Digest №3 - Russian heating and water supply market

Today in our digest: current situation and prospects for the Russian gas boiler market development, current state of the Russian market of radiators, the deterioration of heating and water supply pipes in Russia, review of water treatment and pump market in Russia

We continue to keep you up to date with market trends, current news, latest changes and innovations and help your professional development.

Our third digest is devoted to heating and water supply market in Russia. You will learn about the positive tendencies on the Russian gas boiler market, find out the level of import on the Russian market of radiators and learn equipment from what countries dominates on it, read about the current trends on the Russian pump and water treatment markets.

You will also learn about the level of deterioration of heating and water supply pipes in Russia and high demand in their replacement with new ones.

At the end of the digest, you will find interesting Russian films with English subtitles which help you become closer to the very heart of the Russian customers who usually refer to famous heros from these films in their speeches.

The Russian gas boiler market can grow at a record

Vladimir Putin's orders (as part of the development of gas supply and gasification of regions), which he gave to the government, can contribute to the growth of the gas boiler market by at least 40% by 2030. Heating industry experts consider the free connection of gas-using equipment, solution to the “last mile” problem and completing gasification within the next 10 years as the main potential drivers of the market.

“If all the president’s orders are fulfilled, then we can definitely predict the growth of the market. I think, the growth rate for the premium segment will be about 45-50%, ”says Armen Kalinin, export director at FRISQUET, the leading French manufacturer of heating equipment.

Leonid Bylinin, deputy director of Haustek LLC in the Moscow region, agrees with the forecast of his colleague, but extrapolates it to the entire market, believing that all segments can grow proportionally by 40-50%, since the distribution curve will not change: 7-10% the market will be occupied by gas boilers of the premium segment, 70% - by the reasonably priced and the remaining 20-23% - by the medium.

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Current supply and demand on the Russian domestic gas boiler market

Nowadays, in the post-pandemic period, three main trends are marked on the on the Russian domestic gas boilers market by the survey, including:

Interest in remote control and maintenance systems grew by 34%.

“Before the pandemic, such opportunities were perceived more as a pleasant and useful bonus, but not entirely necessary feature,” says Armen Kalinin, export director at FRISQUET. – “In our new reality home owners don’t want other people to visit their houses as this increases the risk of infection. This leads to the increased interest in remote access systems such as FRISQUET Connect."

Interest in equipment efficiency increased by 23%

According to the FRISQUET study, before the pandemic, about one of five potential equipment owners specified the boiler efficiency rate. Now, one of four asks whether a heat generator is really capable of saving up to 25% of gas. This becomes fundamentally important, since, according to the research, the "communal" payments increase by third during the isolation regime.

Interest in equipment reliability increased by 18%

“Potential buyers have become more interested in the assembly quality, asking questions about the reliability of equipment, warranty periods: they need a minimum of two years (or better, five, or even 20 years) warranty. Because if the manufacturer is ready to “subscribe” to such terms, then the boiler is really reliable,” comments Armen Kalinin, FRISQUET.

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The Russian market of radiators: who dominates it

Experts of the ROIF EXPERT marketing agency carried out a study, during which they analyzed the state of the Russian market of central heating radiators over the past five years.

The results speak for themselves: the share of imported products is 59%, and over the past 5 years, the dynamics and trends have remained unchanged. The "increase" in the share of imported radiators in the Russian market is especially noticeable in 2017-2018.

In fact, the Russian radiator market is highly import dependent. The estimated cost of importing products to the Russian market was about $ 150 million in 2018.

Key foreign players, as before, remain:

China - 25% of the total imported products
Turkey - 17% of the total volume of foreign-made radiators
Poland - 16% of the total volume of imported radiators

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The Ministry of Construction of the Russian Federation reported on the 58% deterioration of utilities in the country

The Ministry of Construction will carry out a complete inventory of all utilities in order to have complete and up-to-date information about their state, as the deputy head of the department Maxim Yegorov reported. According to his report, the deterioration of networks across the country accounts to 58% with a total length of over 900,000 km.

