Front loaders are one of the most called-for kinds of road-building machinery.

Wheeled front loaders are used for handling operations, earth-digging works and land-leveling; they are also used for moving crushed stone, gravel, sand and other materials as well as for road-building and rigging works, and waste removal.

The working procedure of a front loader equipped with a bucket includes the following operations: moving the loader to the place of material intake with the simultaneous lowering of the bucket; introducing the bucket into the material using the crowding force; lifting the bucket with the derrick; transporting the material to the place of unloading; and dumping the material by tilting the bucket.

According to the type of their undercarriage, one-bucket front loaders are divided into caterpillar (based on serial caterpillar tractors) and rubber-tired ones (based on serial wheeled tractors, special self-propelled wheeled undercarriages). According to the type of pivoting movement, front loaders are divided into loaders with a hinged frame, loaders with all steerable wheels, and skid steer loaders. According to the kinematic scheme of the lever-actuated system of the operational equipment, there are loaders with a z-shaped scheme (the most widespread one), a semi-revolving scheme and a mixed scheme. Depending on the transmission type, there are loaders with a hydro-mechanical transmission (the most widespread one), a hydrostatic transmission and a mechanical transmission.

PRODUCTION OF FRONT LOADERS

Of the CIS countries, only Belarus (Amkodor PA, Belaz PA and Mogilevsky Automobile Plant) and Ukraine (Kharkovsky Tractor Plant) produce front loaders.

The capacity of loaders produced by CIS enterprises ranges between 57 and 360 kW, with their weight ranging between 7.3 and 49.6 tons, and the hoisting capacity ranging between 2.2 and 1 tons.

Russia. In Russia, production of wheeled front loaders is concentrated at enterprises that used to be a part of the road-building machinery and tractor construction sector such as the Chelyabinskiye Road-Building Machines CJSC, Pogruzchik OJSC, the Peterburgsky Tractor Plant OJSC, Donetsky Excavator OJSC, Promtractor OJSC and the Chelyabinsky Tractor Plant (Uraltrac) Ltd.

Construction of front loaders is mostly developing based on the largest manufacturer of specialized machinery in Russia – the Chelyabinskiye Road-Building Machines CJSC (CRBM), which is a part of the GAZ Group. The CRBM is currently producing a wide range of makes of front loaders with the bucket capacity of 1.5 to 4.15 cu. m. Among them are B125, B138, B160 and NO-40 front loaders.

Ukraine. Production of front loaders in Ukraine is not well developed. The Kharkovsky Tractor Plant named after S. Ordjonikidze OJSC, one of the largest manufacturers of road-building machinery, haulage trucks, and agricultural wheeled and caterpillar tractors in Ukraine, produces only one make – the T-156Б-09 front loader.

No statistical data on front loaders are collected in Ukraine. In the opinion of market experts, in 2005-2007 no more than 150 pieces of such machinery were produced in Ukraine.

Belarus. The main manufacturer in Belarus is the Amkodor OJSC. Amkodor is one of the largest manufacturers of road-building, communal, snow-removal, aerodrome, specialized, forestry and agricultural machinery and equipment in the CIS and European countries.

IMPORT OF FRONT LOADERS

Russia. In the past few years, the structure of import by manufacturer has changed considerably. JCB Company remains the unconditional leader both in kind and in terms of money. But Chinese manufacturers – XCMG, LONGGONG, SDLG and others are rapidly strengthening their positions in the market of front loaders. Their aggregate share constitutes half of the Russian import.

At present, China is the world’s fourth market of road-building machinery after the USA, the EU and Japan. In the opinion of experts of the British consultative company Off-Highway Research (OHR), thanks to the availability of large production capacities in road-building mechanical engineering and a relatively low level of wages, the country’s share in the world output of construction machinery will reach approximately 50% at the beginning of next decade. In 3 or 5 years, if the current economic conditions in Russia do not change, Chinese-made construction machinery will account for 5% to 10% of the Russian market, according to very modest estimates.

In 2005-2007, the import of wheeled front loaders into Russia grew more than four-fold in terms of money and more than 4.7 over – in kind.

While in 2005 the ratio of domestic output to import was 1:1, in 2007 it was 1:4.

