Since the beginning of this year, the industry has already grown by 35%, up to $600 million in value terms, compared to the same period last year, and this has become a record high for the last 36 months.
According to predictions of analysts in the Russian Ministry of Industry and Trade, if the same growth rates are maintained in the second half of 2017, the total value of the market may reach $1.2 billion, which would be a historical record for the Russian nonwovens industry in the modern history of the country.
The ongoing growth of the industry could be mainly explained by the recovery of the major nonwovens’ consuming industries in Russia, and a significant growth in the demand for nonwovens from the country’s military and defense industries.
The growth of the industry is also due to the increase of its state support. Last year, the Russian government included the nonwovens and technical textile industries in the list of industries for which development will become a priority for the state until 2025. The latter also resulted in the provision of a number of grants to some leading domestic nonwovens companies for the expansion of their production volumes and increasing R&D activities in the industry.
In addition to the support of domestic producers, as part of the state plans is also creating conditions for the attraction of foreign investments to the industry. As part of this, Russia’s president Vladimir Putin has recently promised leading Western nonwovens’ producers to provide tax, customs and other benefits in the case of their decision to establish production capacities within the territory of the country.
According to Dmitry Peskov, a press-secretary of Putin, localization of production within the territory of Russia will be beneficial to foreigners, taking into account the resuming devaluation of the Russian currency – ruble, which makes local production more profitable than further imports from abroad. This also provides an opportunity to local producers to start expansion of their Russian-made products to some neighboring countries in Eastern Europe and the CIS region.
Such an opportunity, for example, is also considered by some major global diapers manufacturers operating in Russia. In the case of the local diaper market, according to predictions of state analysts, the market is expected to grow by 15-20% both in volume and value terms this year.
The introduction of Western sanctions against Russia along with the economic crisis in the country has resulted in the suspension of many investment projects in Russia, which were implemented by foreign investors. However investment activities of foreigners in Russia has started to recover since the second half of the current year.
For example, Procter & Gamble (P&G) has officially announced its plans to invest up to 5 billion rubles ($120 million) in the expansion of its plant for the production of diapers and other similar products, based on technical textiles and nonwovens, in the Tula region.
In addition to duties, the companies are still unhappy with the existing high level of corruption in Russia, which complicates implementation of many of their investment projects in the local market.
The financial recession in Russia has resulted in an increase in the prices of diapers in Russia and is associated with this decline of consumer sales, however, amid the ongoing recovery of the market, producers hope to restore their positions in the local market to up to pre-crisis figures of 2014 by the end of the current year.
Last year, the Russian diaper market amounted to RUB 6.7 billion ($120 million) in sales terms, which, according to Manturov, Russia’s Minister of Industry and Trade, and a person that oversees the development of the diaper industry in the Russian government, is a very small figure for the country, but, he says, the market has the potential to grow by 10 times in the middle term.