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Product category: Engineering Industry Reports and Surveys
News Release from: Frost and Sullivan
Edited by the Engineeringtalk Editorial Team on 16 February 2006

Export industries spur demand for
welding gear

Report predicts Russian welding equipment and consumables market to swell from $385.5 million in 2004 to $874.4 million in 2011 and in Ukraine from $84.9 million to 210.8 million over the same period.

The growth of export-based industries with the obsolescence of existing equipment is spurring demand for modern welding equipment and consumables in Russia and Ukraine Boosted by these trends, the Russian welding equipment and consumables market will swell from $385.5 million in 2004 to $874.4 million in 2011 even as its complement in Ukraine expands from $84.9 million to $210.8 million over the same time frame, according to a report from market watcher Frost and Sullivan

Rapidly growing, export oriented industries such as oil and gas in Russia and metallurgy in Ukraine, together with heavy engineering and automotive or aerospace sectors in both countries, are motivating higher uptake of welding equipment and consumables.

The development of these export-based industries in both countries is, in turn, generating strong domestic demand for such industries as heavy engineering, power, automotive and construction, which use more sophisticated welding equipment.

Even as export-based industries are powering economic growth in Russia and Ukraine, many domestic manufacturers are contending with obsolete welding equipment.

To remain competitive in the global markets, many companies are investing in modern, high quality welding equipment.

The replacement cycle has already started in Russia and is expected to start in Ukraine in 2006-07.

Fuelled by demand from oil and gas, heavy engineering and the power and automotive sectors, the arc welding equipment segment will be the main engine of growth in the Russian welding equipment and consumables market until 2010.

Within this product segment, MIG and MAG welding will make particularly strong gains due to the enhanced quality of welding and higher productivity levels that they support.

However, during 2010-11, the major growth will come from the resistance welding equipment sector due to increased demand from automotive and consumer goods industries.

Similar to the Russian scenario, consumables, with nearly 66% of overall revenues, comprised the largest segment within the Ukrainian market for welding equipment and consumables in 2004.

Among welding equipment segments, arc welding contributed the largest revenues to the overall market followed by resistance welding and then gas welding.

Inevitably, the heavy dependence on export industries is likely to be a double-edged sword.

For instance, potential falling fuel demand and lower prices for crude oil and natural gas and the current slowdown in the global metallurgy sector will have a large-scale, dampening impact on the uptake of welding equipment and consumables.

"An apt strategic response to this challenge might be to diversify into supplying less export dependent segments and to monitor global trends related to Russia and Ukraine's main product exports," said Frost and Sullivan Research Analyst Titus Hocevar.

"This approach may be necessary to lessen the revenue fluctuations of welding manufacturers in Russia and Ukraine related to the export dependency of these countries on commodities".

While the welding equipment and consumables made by local Russian and Ukrainian companies trails its foreign counterparts in terms of new technology, usability and quality, their low price gives a key competitive advantage in these price sensitive markets.

New entrants and foreign companies therefore have to contend with the strong domestic welding equipment industry.

In particular, local Ukrainian manufacturers are increasingly using imported components to keep their production competitive in the market.

For instance, Ukrainian welding equipment manufacturers currently use up to 70% of foreign components in their equipment.

Recent Kzeso welding machines are equipped with Siemens and Bosch components that while resulting in a doubling of prices, also provide better quality of the welding and higher productivity of the equipment.

"To gain competitive advantage over domestic incumbents, new market entrants and foreign companies could establish local production facilities in Russia and Ukraine, thereby reducing production costs of welding equipment and consumables," said Hocevar.

"At the same time, leveraging local, skilled specialists together with western-type management will ensure that high production standards are attained".

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