Import structure by manufacturers of front loaders (in kind, Russia)

Source: Federal Statistical Agency. Estimates: Abercade Research Company

In 2005-2007, the dominating position in the import of loaders belonged to Lonmady CJSC. Its share in the total import of front loaders constituted 15% in kind and 21% in terms of money.

The rating of companies supplying loaders (in kind, Russia)

Source: Federal Statistical Agency. Estimates: Abercade Research Company

Active market participants are also STD Serviced Ltd. (6% in kind and 3.2% in terms of money), Volvo-Vostok CJSC (3.5% in kind and 8.4% in terms of money).

In 2007, the total volume of supply of front loaders by six leading companies constituted 30.7% in kind and 45.6% in terms of money.

An analysis of the 2005-2007 volume of import of wheeled front loaders (with the exception of small-sized loaders and skid steer loaders) has shown that 64% of new machines and 36% of secondary-market machines were purchased in that period of time.

The development of a secondary market of specialized machinery is typical of many countries. The category of potential users of second-hand specialized machinery in the Russian Federation primarily includes companies starting their business and having limited financial resources, and intermediary firms.

In order to reduce the volume of import of second-hand machinery, the Russian Federation changed the customs rates on the import of specialized machinery and trucks over five years old. According to experts, that measure made the cost of second-hand machinery practically equal to the cost of new machines. So, it has become unprofitable to acquire second-hand imported machinery.

Ukraine. In 2005-2007, the import of loaders into Ukraine was growing at a double pace.

The structure of import by manufacturers (in kind, Ukraine)

Source: Federal Statistical Agency. Estimates: Abercade Research Company

The structure of import into Ukraine is largely similar in type and size and age to the structure of import into Russia.

Belarus. In 2005-2007, dynamics of the import of road-building machinery into the Republic of Belarus varied considerably. In 2006, its import increased by more than 75% against 2005, while in 2007 it remained the same as in 2006.

A large enterprise – Amkodor Open Joint-Stock Company – fully meets the country’s requirements in construction loaders, and for that reason the import of this type of road-building machines is no more than 50-100 pieces annually.

EXPORT OF FRONT LOADERS

Russia.

Export structure by loader manufacturers (in kind, Russia)

Source: Federal Statistical Agency. Estimates: Abercade Research Company

A rating of countries importing Russian-made front loaders has been formed based on an analysis of the data on the 2005-2007 volume of export in kind and in terms of money. The main destination countries of exported loaders are Kazakhstan, Iraq and Ukraine. Their aggregate share constituted 76% in kind and 72% in terms of money.

The rating of countries importing Russian-made front loaders

Source: Federal Statistical Agency. Estimates: Abercade Research Company

The main share of the Russian export of loaders consists of new (about 85%) machines weighing up to 25 tons (90%).

Ukraine. In 2005-2007, no dynamics was observed in kind in the export of loaders from Ukraine; in 2007, only 30 loaders were exported, but in terms of money the amount increased by 1.5 times.

Belarus. Belorussian loaders (including those produced by Amkodor OJSC) belong to the segment of machines that sell the best. Practically the entire output is exported to various countries of the world: Azerbaijan, Bulgaria, Venezuela, Georgia, India, Kazakhstan, Romania, Serbia, Turkmenistan, Uzbekistan, and Ukraine. More than half of the products are exported to Russia.

According to an estimate of Belorussian experts, demand for construction machinery will continue for at least another five years due to a favorable situation in the external market and, primarily, intensification of construction work in connection with the 2014 winter Olympics in Sochi and the 2012 European football championship in Ukraine.

Market Development Forecast

According to aggregative estimates, in 2000-2005 the extent of utilization of construction machinery by various organizations decreased 4-6 times over. The movement of main assets was unilateral – write-off of machinery along with its extremely insignificant renewal. The average service life of equipment was twice longer than the standard one. Specialized mechanization administrations and enterprises equipped with unique and costly equipment, which is now in a state of extreme wear, found themselves in an especially difficult situation.

Russia. Front loaders are in extremely short supply. Russian manufacturers are unable to meet the demand in this market segment, in contrast to Chinese manufacturers who double their supply annually. Domestic products, which met the requirements of Russian consumers most fully before 2000, are no longer in high demand. Production grows only at those Russian enterprises that are capable of improving the consumer qualities of their products and maintaining the price-quality relationship at a level competitive with foreign manufacturers. Another problem of Russian manufacturers is the small family of the machinery offered.

