Pfleiderer AG resumes Russian expansion
28 January 2011Pfleiderer AG originally announced its plans to build this fibreboard plant in the middle of last year. However, due to the global recession the implementation of the project was suspended, but it is now back on track.
According to experts on the Russian Kommersant business paper, the new plant is expected to become Europe’s largest facility for the manufacture of fibreboard, with a total production capacity of 500,000m3 of MDF/HDF per year.
Pfleiderer AG places high hopes in Russia due to the fact that, unlike western European markets, the Russian MDF/HDF market was not heavily affected by the global recession, because most of the local production is sold domestically.
In addition, despite the consequences of the recession, the demand for the branded products of western companies continues to remain high among Russian consumers, thanks to their traditional high quality and huge marketing promotion – even despite the fact their price often exceeds the cost of similar products manufactured by Russian companies.
Total investment in the project is estimated at 7.5bn rubles (€187m). According to the preliminary plans of Pfleiderer AG, the investment was estimated at €144m, but the company decided to increase this figure.
In addition to the facility itself, Pfleiderer also plans to build a warehouse, to expand roads and to build railways. The project will be implemented by Pfleiderer MDF Ltd, the company which was specially established for the construction of the plant.
During the second stage of the project, the company plans to launch production of laminate flooring on HDF substrate. Due to the high cost of using HDF, such laminate flooring is not as widely distributed in Russia as is the MDF based product.
Vladimir Kotenev, director general of OOO Pfleiderer, the Russian subsidiary of Pfleiderer AG, said the company decided to revive the project in September after a visit to Novgorod by Pfleiderer’s chairman, Hans H Overdiek.
According to Mr Overdiek, the Russian market for MDF panels has been growing steadily since the end of the crisis, while its current capacity is estimated at approximately 1,500m3/year. Since 2004, the market has significantly increased, thanks to the commissioning of the capacities of two of Russia’s largest MDF producers, Kronostar and Kronospan, as well as several other companies.
However, in recent years only a few production facilities were launched. This can be explained by the high cost of equipment and the consequences of the recession.
According to data from ABARUS Market Research, one of Russia’s leading analyst agencies in the field of construction, the Russian MDF market is growing steadily. In 2004-5 its rate of growth exceeded 100%, while in 2006-7 it slowed to 50-60%. In 2008, growth stopped, while in 2009 there was a decrease of 8 to 9%. This year the market is expected to grow by about 15% compared with 2009.
Most of the MDF panels in Russia are used in the production of furniture, which accounts for approximately 65% of the market, while the remaining 35% is used for construction and decoration materials.
In this regard, the launch of the new Pfleiderer plant, according to most analysts, will have a positive impact on Russian furniture manufacturers.
The construction works are expected to begin early in 2011 and should be completed by the summer of 2012.
Most of the production of the future plant is expected to be sold to Russia’s major furniture producers, as well as to dealers with a particular focus on the enterprises based in the northwest region of Russia.
The launch of the new plant is expected to make Pfleiderer one of Russia’s largest producers of fibreboard and will contribute to tightening competition in the local market, which is currently dominated by several local players including Kronostar, Kronospan, ZAO Novoeniseysky Wood Chemical Complex and some others.
According to the director-general of the Association of Woodworkers and Furniture Makers of the St Petersburg region, Mikhail Pilzer, current demand for MDF panels in Russia is high.
“One of the main advantages of fireboards is, that unlike particleboards, they can be milled. In addition, these boards are more water-resistant and suitable for the production of bathroom furniture,Mr Pilzer said.
Experts also believe that the establishment of the new Pfleiderer AG plant may result in the reduction of imports of MDF to Russia.
Russian MDF Imports
Thanks to the recession, imports of MDF panels has significantly declined, from 33% of the total market in 2005 to 15% in 2009.
Last year, about 160-170,000m3 of MDF was imported to Russia. In comparison, in 2003 this figure amounted to 2,041,000m3, while in 2004 it was 150,000m3 and just before the crisis in 2008, only 390,000m3.
Laminate flooring accounts for more than 60% of total MDF imports, while second place (18.5%) is occupied by boards for cabinet furniture, furniture facades and decorative detailing. The share of cladding panels (wall and ceiling), as well as other panels for interior decoration, is estimated at 9%. Boards for the production of doorsets, boxes and linings account for approximately 4% of total imports.
Amid the ever-recovering market demand, ABARUS Market Research predicts an increase in imports in coming months, which could have a negative impact on local consumers – mainly small and medium-sized businesses.
However, the establishment of a new Pfleiderer plant is expected to result in a decrease in prices of about 30%.
Second Russian plant
The new fibreboard plant will be the second facility of Pfleiderer AG in Russia, in addition to its €90m particleboard plant, launched in 2006. At the initial stage, it had the capacity to produce 500,000 tonnes, but thanks to the ever-growing demand for particleboard in Russia, several months ago Pfleiderer decided to expand its output by 10% to 550,000 tonnes and to expand its range.
Most of the plant’s production is sold within Russia, as well as CIS countries such as Kazakhstan, Belarus, Uzbekistan and Tajikistan.
According to analysts’ estimates, the current share of Pfleiderer in its ‘domestic’ northwest particleboard market is 55-60%.
At the same time, the annual volume of the Russian particleboard market is estimated at 4.7-4.9 million m3; five times more than the MDF volume.
