Nonessential annual decline of production at the Russian ceramics ware market is followed by increase of price per item. Why is that and does the ceramics market meet consumer requirements?

Raw material situation

In the last three years ceramics increased in price by more than 14%, while its production reduced by more than 1%. There was much of the same situation earlier as well. As a matter of principle it is quite bearable compared to the West, where Chinese kitchenware is overwhelming and national production has suffered significant decrease. In 2004 more than 205 million were produced to the amount of 1.690 million rubles. The production volume in the previous periods can be found in Table 1.

Table 1. Ceramic ware volume

Changes in the prices for end-use products are due to the increase of the prices for raw materials (which in its turn is due to the increase of the cost of energy and transportation and stable inflation). The annual price increase has been 25-30% during the last several years. At present the selling price of a ton of clay on the territory of Russia varies between $10 and $60 (depending on the amount of impurities). And this is when most of the factories have their own sources of raw materials. It should be noted that clay is supplied at a price twice lower - $30-35 per ton.

Approximately 10-12% of raw materials for production of ceramic ware are imported, where Ukraine has almost 100% share (supplying among other things kaolin, which is rather rare in the Russian Federation). This is explained by the fact that the quality of clay from Russian fields (Lukoshkinsky, Cambrian, Berlinsky, etc.) is much lower than that of clay from Ukrainian fields as regards detrimental impurities (quartz, carbonates, pyrites, coal etc.) negatively affecting the quality of china and ceramic ware. Besides, Ukrainian suppliers are still competitive since they have railway transportation benefits on their territory. And this is very important as annual transport expenses on imported clay consumed, say, by ceramic factories of the Moscow Region amount to 73.6% of the total cost of supplied clay, while the transport expenses on clay from local fields (on the territory of the Moscow Region) do not exceed 10-20% of the total cost.

Impact of Import

A certain decline in national production is compensated by import of articles. Import has been smoothly growing since the year 2000. Annual growth is from one to several million articles per year. In money equivalent it is similar - $1 -5 mln.

The annual growth rate of china import in terms of value is about 12% (and in physical terms - 19%), the most sharp growth being in 2003 and 2004. Statistics says that in 2003 the growth rate amounted to 20% in terms of value and 29% in physical terms.

The volume of ceramic non-china ware import has grown in the last years from $11.7 mln to $20.5 mln, i.e. by 37% {as for physical terms -growth was 21% before 2003 and above 32% after 2003).

The total import volume of all ceramic ware has grown almost by $17 mln since 2001 (from $31.387 mln), with the annual growth rate being about 21% in terms of value and about 20% in physical terms.

The major importers of ceramics are Ukraine - more than $10 mln {40-50% of the total volume), China - more than $7 mln (40-45% of the total volume) and Czech Republic -about $2 mln. Among other suppliers there are Germany, Italy, Finland, Poland and others. Total volume of import is estimated as more than $25 mln.

It is easy to see that Russia becomes an additional sales area and saves European countries from the crisis of overproduction. At the same time the price level of foreign-made goods is a bit higher, which affects in a certain way total price situation at the Russian ceramics market.

Slack Export

The situation with export unfortunately leaves much to be desired. Ceramic ware export remains on the same level - slightly more than $10 mln. At the same time the exported china volume is getting smaller each year (in particular, from $5.653 mln to $5.082 mln in the period from 2001 to 2003), and the volume of non-china products exported out is slightly increasing (from $4.497 mln in 2001 to $5.41 mln in 2003). Thus the financial and physical balance on the exported ceramics market remains at the same level.

Main importers of ceramic ware are from Russia are Turkey (30-40% excluding china), USA (about 17-9% of china), Denmark (16-23% of china) and Uzbekistan (6-17% of china).

             200I                2002               2003

Volume of exports of ceramic from Russia in value terms, USD

Volume of exports of ceramic from Russia on the basis of quantities, kg 

Volume of import of ceramics from Russia (incl. porcelain) for the period in 2001-2003 years. On the basis of quantities and in value terms.

            2001               2002                 2003

Volume of import of ceramic from Russia in value terms, USD

Volume of import of ceramic from Russia on the basis of quantities, kg 

Unfortunately, foreign sales of ceramic ware are characterized by negative balance. Import excess over export has grown by more than 70%. In 2001 the difference was $21.236 mln, in 2003 - $34.711 mln already and in 2004 - about $40 mln in average (the exact figure was not disclosed). Negative balance dynamics can be explained by the growth of ceramic ware import to Russia in those years with practically the same level of export of these products. It surely does not lead to the reduction of prices on the Russian market.

Obviously today's steady situation on the ceramics market will remain in the nearest future. Despite low activity, the consumer demand is being quite satisfied with manufactured and imported goods.

The market is stable. Russian enterprises cannot influence the current situation. Only a few small production facilities have appeared lately.

Most enterprises cannot afford re-equipment of production facilities. Foreign manufacturers do not make any active steps regarding their intervention to Russia. Kitchenware market is rather conservative; therefore there are no new types of products -changes in the range are related to decoration, painting etc.

Perhaps the only annoying thing about this balance is the low import duties for china and faience enabling Chinese and Ukrainian manufacturers to successfully compete with local factories by dumping prices. But this annoyance is rather seen in experts and analysts. Because neither China nor Ukraine can significantly improve their position on the Russian market.

Potential changes depend on taking some decisions at the governmental level, for example, the support of local manufacturers, increase of customs duties for this category of goods, etc.