Vladimir Potapov

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eed for investments
The Russian housing and communal services sector urgently needs large-scale investments. It has become obvious, when all plans to reform the sector have deadlocked. The Government’s course to gradually cancel state donations has only led to the increase in apartment rent and cost of communal services, not to the improvement of their quality. On average, 82% of these services are now paid for by residents themselves and in most regions the amount of payments has reached 90%. These funds are spent on providing current services and paying for resources but they cannot be used for modernization.
Attempts to stop the process of dilapidation of housing resources and the infrastructure just failed. According to the approximate estimate by the Federal agency for construction and housing and communal services, the wear extent amounts to between 60% and 70 %. As official from this agency Vladimir Zhdanov believes, their complete restoration will require no less than $80 billion. But, in his words, "not a single budget can bear such a burden". By the way, the 2005 federal budget provides for only $40 million to finance the program of reforming and modernizing Russia’s housing and communal services complex.
That is why authorities consider attracting private investments to be the key condition for implementing modernization of the housing and communal services sector. The business community is offered to join the State in determining "directions of scientific research works, in stimulating the use of promising technologies and equipment" and, at the same time, "in sharing related risks". And there are those, who wish to do it. One of the reasons for this is that, by itself, the sector is quite attractive: by estimates, the volume of provided services amounts to $32.5 billion with the guaranteed profitability equaling 5% to 7%.
As far back as 2001 RAO UES of Russia with the participation of Gazprom, Interros and Renova initiated the establishment of the Russian Communal Systems Company. However, they failed to divide this market sector between themselves and each of these "players" preferred to act independently.
Along with the Russian business, foreign companies also intend to operate in the sphere of housing and communal services. For example, the Russian-German consortium (it includes DaimlerChrysler Services, BASF-Gruppe, Henkel, DAW, Phoenix, Hydrometer, Techem, Veka, Knauf, Russicon-Gruppe) is planning to attract $300 billion in 20 years for modernizing the Russian housing and communal services complex.

Need for metals

Producers of steel and non-ferrous metals regard the sector, above all, as an enormous promising market: the share of metal products in the prime cost of its services reaches 30%. By estimates, the need for pipes alone amounts to about 1.5 million tons year-on-year.
Only recently the major portion of supplies fell on ordinary steel pipes with the maximum service life of 10 years. At the same time almost no copper pipes are used: they have indisputable advantages, although cost higher. UMMC, which started to actively advance them to the Russian market, reminds that in housing sectors in a number of European countries the share of copper pipes in the total volume of communications (water supply, heating, gasification) comes to between 60% and 70%, while in Germany and Great Britain steel pipes are not used for these purposes at all.
Recently, UMMC and the company Majdanpek, its partner from Serbia, started the project to make copper pipes for the housing sector. At the beginning of operations in Russia they hope to sell about 1,000 pipes annually. However, analysts are forecasting a higher demand for this product, not only from developers of the premium class housing. Alexander Deineko, the president of the Pipe Industry Development Foundation, believes that ideally the share of copper pipes should match volumes of new house-building.
Anyway, volumes of steel pipe supplies to this market have already gone down from 480,000 to 440,000 tons: they are being pressed out by pipes made of PVC and other man-made materials. Nevertheless, producers of steel pipes are not going to yield this market niche. They have started to use corrosion-resistant coverings on a wider scale. As the Pipe Industry Development Foundation estimates, in the last three years the demand of housing and communal sectors for zinc-coated pipes has increased more than two time, from 30,000 to 67,000 tons year-on-year, accounting for about 10% of supplies.
By the way, according to experts, today’s repair of dilapidated heating systems costs three to five times more than construction of the new ones. That is why those businesses that are coming to the housing and communal services sector intend not to patch up old ‘holes’ but to build new communications, advance the latest technologies and up-to-date materials.