An important factor that maintains the demand at a sufficiently high level is the overarching process of replacement of machinery imported some 10-12 years ago. Another demand reserve is the emergence of clients in those parts of Russia where economic reorganization lags behind that in central regions, and private companies needing new imported machinery and capable of paying for it start to emerge only now.

Machinery sales grow almost twice faster than Russian economy at large. Given a favorable economic situation, in 3 or 4 years the volume of sales in Russia will be comparable to that in Western Europe. However, the current deficit will hardly be overcome sooner than in 10-12 years. However, if for some reason a powerful investment inflow starts coming to Russia as was the case with China some time ago, and a considerable part of it will be directed into the road-building sector, then this period may be cut by half

In the opinion of experts, the following options of development of the Russian market of specialized machinery are possible. Option one: the attractiveness of prices on domestically manufactured machinery will be gradually smoothed over as compared to the imported one, and the domestic market will be eventually divided between Eastern and Western manufacturers who will compete with each other while Russian companies will be engaged in servicing. Option two: Russian enterprises will do their best to offer machinery equal in its quality to international analogs. One more option is the manufacture of high-quality components in Russia thereby creating conditions for the work of both foreign and domestic investment.

Ukraine. The market of front loaders and construction machinery in general is not uniform in Ukraine. In megalopolises where large-scale construction projects are implemented imported equipment prevails. In Kiev, Kharkov, Donetsk and the Crimea its share constitutes up to 70% of the total main assets. The regions use mostly domestic machinery and about 15-20% of imported one. Domestic loaders are represented by such manufacturers as Atek CJSC (Kiev), Borez OJSC (Borodyanka, Kiev Province), DonEx OJSC (Donetsk) and the Kharkovsky Tractor Plant named after S. Ordjonikidze.

The market is dominated by Belorussian and Russian loaders. According to a marketing research undertaken in the Eastern parts of Ukraine, the share of Belorussian-made front loaders constitutes 47% (Amkodor - 35% and MOAP – 12%), the share of Russian-made front loaders is 15%, and the share of Ukrainian front loaders (Kharkovsky Tractor Plant) constitutes 10% of the operating loaders. The remaining share belongs to loaders imported from foreign countries other than the CIS.

Belarus. As of the start of 2006, the pool of front loaders in Belarus included 1,347 pieces. Based on the data provided by the Ministry of Architecture and construction of the Republic of Belarus, state investment and development programs for the period until 2010 will require another 598 machines.

THE MARKET OF CONSTRUCTION MACHINERY LEASING SERVICES IN THE RUSSIAN FEDERATION

Leasing of specialized machinery is rather a popular service. According to experts, the market of construction machinery leasing grows by about 20% annually. The further forecast is optimistic. The explanation is simple – building companies refuse to deal with “associated problem” fully or partially, preferring to dedicate themselves to their specialized activity instead of maintaining a machinery pool. Besides that, leasing permits to build up production capacity during peak periods and exclude expenses related to equipment maintenance.

Along with the growth of the machinery market, Russia witnesses the dynamic development of the leasing services market as well. In the past few years, the Russian leasing market has been developing steadily and actively. The rapidly growing market of construction and road-construction services leads to an increasing demand for additional means of production from its participants. The specificity of the construction sector often requires the simultaneous presence of machinery on several construction sites or its introduction into operation without the diversion of circulating assets.

According to the total cost of transactions, the leasing of road-building machinery rates among the top ten leasing objects and constitutes about 5% of the total volume of leasing services.

As compared to 2006, the amount of machinery leased in the Russian Federation in 2007 doubled. Competition among leasing companies led to the elaboration of more convenient schemes and a reduction in advanced payments under contracts. At the same time, it takes less time to collect the required documents, and the procedure has been simplified. Periods of leasing transactions become longer. A few years ago three-year contracts were mostly used, while now an average period is five years.

The main constraints to increasing the volume of leasing transactions in the Russian Federation are:

· Shortcomings in tax administration;

· Increase in lessors’ crediting rates that started in the fourth quarter of 2007 due to decreasing liquidity of bank assets following the world financial and stock market crisis.