The CTT Bauma trade show is main event of construction industry in Russia. Since 2017 it’s owned and operated by Messe Munich. The show was conducted this year in Moscow May 25-28 in its usual place, the Crocus Expocenter. Last year, the fair was off because of the COVID pandemic, but this year we saw that both the exhibition and construction industries are showing a growing trend. The fair’s indoor exposition was restored to three pavilions, and the outdoor exposition also grew in size versus 2019. There were 351 exhibitors from 17 countries, somewhat better than last time. A total of 184 brands were represented.
Here is, however, one unpleasant factor. Most of the international OEMs did not participate in the fair this time. Wirtgen, Volvo, Cummins, Caterpillar, Ammann, Hyundai, Renault, Komatsu machines were missing from this fair. John Deere, Doosan, Kato, and some other brands were limited, having only small booths, set by the local dealers. Many Russian machine makers, who usually participate in the fair, also ignored the event. Among them – GAZ, Chetra, DST-10, Chelyabinsk Tractor Plant, YAMZ.
The most obvious reason for this limited participation is a lack of interest in these mass events by sellers. Given the growing market, the companies do not see a reason to spend resources on expensive trade shows with doubtful pay-back. Large companies are focusing on direct relationships with large customers such as the State, which is the largest one. Smaller companies still consider participating in the fair as useful.
There were many companies from Germany, Italy, Finland, Switzerland, and Belgium. Putzmeister and MG were a few foreign companies, who kept the tradition to participate in the fair over the years. Japanese Kubota showed their small diesel engines and gen-sets. A Honda distributor presented a range of its compact engines for various applications, but Belorussian Amkodor reduced its exposition to one single grader.
Meanwhile ,the vacant places were taken by the Turkish and Chinese companies. Although Turkish Hydromec was absent, many other companies, most of them unknown to the Russian market, were participating. Among them were Gosmaksan, Ermak, and Gelen. They were supported by the Istanbul Chamber of Commerce and Exporter’s association.
China did not set up a national exposition, but Chinese machines were shown by their companies in large numbers. Zoomlion has set a comprehensive range of their machines, including cranes, dozers, concrete mixers, excavators. XCMG also took a big part of the outdoor exposition and showed its road construction machinery, including graders, dozers, rollers, excavators and so on. SEM construction machines were shown by its distributor Zeppelin. SDLG, Weichai, Sunward, JAC, Hongyan showed smaller exposition. So, at the end of the day the number of the Chinese machines on the fair was second after machines made in Russia.
Trucks (especially dump trucks) represented a significant part of the fair. Besides traditional KAMAZ, MAZ, Ural, there were significant fleets from Mercedes. OEM shown 6 Arocs trucks and Unimog communal machine. There were also trucks from Scania, Fuso and MAN. All of these trucks are assembled in Russia, with one exception – Unimog is of German origin.
Russian companies made up a vast majority of the exhibitors. KAMAZ showed 8×4 and 6×4 dump trucks with P6 910.15 engines, developed together with Liebherr. Another feature in the KAMAZ stand was a driverless truck, equipped with AI, side radars and a number of cameras. This truck can be operated without use of satellite navigation. The prototype is being tested now, but the date of mass production is unknown.
Sankt Petersburg Tractor plant showed its K-708 wheel loaders. UMG Group (part of Russian Machines presented wheel loaders, excavators and the large mulcher M-300 for the forest industry. Klintsy plant, besides truck-chassis based cranes, showed its self-propelled crawler crane, powered by a YAMZ engine. Rybinsk Dormash presented a modified vibration roller with new original cabin.
Smaller companies showed some interesting machines. Kameshkovsky Mekhanical Plant showed a new skid steer loader Vladimir. It has Xinchai 48hp engine. The rest of components are local made, according to the company representative. They plan to make and sell at least 20 units in 2021. Mitrax, from St. Petersburg, showed a mini loader with articulated frame. The OEM claims that its price and operational cost are lower than for skid steer loaders, and the machine is more efficient. The company with same location – Katrina – also showed a mini excavator. The machine weights 770 kilogram and can be used both indoors and outdoors, since it’s possible to get it through a regular doorway. Now, the machine is assembled from foreign components, but the plans call for them to use local components.
