Russia are the main investors and the locomotives of growth [for companies]. Defense industry, oil and gas extraction, processing industry, pipe industry, railway and transport segments have stable demand for coating. So there could be found some points of growth in government programs in the defense industry, aviation, shipbuilding and many other industries,” Abramov stated, adding that at the same time, this issue will largely depend on the state of affairs in the country’s budget which is largely dependent on global oil prices.

Market participants can really benefit from the implementation of such programs, as they may urge authorities to not let foreign suppliers to participate in such activities. This approach already proved itself in a number of other industries, where import-substitution programs also potentially may bring good result to manufacturers. However, according to Averyanov, Russian coating producers lack of experience in lobbying initiatives.

“There are numerous issues in the
question, Averyanov said. “First of all,
compare to the scale of oil processing or
metallurgy [where companies are actively
lobbying needed decisions], coating pro-
ducers are rather small. Secondary, there
is no any attitude among our market
players to cooperate with the government
bodies. So most of our manufacturers,
with the exclusions of maybe 2-3 com-
panies, are not working with the state to
solve its problems” he said, adding that
with the support of industry association
this situation may change in future.

“We believe that we currently see increased interest in domestic products in sectors where it previously has been used only imported coating materials, as today due to the obvious reasons [devaluation of Russian ruble] this production became less attractive. For example, domestic production already used somewhere in shipbuilding, machine building, oil and gas industries, wherever it is used large and complex steel structures, requiring strong protection against corrosion,” Tikhonova said.

“For us, import substitution is now a new theme. Already during several years we have been operating in the context of import-replacement strategy at the Belarus market,” commented Uris Avotins, director of Telko for Russia, Belarus and Kazakhstan. According to him, this situation is dangerous for the industry as numerous producers in order to cut production costs have to switch to manufacturing of a less quality product. In the long-term this main ruin all import-substitution initiatives.

“This situation has a dual effect: on the one hand, we see the growing demand for local raw materials, on the other – for domestic production of finished products with high quality it raises demand for imported raw materials. Despite the economic difficulties in the country, for the Russian coating manufacturers it is necessary to understand that reduction of both quality and prices is a road to nowhere, to a standstill. The demand for cheap coatings is a temporary phenomenon, while future will belong to companies with appropriate quality” Tikhonova claimed.

Threat of counterfeit

One of the main negative effects of Russia’s economy crisis for the market is the sharp rise of counterfeit coatings. Alexandr Boitsov from scientific