Investors Seize on Laminate Opportunities in Russi

Moscow, Russia, August 10--Foreign investors have found a new free niche on the Russian building materials market: Laminate manufacturing, according to RIA Novosti. For several years now overseas producers have been supplying Russia with this popular material, a fairly close imitation of parquet wood flooring, and more adventurous companies even started building their own production units in the country. Investment volumes in these plants exceed those made by global auto-makers in their Russian assembly operations. The Russian building materials market is among the most rapidly developing in the country. As a rule, proximity of raw materials is what attracts investors, and in recent years this market has increasingly become an outlet for locally produced wares. Most market players think Russia is still in its early stages, but this does not prevent the market from making huge strides of up to 30% a year. And its potential will not be exhausted for a long time. Specialists believe that all quality products in this sector are still being brought in from abroad, and locally manufactured products are not durable. In other words, locally produced quality goods, on condition they are priced below their overseas competitors, are bound to catch the market. Many foreign companies are citing huge sums they are investing in building factories across Russia. Moreover, the top three firms alone account for half a billion euros in investments. The biggest player on this market - Swiss company Kronostar - has allocated 100 million euros to build a factory closer to forests in the Kostroma region. Its Austrian cousin, Kronospan, has spent about the same amount to acquire a factory not far from Moscow. These funds are unlikely to be wasted. Factories belonging to the Krono Group will become the largest in the world, and be in a position to surpass three times the present laminate needs of the Russian market. The German company Egger, which belongs to the international holding Tarkett, has invested even more - over 300 million euros - in woodworking in Russia. Currently, Kronostar has 10% of the Russian laminates market, followed by Tarkett with 7% and Kronospan with 6%. The other brands available - Quick Step, Pergo, and others - are not produced in Russia and imported from other countries. Soon, however, the situation is likely to change drastically, as companies building enterprises in Russia look to at least double their market share. Moreover, all these companies hope to export their products into neighboring countries and even Europe in the near future. True, American companies (the world's largest) are conspicuous by their absence. Although their laminates are selling in Russia, local production is not yet mooted. But their future appearance on the market with Russian-manufactured flooring materials might alter the present market situation. However, keen competition is still far away, because the Russian market can for now absorb all newcomers. At present, Russia is building 36 million square meters of housing a year, with 16 million of it cottage space. The country's requirements, however, are 150 million square meters a year, and the pace of construction is quickening. The Federal Service of Statistics reported that in the first quarter of 2005 6,700,000 square meters of housing was turned over to tenants, or 12.7% more than in the same period of 2004. Private and public organizations built 68,300 new apartments in the first quarter, with Moscow accounting for 44% of the total. In 2005, the capital's builders plan to commission more than 4.5 million square meters. Naturally, the building materials market will follow suit, developing as rapidly as housing construction. New Russian products will fill the niche.

Related Topics:Tarkett, RD Weis, Mohawk Industries

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