Page 16 - Retrading Business N102 2022-03
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COUNTRY
REPORT - RUSSIA
Russia’s tyre retreading industry is doing better than expected in the face of Western sanctions and economic downturn, but the long-term outlook looks grim due to an anticipated lack of premium casings, raw materials and equipment. The Russian invasion of Ukraine on Feb. 24 triggered a mass exodus of Western businesses from the country. At the time of writing, more than 1,000 companies publicly announced their decision to voluntarily sever ties with the Russian market, according to research conducted by the Yale School of Management.
Several tyre companies have followed the lead. On March 18, Brid- gestone said it would suspend the operation of its Ulyanovsk plant in Russia’s Urals, halt imports and investments. On June 28, Miche- lin and Nokian Tyres also rolled out plans to curtail operations in Russia, citing an inability to import raw materials to the country.
Both companies have not only manufactured and imported tyres to the Russian market but also were important players in the raw materials market.
LOGISTICS HAMPERS RAW MATERIALS IMPORTS
To some extent, the decisions to halt Russian operations are asso- ciated with a logistics crunch. In March 2022, the world’s three lar- gest container shipping lines Switzerland-based MSC, Denmark’s Maersk and France’s CMA CGM all temporarily suspended non-es- sential bookings to and from Russia. As a result logistics costs on international cargo bookings skyrocketed.
Several Russian business associations reported that the average price of delivering a container from Europe to Russia jumped to €11,000, against €3,200 before the invasion. In addition, as nearly 80% of the Russian banking sector is subjected to punitive Western sanctions and the largest banks are disconnected from the SWIFT system, making payments for delivered goods turns into a tricky task.
A source in the Russian tyre industry explained that most European suppliers now ask Russian distributors for full pre-payment of orde- red goods. He explained that for small businesses this means a rising credit burden, plus nobody can guarantee that the ordered goods
On the other hand, Alexander Kazachanko, Vice President of the Automotive Service Association in Russia commented that the imports of the raw materials in the retreading industry are not expec- ted to grind down to a halt, since some countries remained friendly to Russia.
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