In May 2016, the Industry and Trade Ministry adopted a comprehensive program for the development of the country’s chemical complex with a separate sub-program dedicated to the coatings industry. The program is amended and updated every half-year and the last version envisaged that Russia will become a net exporter of coatings within the coming several years.
Sergey Tsib, the Deputy Minister of Industry and Trade at the post in in-house publication of the country’s government revealed that in 2016 Russia’s coatings industry increased combined production performance by 8.3 percent compared to 2015, to 1.3 million metric tons (mt) in total with the overall value of some Rub 102.6 billion ($1.8 billion).
Russia is keeping up the pressure to take the volume of import down and in 2016 it already cut it by 13 percent compared to 2015 to 352,700 mt, he emphasized. In the meantime, export last year was surging, jumping by 55 percent year-over-year to 240,000 mt. Tsib said Russia is still exporting less coatings than importing, primarily “due to the low base effect,” but promised this situation will not last for long.
In 2018, he continued, Russia’s government plans to embark on a separate program for the development of the coating industry for the period until 2025. It should stipulate some interim goals on the way to matching the long-term targets provided by the last year’s program for chemical industry development.
The latter, among other, forecasts that in 2030 Russia’s coating markets will rise in size by two times to Rub 25 billion ($438 million), together with the average use of coatings per capita from 10.8 kg last year to 22 kg next year. The important point is that share of importers in Russia by that time should reduce from 44 percent to 40 percent, while export jumps by 20 times.
According to the information unveiled by the Ministry, the import-replacement program in the industry at the moment involves 12 plants to be built in the country by 2020. These facilities will produce organic and inorganic pigments, including titanium dioxide pigment, as well as powder paints, emulsions of acrylic, non-aqueous paints and varnish materials for industrial use.
At least two plants are already slated to be commissioned this year, including one facility of the San Marco Group in Kaluga Oblast and Nor-Maali Оу in Pskov Oblast. The Ministry lists only import-replacement projects, which means that this is not the exact figure, and it does not include various projects of the smaller scale and those that do not involve import replacement.
The absence of legislative base is a challenge
However, it would be wrong to say that the development of the coating industry in Russia is passing without a hitch. According to the industry associations, the manufacturers are suffering certain problems due to the absence of technical regulations within the Eurasia Economy Union, that in additional to Russia includes Kazakhstan, Belarus, Armenia and Kyrgyzstan.
As explained Viktor Ivanov, president of the Union of Chemists of Russia, the absence of technical regulation on the safety of coatings, as well as the technical regulation on the safety of chemical products, which in theory should be adopted first, makes the situation in both industries rather unclear and vague for the market players. He explained that the discussion of both regulations in Russia has been taking place for 12 years, but things haven’t gone forward an inch.
His opinion was supported by Gennady Averyanov, president of the Russian Association of coating manufacturers, also known as Tsentrlak, who has pointed out that the technical regulation on coatings should manage the demands to the receipts of painting and set requirements to the products safety both for human and environment.
Averyanov also indicated that the last version of the technical regulation has been developed by the Russia’s Ministry of Industry and Trade and submitted to market players back in December 2016, but that version had quite a few errors and gaps, so it was heavily criticized by the manufacturers and it was easier to write an entirely new document, instead of amending that one.
The technical regulation on coatings is very important for manufacturers in Russia due to two main things, Averyanov explained. Firstly, it will give Russia’s sanitary body, Rospotrebnadzor, the legal framework to eventually take down the manufacturers of faked and counterfeit production, which is on the rise since the beginning of the economy recession in Russia and may occupy 5-15 precent of the country’s market, according to various estimations.
Secondly, it is believed that the adoption of the technical regulation can help the industry to promote export, especially in case it would be harmonized with the regulation of the European Union, including RACH and regulation on volatile organic compounds.
So, in general technical regulation is called to set some clear and transparent game rules at the regional market, but when it will be adopted yet remains unknown. Tsib said that the Ministry has recently proposed some amendments to the draft technical regulation submitted in December 2016 in order to wind down the concerns of the coating producers.
At the same time, he did not specify when the document will be adopted, only saying that at the moment that still challenges remain to bring into compliance all terms and definitions in the coating industry to the current legislative base. This means that firstly the authorities need to figure out what is what in the industry, including what substances in the receipts of coatings can be potentially harmful and as the result should be restricted in use.
Russia is mastering new types of coatings
Meanwhile, Russia’s coating manufacturers are really catching up with the global players in terms of the product quality and range, Averyanov claimed. He explained that domestic companies in recent years made a breakthrough – starting to produce some high-technological coatings that previously were only imported into the country.
In particular, domestic manufacturers developed coatings for the anticorrosive protection of metal structures with a service life of up to 30 years. It has also designed a group of self-cleaning coatings, as well as highly resistant varnishes for parquet. New generation of coatings has been developed for the aircraft industry. Some new coatings were developed for industrial applications in engineering, railway cars, wagons, buses and trucks, Averyanov listed.
As of now, imported coatings still prevail in car painting, as well as in the shipbuilding segment, Averyanov noted, adding that in theory domestic manufacturers can become real competitors to the foreigners in this segment within the coming 2-3 years as well, but only in the case of some relevant support from the state would be allocated.
At the same time, it is yet not known if the government would be willing to include some state aid for the research and development projects in the coating industry into the industry’s development program in the period from 2018 to 2025. Russia’s manufacturers are repeatedly complaining that their budgets for innovations are limited and much smaller compare to budgets of the global players and this factor really limits the potential of import-replacement initiatives.
Speaking about this issue Tsib admitted that there is not any centralized work in the area of R&D in the coating industry for now. Today it is only limited with the initiatives of the particular companies, which are inventing some know-how and using it to manufacture some marketable products. However, there is no any “system development” yet.
At the moment, Russia’s government is supporting the manufacturers in the form of lowered customs duties for raw materials wherever it is necessary, also reimbursing some spends associated with the export development and allocating some target aid to the high-tech production, Tsib informed. However, the state support scheme is not included any subsidies on the research activities.
The Year of Ecology
In addition, 2017 was declared the Year of Ecology in Russia and according to the government some relevant initiatives for the introduction of environmental-friendly technologies should be put in place in almost every country’s industry, including coating.
It is known that the government is preparing some kind of a list of best available technologies (BAT) the use of which should bring the quality of domestic products in line with some global standards of ecological compatibility.
The application of BAT should become compulsory by next year and large fines are promised to be placed on manufacturers who will violate them. At the same time, most details of this reform remain behind the curtain.