We see that the Bauma CTT fair is quite modest. At the same time, practically all the market participants in the fair are talking about the active growth trend in the Russian construction industry. Some of them are even talking about an “overheated market”. So, according to AEB, the construction machinery market in Russia has grown by 25% Q1 2021. Similar growth is expected through the end of this year, then the growth will remain, but at a slower rate.
The main factor driving this trend is pent-up demand from 2020, increased export demand and continued State support for the industry. For example, the State is subsidizing the creation of new components for the construction machines. It sponsored transport expenses during export (as a result, it’s sometimes cheaper to sell a machine to Africa, than to Russian Far East). Compensated leasing payments is also powerful tool. It has helped to increase production by 30% on average.
Restrictive measures are also working. For example, the anti-dumping tax for Chinese dozers below 250 hp, set by Euro-Asian Economic Commission, are still in force. The size of this tax varies from 9.65% to 44.65%. It was established in November 2015 for five years and should have expired last November. However, authorities decided to make an additional investigation regarding possible dumping, and extended the restriction until the end of investigation, which should be completed at the end of July 2021.
After this, it’s a high chance, that the restrictions will be continued for the next five years. Despite this situation, Chinese OEMs are optimistic regarding the Russian market. XCMG is planning to increase supplies to Russia by 1.5 times. Zoomlion has opened the official representation in Moscow in 2021. We should note that the quality of Chinese machines has increased significantly during recent years. So, they have a good chance to take a big market share in Russia. For current statistics, China takes about 50% of dozer imports to Russia. The leader here is Shantui with 30% (this OEM did not participate in the fair). Only problem with these machines is a weak service support.
Russian OEMs are also optimistic about the market. They grow their share in the market to 43% (from 20%), and are going to increase it further, to 50% and more. Local dozer and loader maker Chetra, claims that for four months of 2021 they have increased production by 40%. The export figures are up by 200%. International OEMs are not so happy, because to get the privileges, they have to set more production plants in Russia. Volvo get frozen out of its project to make excavators in Russia. The reason – according to the SPIC (Special Investment Contract) they have to localize engine production. They estimated their market size for 5000 engines, whereas their expectations were on the level of 30,000 units. So, the project was cancelled (or, at least, postponed).
The clear negative factor for the Russian machinery market is raising prices for metal. It started last year and now continues. Metal products have increased in price by 50%-80% for the year. In the worst case, the current growth trend may be interrupted by the rising metal prices. Actually, it is an old problem, which was discussed even five years ago, but now the government is working out measures, which are very unpleasant for local metallurgic companies. Among them are compulsory sales of metal by fixed prices, increased taxes, export restrictions and some others.
Recently, Russian vice-prime minister Belousov has blamed owners of metallurgic companies for “greediness” and told them that they have to share their extra incomes, including returning to State budget US$ 1.5 billion (100 billion rubles) of “unjustified enrichment”. Taking into consideration the trends in Russian hierarchy of power, this claim will be fulfilled, and Russian machine makers will have more time to adjust to the growing steel prices in more friendly environment.
Finally, market players have shared their vision of the global trend in construction market development. Foreign companies were talking about changes in fuel environment. They expect to get out of diesel engines. Smaller machines could be powered by electric batteries, whereas larger ones will use hydrogen as a fuel.
Local experts were talking at the fair about changes in component production. Metal parts could be replaced by parts made of carbon, aramid, and plastic. Classic process of production could be replaced by additive technologies, such as 3D printing. Prototype tests will be changed by computer modelling, which will reduce the R&D process from years to weeks and days. And manual operations of machines will be transferred to autopilots, neuron networks and AI. PSR
Maxim Skov is Market Consultant in Russia for Power Systems Research
