The Russian market has the potential to become one of the largest markets in the world, so in the near future, considerable growth of industrial machinery manufacture and consumption can be expected. However, for the brave of heart, Russia’s growing markets offer moulders many opportunities. A moulder willing to do the due diligence required will find opportunity in this maturing market.

On one hand, Russia’s huge oil and gas reserves offer an undoubtedly strong lure to processors looking to reap the benefits of cheap energy products, and as Russians’ real disposable income continues to climb a rates around 9% in 2004-well above the 7.1% GDP growth witnessed during the same period-the Russian market appears ripe for exporters and domestic plastics processors.

The Russian plastics and moulding sector grows parallel to the development in the industry. The existing stock of injection moulding machines is estimated at approximately 10,000 units, mostly outdated. As the Russian companies lack the necessary production opportunities and the required know-how, the bulk of these machines are imported.

In this sector local production is barely sufficient; 95% of the needs of machinery and equipment are provided by technological developments, the need of renewal of the machinery and the equipment increases the demand of the sector. With these factors, the Russian moulding sector represents an ideal market for European exporters. From this aspect geographical proximity is also an advantage. In the coming two years it is expected that the growth trend in the sector will continue and the demand for the importation of the moulding machinery increase.

There are currently about 5,000 companies and workshops in Russia (of varying levels of technologic tooling), producing 350-400 thousand types of plastic items by moulding. In the 1980s, the former USSR's production companies installed more than 3,000 injection moulding machines annually. More than 80 percent of these machines will soon need replacing.

In the Russian plastic processing industry, locally produced equipment represents only 3-5% of all moulding machines, while imported machinery represents 98-97%. In 2004, the Russian market for injection moulding machines was about 900 units, which were worth about $84 million, an increase of 45.6 percent from the previous year. At present of this market German companies make up over 50%, with the Italians second with approx. 17%, contrary to general belief, the South Korea Taiwan and China only make up just over 20% of the market combined, and their market share is decreasing as newer and better quality machines are required. The size of the total market for market for plastics processing equipment (inc. Rotation moulding machines, Blow moulders, Vacuum and pneumatic moulding machines, Extruders etc.) is estimated to be now; based on the last recorded figure of $156 million in 1999; approximately $450 million.

As about 25% of moulding machines have been in operation for more than 20 years, these machines will have to be replaced within 3-5 years, which creates a potential demand for moulding equipment. At present the existing stock of injection moulding machines in Russia is estimated at 10000. Currently, from 30 to 50 foreign companies regularly supply moulding machines to Russia, but only a few have a well-established distribution and service system.

Of course, the Russian’s government also places a duty on its own exports, and these taxes can hurt global competitiveness and discourage foreign investments in new world-scale plants that are desperately needed to grow Russia’s market. Russian resin production facilities, like most Russian refineries and other chemical plants, are generally in need of technological upgrades. As a result of these conditions, moulders using higher-grade engineering plastics must for the most part rely on imported resins.

Additionally, the need to improve and expand the country’s transportation infrastructure and the upgrade and reconstruction of Russia’s refineries and other petrochemical facilities should offer moulders servicing the construction industries many new opportunities. Especially as Russia is one of the largest manufacturing centres in the world.

Just as important for moulders exporting to this market, Russia’s bid for WTO (World Trade Organisation) membership will help reduce and eventually eliminate import tariffs on commodity plastics. Presently, import tariffs on resign range from 5-10%; this tax has hurt the development of many plastics consuming industries, especially considering the inability of domestic suppliers to satisfy local demand. Similarly, if Russia’s WTO bid pans out, import duties for finished plastics goods like moulded parts, which are currently taxed high as 20%, should also fall substantially.

Russian manufacturers have also reaped many benefits from this energy trade. For instance, government revenue for oil and gas exports have helped reduce the tax burden on domestic businesses, and an appreciated rouble has made imported technology and other foreign inputs affordable.

The abundance of cheap oil and gas (Russia is the world’s leading exporter of natural gas and second leading exporter of oil following Saudi Arabia, and has occasionally even taken the number one position) naturally holds a great attraction for downstream petrochemical and resin producers, just as it has in the Middle East, who are now starting to create partnerships, joint consulting centers, and “virtual projects”, in Russia.

Finally the Russian consumer market also received additional support in 2005, when Russian legislatures approved a $1 billion spending plan intended to complement President Putin’s ambitious goal to double wages and pensions by 2008. Along with well as the plan to upgrade Russia’s infrastructure system by 2010 this will serve to create higher plastics and moulded items consumption levels.