The Russian FOC market
The state of the cable and wire industry in Russia is a good indicator to evaluate the economic situation of the country. Despite the fact that this industry supplies all the technological sectors, which could not function properly and develop without cable networks, it is quite complicated to evaluate the current state of affairs.
One the one hand, the reduction of imports in the Russian cable and conductors market allowed domestic companies to occupy the niche created and increase their production. On the other hand, the competition has increased sharply with the main selling point for most products being the price.
Most of the demand for cables and conductors comes from 4 industries, namely the power sector, the mining industry, the oil & gas sector and the construction sector.
The State program of import substitution supported domestic companies
Those producing cables and conductors to increase their competitiveness, which allowed them to produce high quality products for lower prices compared to foreign brands, such as aluminum alloy rod, aluminum-clad steel wire, insulation materials for high-voltage cables, optical fiber. The technical regulations for cable production in Russia are not as restrictive as in Europe and do not match, or partially match the European Construction Products Regulation, which undermines the development of export to Europe.
Import substitution policies do not concern the development of machines needed for the industry and are limited to the production of the cables.
The import of wire and cable extrusion machines decreased from 83 extrusion lines in 2013 to 40 machines in 2016
For instance, there is almost no domestic offer of wire and cable extrusion machines, whereas their import decreased drastically from 83 extrusion lines in 2013 worth 31.8 million USD to 40 machines in 2016 worth 2.3 million USD. In 2018, 90% of the cable production equipment was imported.
The industry explored the possibility to replace PVC
Which is the basic insulation material for the cable production in Russia, by other polymers. PVC accounted for 70% of the insulation material used in 2016, with only 26% of other polyethylene plastics. The main producers of cable plastic coatings in Russia are Bashkir Soda Company, Bashplast and Vladimirsky Chemical Factory. As they did not reach their maximum production capacity, the companies compete for customers by expanding their range of products, implementing aggressive pricing policies and providing aftersales services.
The Russian market is almost exclusively occupied by Russian producers
From 2013 to 2015, the demand for insulation material fell down to a minimum low compared to the past ten years, which led to foreign producers leaving the Russian market. The share of imported insulation material was about 3.8% in 2016 and remained low in 2018.
Innovation is necessary to be an active player on the Russian market
In the energy sector for example, Russian companies are developing solutions such as heat-resistant zirconium aluminum alloy as conductor to produce high-temperature non-insulated wires with increased capacity and resistance to wind-ice loads, or aluminum-clad steel wire (which is also a unique product) as a conductor makes it possible to produce a more reliable and durable cable.
Most of the innovative solutions concern the use of new insulation materials. They could be used for the manufacture of low and medium voltage power cable insulation from high strength ethylene propylene rubber (HEPR), which has clear advantages compared to PVC and cross-linked polyethylene insulation.
Prices on the London Metal Exchange influence the Russian domestic market
80% of the product cost depends on raw materials.
Because metal prices are defined on the international market, any change in the ruble exchange rate directly impacts the final cost of the product (80% of the product cost depends on raw material).
The advantage is that Russia produces raw materials, which makes it economically interesting for the export of cable products made in Russia.
Recycling cable plastics is a rising problem as new polymer are used for insulation
It is a serious issue as most of the cable producers in Russia dispose of their cable waste in a very polluting way by sending it to incineration, whereas recycling facilities exist but are almost not running. For example, the industrial facilities of Cable Alliance have a recycling capacity of 400.000 tons of polymer waste per year but recycled only 2.5 tons in 2016.
The situation on the cable market is improving but far from being perfect
Despite the improvement concerning products quality, the market has to overcome a number obstacle on the road to progress: raw material supply, the lack of regulatory framework, unfair competition, lack of financing for R&D and modernization of technological processes. The Russian market produces all the types of cables, from electricity transmission and distribution in apartment buildings to high-frequency signals for the International Space Station.
The development of cable products has not reached its maximum
The next stage of development will be the research and development of new materials used in cable products and of their recycling processes. There is a trend in reducing cable dimensions along with the costs of materials used while increasing products’ life span and maintaining their basic performance characteristics.
The cable industry is shifting toward long-term development
There are many cable factories opening, producing and selling cheap, low quality or even counterfeits cables once before disappearing. It is common to see factories built up by opportunism and working for a couple of years or three years and shutting down after exhausting their stock.
Many enterprises propose high quality and reliable products.
Many enterprises, as the Samara Cable Company, have a completely different approach and propose high quality and reliable products. The trend is now about diversifying and expanding their range of cable products.
Cable industrial companies strive for transparency and high-quality products
Because of significant amounts of counterfeits in the cable production, the public initiative called Cable Safety was launched by the Aluminum Association and the Elektrokabel International Association with the objective of driving the market toward transparency and concerns about quality are being examined according to Custom Unions and Russian standards. The project led to the signature of the joint declaration of work ethics in the Russian electrical market and cable and wire segment, supported by over 120 producers, distributors and consumers of cable products. Companies now have to provide samples of their production and answer regulatory bodies in case of violations. The results of the controls are published and available to the public, which is particularly important for end-users, especially the population. This leads to the formation of a pool of trustworthy partners and helps getting rid of counterfeits.
The production of fiber optic cable (FOC) in Russia is growing at a fast pace
With a 30% growth in 2018 with around 5.5 million km produced, the Russian FOC market came back to its pre-crisis levels and compensated the 2015-2016 losses. This shows the market is recovering thanks to the federal program „Digital Economy“ on which the government will spend 2.16 trillion RUB (33 billion USD) from 2019 to 2024.
With a 30% growth in 20188 the Russian FOC market came back to its pre-crisis levels.
The government strategic goal is to make a breakthrough in improving the quality of life for people, modernizing the economy, infrastructure and state governance by using digital technologies.
The FOC market development come within the scope of Russia’s development
The FOC has an important potential as telecommunication companies are planning to deploy 5G networks and IT companies to build supercomputing and data centers within the next 10 years. As China’s FOC consumption slowed down in 2018, Chinese producers increased their activity in the CIS, which increased competition in Russia, Kazakhstan and Belarus.
International exhibitions and trade fairs
Cabex 2019 is a yearly exhibition about the cable industry, presenting the latest cables, fastening hardware, wires, electrical goods, cable pulling and recycling equipment. Cabex is a business platform for domestic and foreign manufacturers willing to attract customers, promote their products and develop sales on the Russian market.
In 2018, Cabex gathered over 4000 professionals from 35 countries and around 154 companies from 9 countries. The main newcomers present at the exhibition in 2018 were Tolyatti Foundry and Mechanical Plant, Rostov Electrometallurgical Plant, Ivanovo Cable Plant, La Triveneta Cavi SpA, MG Recycling (Italy), Rosvaer, Uzeltehsanoat (Uzbekistan), Holding Kablovi Ad Jagodina (Serbia), Metaclay (Russia).
For more information about the Russian cable industry and related opportunities for foreign companies, you can contact us. We will be glad to provide you with a full listing of all major cable producers active in Russia. For further information we offer tailor-made market researches and sales development support.