Russian market for pipes, fittings and valves in 2023-2025

Will the Russian market for pipes, fittings and valves continue to grow in 2024-2025?

The implementation of large-scale new housing and civil construction projects is impossible without the accompanying development of utility infrastructure, including water supply and drainage. Dynamic new construction and active modernization of existing networks have undoubtedly influenced the development of the pipes, fittings and valves market. But what will it be like in the short term?

Russian pipe and fittings market

According to Kirill Trusov, member of the Board of Directors, Director of the Operations Directorate of the Pipe Division of POLYPLASTIC Group, the volume of the Russian polymer pipe market in 2023 is estimated to exceed 600 thousand tons. This is almost 20% more than in 2022. Including fittings, the total market volume amounted to almost 1.2 million tons, which is 10% more than in 2022 and 42% more than in 2021. In turn, the total market volume of steel pipes in 2023 reached 12 million tons. This growth was driven by various government-sponsored programs aimed at upgrading utility infrastructure, new construction of networks and gasification of territories.

In terms of pipe types, pipes for water supply and agriculture are most in demand. At the same time, the dynamics of demand growth for non-pressure pipes is still behind the expectations of the expert community.

Among the peculiarities of 2023, it is worth noting the overcoming of the supply deficit observed in 2022 due to the withdrawal of some manufacturers and, accordingly, the transformation of the market. Currently, about 80% of polymer pipe grades are produced at SIBUR Group facilities. In addition, imports of raw materials of pipe grades increased one and a half times in 2023. Almost 70% of these raw materials were supplied by Asian producers. At the same time, according to Ivan Bagaev, General Director of ROSTterm LLC, the dependence of the domestic market on imported raw materials exists, but it cannot be called global.

Russian market of pipeline valves

In 2023, sales of pipeline valves decreased by 8.7%, amounting to about 442 thousand tons. Such data are given in their research by experts of BusinessStat. Such dynamics is explained primarily by the reduction in revenues of one of the main consumers of such products - the oil and gas sector. At the same time, the needs of the utility sector in 2023 remained at the level of 2022, which inspires cautious optimism.

Among the interesting trends of the pipeline valves market it is worth noting its development primarily at the expense of domestic companies. The share of Chinese manufacturers' products is about 30%.

Challenges and prospects for the Russian market of pipes, fittings and valves in 2024-2025.

It is important to realize that the pipes, fittings and valves market is tied to the volume of repairs and renewal of municipal infrastructure. Accordingly, in 2022-2023, a number of customers have postponed repair works due to unclear prospects and financial constraints. The resulting pent-up demand may be realized as early as 2024-2025.

Large-scale projects with state participation will remain the main driver of the pipes, fittings and valves market. Firstly, this is new construction, both residential (primarily based on the mechanisms of integrated development of territories) and civil construction (including within the framework of the Stimulus program aimed at the development of social and business infrastructure). Even despite the probable decrease in construction rates due to the growth of the key rate and the rise in the cost of borrowed funds, we should expect substantial support from the construction complex for this market.

Secondly, it is a large-scale program for the modernization of utility infrastructure. In a number of regions and municipalities there is a deplorable condition of engineering networks, which can lead to emergency situations. To address this problem, it was decided to allocate about RUB 4.5 trillion for the modernization of the housing and utilities sector by 2030.

The key challenge that the industry will face is an increase in the key interest rate and, accordingly, a rise in the cost of borrowed funds required for the development and expansion of production facilities. Accordingly, under the current conditions, preferential and government-subsidized loans are of particular importance, which will enable manufacturers to modernize existing facilities and launch new ones.