Coatings World - July 2016

Russia
July 2016 www.coatingsworld.com Coatings World | 41

Since we produce our high quality coat-
ings only from raw materials that meet
Hempel’s strict quality requirements, our
policy is to buy local raw materials only
when the local quality standard is fully
met and the price is no higher than im-
ported. We are working with many local
raw material suppliers to help them to
meet our strict criteria and we see this co-
operation as an ongoing long term part-
nership. On the other hand, certain raw
materials, such as epoxy resin, are simply
not produced in Russia/CIS, and may not
be for a very long time, so we are forced
to import certain raw materials.”
At the same time, he explained that a
number of Russian-owned local produc-
ers have been trying to take advantage of
the government’s import substitution pol-
icies by offering alternatives to imported
premium industrial coatings. He noted,
that these producers have been somewhat
successful in lobbying state enterprises to
use their products by using local testing
and certification bodies, but usually with-
out passing internationally recognized
testing procedures.

“We have in certain cases conducted
our own comparative testing and have
also received reports from a number of
quality-minded customers, and negative
gaps in quality are usually seen.”
“More recently, we have seen disturb-
ing instances where customers have been
forced to use alternative coatings from
certain Russian-owned local producers,
rather than the tried and tested premium
coatings. We see this is a negative trend
because it does not lead to market effi-
ciency which we believe comes from fair
competition. In the end, the customer suf-
fers by either paying too much or by re-
ceiving a lower quality. We are all for an
open market and a transparent and level
competitive playing field,” de Groot said.

Huge localization for PPG
Group

PPG Group noted the worsening of the situation in the country’s market, according to Jens Brackebusch, general manager PPG Russia.

“I believe everyone in the coatings in-
dustry has felt the crisis here in Russia.
When industries like automotive drop by
nearly a half in a few years, all suppliers
to this industry are affected. Up until the
end of 2014 we were doing well as a busi-
ness, and we are now steadily recovering
after a difficult 2015,” Brackebusch said.
The key point of the company’s strategy
here is the construction of a plant in Lipetsk
Oblast with overall capacity of 25,000 tons
of coatings per year and investment of RUB
1.97 billion (US$ 30 million).
“The Lipetsk plant project was initi-
ated out of the necessity to localize the
production of coatings we have been im-
porting historically from production sites
in Western and Central Europe. The pres-
sure on localization of production from
customers, especially in the automotive
industry has increased over the years and
we have therefore decided to offer this
sourcing possibility to our local customer
base,” Brackebusch explained.
“In this production site we will pro-
duce products for various industry
groups, such as automotive, industrial,
metal packaging as well as for marine
and oil & gas customers. The majority of
those customers are buying already from
us today – the plant will allow us to bet-
ter serve this customer base from a local
production platform that will cater to
their needs. We believe that this project
will suit our business plans for the next
foreseeable future,” he added.
Speaking about the general market sit-
uation, the manager of PPG Russia stated
that the current economic situation and
the Ruble devaluation have clearly put
pressure on the cost of coatings in Russia
with two main tendencies are competing
with each other at the moment.
“The pressure for low cost at the price
of quality and the drive to increase the
export of Russian goods are competing
with high quality international products.
While I believe that the low cost driver
will be significant in the short term, I trust
that the need for quality coatings allow-
ing Russian industrial goods to compete
with international companies will prevail
in the future,” Brackebusch explained.

In terms of the advantage position of Russian coatings producers compared to foreign brands, which has been previously indicated by Tsentrlak, Brackebusch said it is overstated, as there are some instances where the activities for foreign companies are restricted, but this remains a very small part of the Russian coatings industry.

Not a lot of problems for
Tikkurila

According to Ilari Hyyrynen, managing director Tikkurila in Russia, the situation in the past two years has not been easy but the company has managed well.

“We have been able to grow nevertheless due to the crisis. Growth has not been as fast as assumed still in year 2014. Weakening ruble has affected to our business as business of all companies importing goods to Russia. We have not been able to transfer devaluation of Ruble fully to sales prices,” Hyyrynen said.

He also indicated that the company produces a full range of deco and industrial products in Russia, importing high-end premium deco paints from Finland. At the same time, the target currently is to localize more and more production and raw-material purchases to Russia.