30 June 2022
Regiony Rossii magazine, No. 6 (193) 2022
Because of the sanctions, machine-tool production in Russia has confronted a number of problems, since global companies carrying a lot of weight in the industry have left, and it will take years to make analogues of machines and their components domestically. Pumori Corporation General Director, Head of the Ekaterinburg branch of the Sverdlovsk Regional Union of Manufacturers and Entrepreneurs Mr. Alexander Balandin told the magazine about the level at which the industry is now and the steps to take in order to restore it.
According to the latest forecasts of the HSE Centre of Development Institute, the long-term impact of the sanctions against Russia will take the form of deceleration of the Russian GDP growth rate. From among the basic risks, experts singled out the technological inferiority of the country. Do you think Russia can preclude a technological gap in the production of machines, particularly machine tools? What measures should the government take?
The picture is mixed. One cannot cover all of it with a single answer. The machine-making industry is motley and multifaceted. Some of its branches used to be equipped with a more high-tech machinery; therefore, they will probably stay on a fairly high and stable level.
Talking of machine-tool production in particular, one should understand the history of its development and fall in this country. The Soviet Union was in the top five of the nations with a well-developed machine-tool industry. But later, the development of the Russian economy was more reoriented toward oil and gas; the machine-tool building fell to decay, and few own products were made in Russia. At that time, wide-sweeping purchases of modern machine-tool production technologies from abroad began. They were bought in Japan, Europe, and America — where they are especially well-developed, — the very high tech. They have always been closely followed by Chinese, Taiwanese, and Indian machine-tool manufacturers. Until recently, that import situation prevailed and there was no strict embargo, although since 2014, restrictions had been introduced for deliveries to some companies, and various alternatives appeared in the form of joint machine-tool projects in Russia; for example, there was a lot of talk about the DMG MORI facility in Ulyanovsk.
All in all, Russia is consuming a surprisingly small number of machine tools. Here I consider metalworking equipment, complex production, multi-axis equipment. About five thousand such machine tools were imported to Russia in the prime years. Now, if we look at Germany: it imports 15 thousand machine tools, and produces about just as many. Those five thousand could more or less cover the needs of the defence industry while the civil branches continue in large measure to use Soviet machines.
When we are talking about a technological lag or advance of machine-building, the best indicator for understanding is the quantity of machine tools consumed by the sector, since the machine tool is a means of production and a tool of labor. And the second indicator is educational capacity: how many students are trained in universities, how many workers and engineers. All of that becomes indicative for Russia, where insane amounts of metal are produced and need to be processed. We have not processed that metal. We have chosen to buy finished goods at a ratio that is very unfavorable for us: arbitrarily, if we sell a tonne of metal for 300 euros, then we buy goods made from that tonne paying 30 000 euros. It would have made more economic sense if we’d processed them ourselves. And that was clear long ago: industrialization in the Soviet Union was needed to become independent and utilize our resources as efficiently as possible. And that doesn’t only apply to metal; the same is true for gas and oil, too.
We should be very careful and cautious when speaking about a speediest upswing of the machine-tool industry. If we haven’t been able to do it during the 30 years after the breakup of the Soviet Union, despite the monies spent, also from the state funds, what must have changed now? Will the machine-tool industry development plan include an investment component, like, for example, in agriculture? Nobody’s saying anything about it. I am not talking about these monies being state or private. Importantly, they should be considerable and not on the order of billions of rubles. But it was like this: the government only spent one or two billion, and they reported already that the machine-tool industry is revived. It’s a joke. It will never happen. I estimate that a more or less decent machine-tool factory would cost 100 million dollars or more. There might be a couple of such factories in Russia, but that’s not nearly enough. Such a factory can make two or three thousand machine tools a year, but we must think in terms of twenty or thirty thousand. One has to understand those figures, and one has to be specific.
This development will take years and years, and we will, perhaps, implement some effective projects, but even today it is necessary to make up for what we have lost, and that means we need a strategy how to do it. At first, machine tools have to be planned, designed, tested, marketed, and create preconditions for their prices to be competitive. It’s a tremendous amount of work, and who is going to do it is not clear today.
After the beginning of the special operation, many foreign companies have declared that they are leaving the Russian market. For many years, Pumori has been closely cooperating with Okuma, Japan, with Indian machine-tool manufacturers. How are interrelations with the companies evolving at present?
For years, we have been cooperating with Okuma from Japan, but there is no licence any more.
Some still indulge in illusions that it will be to make some arrangements — using shady schemes, grey-market import — for work with foreign companies; but I believe they have to part with these illusions. We see that all significant machine-tool producers have left Russia. Yes, there is talk that all this is not for long; I can tell you that Okuma was subjected to embargo before — and left for fifteen years. Whether it is a long time or not is not for us to judge, but one thing is clear: in the next 10–15 years these companies cannot be expected to return to the Russian markets, and we have to think how to replace their products.
One of the ways would be looking for other suppliers. China has for many years developed deliveries of their machines to Russia, and done it well, both directly and through a network of their representatives. In the strategic plans, I, too, have provided for links with the Chinese machine-tool industry; at the same time, Pumori Corporation has been for years cooperating with Indian manufacturers.
