Summary of Report -
Revival of Global Economy and Rising Metal Prices Bode Well for the Russian Metal Industry
The revival of the global economy, increasing price of metals and cost competitiveness of large, vertically integrated companies are adding sheen to the Russian metal industry. Although the industry has been growing for decades, it is still maintaining a dynamic pace and is likely to experience a compound annual growth rate (CAGR) of approximately 7.8 per cent, in terms of volume, during 2011-2017. It is still developing due to new exploration projects supported by privately owned companies as well as the Russian Government.
The global demand for metals is anticipated to rise gradually due to the revival of the world economy. The metal industry is highly dependent on demand from its largest end-user industries, including construction, transportation, automotive and electronics. The recovery of these end-user industries in 2010 has boosted the demand for metals. 'One of the most significant advantages of the Russian metal industry is the low cost of metal production,' remarks the analyst of this research. 'This, in turn, is due to the abundance of metal resources, the low cost of energy generation and the large pool of well-qualified yet low cost labour.' Large, vertically integrated Russian companies offer significant cost advantages. On the other hand, they face various restraints, such as low domestic demand for metal products, escalating energy costs and lack of investments.
Development of High-value Products Crucial for the Russian Metal Industry to Maintain its Growth Momentum
Overall, the Russian metal industry needs significant investments for infrastructure and technology development. New infrastructure should include modern plants, up-to-date equipment as well as improved transport infrastructure, especially in Far East Siberia. The mining industry will also require sizeable investments. High initial investments will be required for the exploration of new attractive projects, to carry on geological research for several years and to operate mines efficiently. The lack of a reliable legal system, insecure licensing, inequity in the treatment of foreign and domestic companies, inability to export some commodities directly and a weak banking system are all major factors that hamper the inflow of foreign investments into the Russian metal industry.
In Russia, companies focus on increasing revenues and output, rather than on creating value-added products. This will prove a significant challenge in the long term, as the metal industry is currently dependent on volatile global markets due to the low domestic demand for metal products. 'The prices of high value, processed metal goods are less dependent on economic fluctuations in the global market,' explains the analyst. 'Also, the country's economy is likely to become more stable due to the well-developed manufacturing of high value-added products.' Rising energy prices will impact the metal industry. Therefore, companies should focus on developing innovative, 'green' technologies. 'This will support lower energy usage, while limiting waste generation and pollution,' concludes the analyst. 'In the long term, modern technologies will enable the Russian metal industry to remain cost-competitive.'
Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:
Ferrous metals (iron and steel)
Non-ferrous metals (aluminium, copper and nickel)
Precious metals (gold and silver)
Overview of the Russian Metal Industry: What are the trends in the Russian metal industry?, is available at:
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