"In our country, at least 5% of all deteriorated pipes (first of all heat and water supply pipes) should be replaced annually, but, in fact, according to statistics, only about 2% are replaced with new ones. That is, our fixed pipes are aging much faster than they are replaced. Our primary task is to resolve this issue, " Maxim Yegorov said.

In January 2020, the Ministry of Construction published the rules for granting subsidies for the implementation of measures for the reconstruction and modernization of housing and communal facilities with a deterioration of more than 60%. According to the document, the subsidy will be provided both for capital investments in infrastructure modernization projects and for compensation of the interest rate on a loan received for these purposes, as well as compensation for the costs of the concessionaire or in the form of a property tax benefit. In total, the Ministry of Construction proposed to allocate an additional 366.2 billion rubles from the federal budget for these purposes.

The first project within the program for the modernization of municipal infrastructure facilities with a deterioration rate of over 60% will be implemented in Orsk city, the Orenburg region.

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Prospects of the Russian market of water treatment systems in terms of the crisis

According to analysts, the water treatment systems market is going through periods of economic crises relatively calm. This happens for several reasons:

1. A small share of imports. Approximately 20% of components in water treatment systems are of foreign origin, the rest is the products of Russian companies.

2. Strict environmental requirements. According to market participants, fines for violations of the requirements for the quality of discharged water have increased tenfold over the past year, so the installation of treatment facilities is becoming economically profitable. If earlier about 30% of enterprises preferred to pay fines (it was cheaper), and about 50% tried to use existing loopholes in the legislation, then in a survey of market participants conducted in 2019, 45% announced plans to install or modernize a water treatment system ...

3. Obsolescence of equipment. Most of the systems currently in use were installed 20 or more years ago. Since the financing of environmental programs in the early 2000s was carried out on a leftover basis, the technologies used in these systems were developed in the last century.

More facts and forecasts

The pandemic has caused new trends in pumping equipment in Russia

Grundfos has highlighted the main trends in the pumping market. Among them - an increase in interest in energy-efficient solutions, improvement of the intellectual capabilities of pumps, as well as an increase in demand for products for water treatment and waste water disinfection.

The trend of recent months, caused by the pandemic, is the increased attention to products for water treatment and wastewater disinfection. “Along with the most common chlorination-based cleaning solutions, there is growing interest in products that use sodium hypochlorite as a disinfection reagent,” explains a company spokesman.

Another trend is the development of intelligent pump capabilities. “Pump control units include functions that eliminate the need for external automation. Already now, you can control the device through an application in a smartphone, and remotely control operating modes. Pumps are becoming more and more friendly to non-professional users, ”comments Roman Tsikoza.

Other trends

Let’s watch together!

People in Russia like to use idioms and famous phrases from the Soviet legendary films no matter if it is just a talk with their frends or negotiations with business partners

So when doing business in Russia, you should watch a few famous Soviet or Russian films to be local and keep the conversation going. Using references to the Soviet and Russian films in your speech wiil help you to warm hearts of the Russian partners and set you on the same wavelength with them. We offer you to watch a few extremely popular Soviet films which also slightly connected with water supply, saunas and construction. The films have the English subtitles.

The first film is called "The Irony of Fate or Enjoy Your Bath!" It has reference to HVAC sector as its main hero has a tradition to meet with his friends in sauna every December 31 and you may watch how one day something went wrong, he found himself in Saint Petersburg and his adventures has started.

The second funny film is "Operation 'Y' and Shurik's Other Adventures" where the main hero works at the construction site.

The third film is "Moscow doesn't believe in tears" where the second husband of the main character is locksmith, real professional in his field.

Be closer to the Russian heating and water supply market as nobody else with Aquatherm Moscow!

We are already in an active process of Aquatherm Moscow 2021 preparation and look forward to meeting and connecting you with the Russian buyers at our 25^th international exhibition on February 2-5!

Exhibit in 2021

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