If we take an Indian machine tool and a Chinese one, they are very similar in their technical data, performance, design, and price. One thing is especially important for me: I’ve had a feeling that business in India is more loyal toward Russia; maybe, even more so than the Chinese. It’s easier to get better preferences in India, build long-term relations. I don’t know where it comes from. Maybe, form the time when the Soviet Union helped India; and now, when there’s a gangup on Russia, India decided to remain loyal toward the stance of our country.
Besides, I don’t feel like stepping on the same rake again. Nobody knows what the relations between China and Russia will be in future. We might be friends today, but none tomorrow. We have a common border and a contentious past. Not with India. And I also like that it’s very convenient for us in Ekaterinburg to communicate with India: the time difference is very small: just half an hour with Bangalore, where two machine-tool manufacturing companies work. Those companies are over 60 years old, and a long history of cooperation. And we will market their machinery; we have one exclusive offer, which means we will be the only entity in Russia to represent that company’s interests; and we expect to obtain one more exclusive offer.
I am not saying we don’t want to work with China; we will, because machine-tool making technology is very multivarious. I compares easily with the automotive industry. There are lots of various motor vehicles: big and small, cars and trucks, and others. It’s the same in the machine-tool sector: different sizes, different technological capacities, different purposes. Not to mention accuracies and particularities. But stating that one machine-tool making factory can produce all machine tools would be funny; nobody can.
We have partnered with Okuma, they have a great range, but even they do not produce everything needed by consumers; that is why cooperation with many companies — dozens of them — is necessary, since each one has its own area of expertise, competencies, solutions, and develops in that context.
Now such large machine-tool producing countries as Japan, the US, and Europe, have left Russia. Can it become a launching pad for the development of our machine-tool industry by those who used to make similar products? This country has become accustomed to buying abroad, and now it will have to look for something home-made.
I think that’s what will happen, after all. Russia will occupy these niches with its solutions. Something has already been done, and there are certain private companies, but many kinds of machine-tool production, even using the existing facilities, will certainly not appear in the nearest future. It all depends on how much you invest in it. For example, Okuma has been working for over 120 years, and the Indian company I am talking about has been in the business for 60 years without interruption. Even if there is today an enterprise in Russia, and the market has opened for it, and it has the means, — it won’t be able to meet the existing demand quickly and comprehensively. You know, there’s a proverb saying that nine women cannot give birth to a baby in one month. It’s also the case with machine tools, because there are some points in their development that will take time. I am not saying it cannot be done — it can, and it will be done, but the question is how long it’s going to take.
At present, the problem of components is critical. We don’t have a licence with Okuma any more, that is, we cannot get spare parts. We will Russify their machine, that is, make all components in Russia and assemble in full. But still, cooperation must be: no company will make everything down to the last screw; some standard parts will have to be bought. For example, CNC. The whole world takes it from Siemens, Fanuc, Heidenhain, but they have said they won’t sell any more. We certainly must make our Russian CNC. In fact, there are CNC makers in this country, but their capacities are not adequate even for 15–30 thousand systems. Of course, they can be expanded, but it’ll take time and lots of money. Besides, it’s unclear how the sanctions will develop: hardware components also are where the bans are coming from.
To get stable development domestically and minimize our dependence on foreign products, continuous work is needed in this segment. Remember the difficulties we had in Russia with food products? Now we are also being denied them, but we don’t have such crisis, and we do not starve. Why not? Because a governmental program to support agriculture has been working for many years. It’s an ongoing element of economic action on the industry,reducing dependence on other countries. That’s what machine-tool industry needs, too.
Assuming that the government will start active stimulation of the machine-tool industry development, how many years will it take Russia to attain progress in this area?
I grew up in the time of five-year planning periods, and later I have been carrying on my business with five-year planning, as well. I believe that with an appropriately made roadmap and adequate resources, a program for five years will be quite sufficient to break the deadlock and make it to a certain element of progress.
Early in June Rosstandard Head Anton Shalaev declared that Russian standards in machine-tool production are way behind the global ones, slowing down the development rate of import substitution. Do you share this view? How do you think will the adoption of new GOSTs affect the development of the machine-tool industry in Russia?
It’s somewhat paradoxical. In fact, a standard, for example GOST, is a requirement on what is to be made and how; and if you do not abide by the GOST, you become an offender.
There’s production itself, and there are requirements and existing capacities. And it should be understood that simple indication of a GOST will not bring about change of a whole production stage. These things contradict each other. On the one hand, there are requirements that must be met in production. On the other hand, there is the production, which, to achieve this level, needs strong transformation and modernization, starting with the development stage.
From the political viewpoint, it is correct: you can’t make good products without a respective GOST. But if we are to talk about the practical aspect, it’ll become a thorny agenda, because one can kill everything we have now; will anybody abide by the GOST today, and will the products be what the GOST says they should be?
One should clearly realize the consequences of such declarations. We may run the risk of seeing some companies closing if they have elements of departure from too rigid a GOST; for example, if they follow the old paradigms and the GOSTs of the Soviet make. One has to understand how to meter out. One cannot jump from a backward to a modern state without an investment process. That’s evolution, and it takes money, time, and developments to be effected.
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