Import substitution: how domestic producers seek to occupy emerging niches

Production of hardware products in Russia was growing throughout 2021 and the beginning of 2022. But since the second quarter of last year, restrictive measures were introduced by unfriendly countries, which led to a sharp drop in production. When economic sanctions were imposed, major market players suffered the most. It was not possible to replace significant export volumes by deliveries to other countries (in the first quarter of this year export volumes halved compared to the same period last year). Domestic consumption of metalware also decreased last year. Which led to a drop in production volumes starting from the second quarter of 2022. However, it should be noted that the second quarter of 2023 showed not only growth, but also good stability throughout April - June. That is, we can say that the hardware market has stabilized, the enterprises have found their niches, - said Viktor Kamelin, General Director of the Association of Metalware Manufacturers "Prommetiz" in an interview to the magazine "Expert-Ural". 
 

With the departure of European manufacturers, our enterprises are striving to occupy the vacated niches, emphasizing import substitution. For example, Beloretsk Metallurgical Plant in 2022 increased sales of promising rope products developed and produced by the plant since 2019 for import substitution of similar ropes in the Russian market. These products are used as components on domestic and imported mining excavators. Accordingly, the main consumers have become coal and metallurgical enterprises of Russia," said Sergey Fedorov, Managing Director of BMK.
 

Investment projects of Russian metalware manufacturers are significantly hindered not only by the closure of some export directions, but also by the increasing volumes of imports of Chinese products, in particular the same ropes.
 

- Unfortunately, restrictions have been imposed on publicizing information on imports of hardware products. Nevertheless, we still indirectly assess the market, because we communicate with customers who buy imported hardware, - explained the head of Prommetiz Victor Kamelin. - Of course, imports from unfriendly countries have decreased, although they are still present to some extent. At the same time, the reduction in imports from Europe has led to an increase in other supplies, primarily from China. For example, the share of imports in all types of fasteners has always been greater than what we produce ourselves. Even so, Chinese imports of fasteners have increased sharply. The same situation is observed for ropes, welding wire and other types of metalware.
 

According to the expert, this moment sets the task to protect domestic producers, including when it comes to imports from friendly countries: "On this issue, we cooperate with the Department of Metallurgy of the Ministry of Industry and Trade of Russia and see the understanding that the concerns of our producers are absolutely justified. We have a problem of capacity utilization, which entails issues of employment, tax payments to the budget. Besides, many metalware plants are located in single-industry towns, where the reduction of production has a very acute impact on the social situation.
 

In addition, unfair competition and counterfeiting take place in the supply of imported products. "And this is not only an economic issue. After all, if counterfeit, for example, in ropes or fasteners, there is a safety problem. If such products have low quality characteristics, thereby jeopardizing not only the work of the mechanisms themselves, but also the life and health of workers operating these mechanisms. Therefore, we are actively discussing the issues of certification of hardware products through the logic of safety", - concluded Victor Kamelin.  
 

Source: "Expert-Ural" № 27-33(880) of 22.07.2023