Russian construction tools and materials market

The market of construction tools and materials is one of the key industries in the construction sector that has formed into an integral and competitive system with a wide variety of building and repair tools and materials on offer.

Maxim Bogodvid / RIA Novosti

Current market situation

Construction tools can be divided into two categories, electric tools and manual tools and expendable supplies. The first segment is experiencing a substantial growth in sales globally, with the Russian market accounting for about 1.8% of the total market volume.

Makita power tools were a definite bestseller in Moscow and the Moscow Region before 2022. The company’s market share prior to the crisis was 20%, and now it accounts for no more than 5%. Since the second half of 2022, Makita has ranked fourth in terms of sales volume, while the leadership has been taken by the cheaper segment companies such as Vikhr, Interskol, Zubr and Sturm.

The construction sector is currently seeing an upsurge in activity: records have been set in terms of the construction of housing and commercial real estate in Moscow. At the same time, the construction of new road interchanges is also developing in the city. Since January 2022, repair works have been popular: fearing housing deficit and real estate prices, Muscovites started purchasing residential and non-residential premises. A small decline in apartment repairs was recorded in the third quarter of 2023, which could be caused by the buyers’ focus being moved to fully repaired property.

The competition on the construction materials market is quite high, and the number of participants is constantly growing. Among strong players are Vse Instrumenty, Petrovich, Mir Instrumenta, and Max Master. Brands need to constantly come up with new marketing ploys in addition to maintaining high quality and low prices in order to survive on a competitive market. For instance, they use such tools to attract clients as a guaranteed delivery within 4 hours, visits by technicians to repair power tools, or sales where one can buy three items at the price of two. In these days, many have to yield to dumping in order to support sales, because even a slight regress could lead to losing one’s position on the market.

Construction is a dynamically developing sector of the economy. Participants in this market have wide opportunities for development, which requires constant innovations.

Import substitution

Import substitution is an area that is developing rapidly on the Russian construction market. The advantages of this approach include increasing diversification of the economy, strengthening national security and expanding export potential.

The global logistics changes of 2022 have become one of the reasons behind the active import substitution measures on the construction market. An increase of delivery time from two months to five months required quick adjustment to new conditions. The producers have their warehouse stock to last for 5-6 months, and it was necessary to find a new solution within this period.

In this regard, for instance, our company searched for alternate suppliers in Russia. It was made possible to replace most goods that were manufactured in Europe, such as foam, glue and sealers, with Russian and Chinese-made products.

However, Russian companies currently account for only some 60 percent of producers on the construction market. In the hand tools segment, the market still depends on the Chinese partners, but we hope that in the nearest future, Russia will start manufacturing all range of cutting, measuring and diamond tools. It will allow us to stop relying on imports and ensure stable manufacturing and delivery.

Between January 2022 and January 2023, all construction market players were facing new challenges. Yet, the withdrawal of certain companies that inevitably resulted in a reduced scope of products provided an opportunity for the sector’s development, including increased competition among domestic producers and lesser dependency on foreign suppliers.

Sales performance

Sales performance is a key indicator that helps assess the construction tools market as well as its potential. Over the past year, the industry has seen substantial changes amidst economic instability, resulting in the obviously changing level of construction equipment sales.

For instance, during the first months of 2022, many top construction companies put a temporary hold on new projects. The announcement of all-encompassing sanctions led to a panic in the market; all trading companies began stocking their warehouses, fearing shortages and surge in prices.

As an example of market behavior, we can mention two major hand tool suppliers. The first one raised prices daily without warning; in the morning, its customers purchased rollers for RUR 125 ($1.3) per item, while in the evening it already cost RUR 150 – and such rapid price changes occurred for two weeks. The second example involves a major supplier who stopped shipping operations for several days to recalculate the cost of their products, and then re-entered the market with prices 50% higher. Supplier costs continued to rise, and by the end of the month the commodity cost surged by 95% for both electric and hand tools.

Another negative factor that affected sales performance was two largest maritime carriers pulling out of Russia. Companies had to use rail freight routes that were already overloaded, which led to an increase in the end cost of the goods. With the ruble strengthening in the second quarter, prices recovered to the early 2022 levels.

We should note that the industry has already survived the crisis, the market being fairly stable now and analysts claiming that the domestic demand has recovered to 2021 levels.

If no changes occur and mortgage interest rates remain unchanged, the entire construction sector will advance at the same pace until 2024. The government has already announced efforts to build new roads and implement new projects, as well as renovation plans until 2038. Sales performance in the construction equipment market has indicated an obvious upward trend. Economic instability, technologic innovation and changing consumer preferences are having their effect on this performance. Demand is expected to grow further, particularly for innovative and eco-friendly tools, to provide opportunities for companies in the sector to develop and grow.

The construction equipment and materials market is an essential sector of the construction industry; its analysis has indicated high competitive potential. The import substitution problem remains relevant, requiring efforts to develop efficient strategies to boost domestic production. The market sales performance is linked to the advancement of the construction industry and may vary depending on the economic situation.

In general, the construction tools and materials market remains prospective and relevant, offering vast opportunities for development and innovation.

By Vitaly Kuznetsov, Executive Director and Founder, Tvoy Instrument (Your Instrument) company

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