August 22, 2012
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Home / Issue Archive / 2009 / July – August #7 / Domestic Valve Makers Struggle to Retool, Upgrade Standards as Industry Restructures

№ 7 (July – August 2009)

Domestic Valve Makers Struggle to Retool, Upgrade Standards as Industry Restructures

Russian valve manufacturers are adopting new production methods and embracing new technical standards, including those of the American Petroleum Institute (API), to survive in an increasing competitive environment.

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   Production by domestic manufacturers dropped 4.5 percent in the second half of 2008 over the same period in 2007, according to a report issued annually by Russia’s Scientific-Industrial Association of Valve Manufacturers (NPAA). That trend continued throughout the first half of 2009 though NPAA will not release specific figures until yearend. The volume of imports, meanwhile, is soaring.
In 2008, domestic producers focused mostly on the manufacture of steel gate valves, ball valves, electric actuators, steel check valves and cast-iron gate valves, according to NPAA. Steel back-pressure valves (valve gates) and steel check valves were produced in the highest volume.

   Of greatest significance, however, was that in 2008, for the first time ever, the volume of valves imported into the Russian market exceeded the volume of valves manufactured domestically. Driving this trend was the demand of Russian oil and gas majors for high tech components used in large-scale upgrades of processing plants (refining, chemical, petro-chemical and others) and on pipelines.

   Dmitriy Grak, Editor-in-Chief of the St. Petersburg-based trade journal, “Pipeline Valves” said that 85 percent of imports went to processing plants and 15 percent to pipelines. For example, to upgrade its Kirishi refinery near St. Petersburg, LUKoil imported 40,000 valves of various types, Grak told Oil&Gas Eurasia.

   Imports fall into high tech categories such as limited rotation valve types such as three-eccentric valves and various ball valves made to API standards. Alexander Myshonkov, Chief Engineer at Penztyazhpromaratura (heavy equipment manufacturers in Penza, Volgovytsky region) said that plants such as his want to compete but there is little investment capital available to retool plants so as to manufacture to higher standards.

   NPAA Director Ivan Ter-Mateosiants agrees with Myshonkov. He adds that working with outdated equipment decreases not only the quality of the product but also labor productivity and influences production costs.
“Only a very few enterprises can afford machinery upgrades by reinvesting their own profits,” Ter-Mateosiants said. “In China, the government supports its manufacturers with state-funded research programs and venture projects targeted at import substitution. In Russia, however, this is all just talk.”
Ter-Mateosiants noted also that personnel issues are complicated by incompetence in the intermediate vocational education system in Russia, and detachment of higher education which tends to be theoretical not grounded in practicality. Good engineers, technologists, and machine tool operators are in short supply. And it’s a problem that the NPAA is taking steps to address. For example, it recently launched a program called “Pipeline Fittings Design” in cooperation with Kurgan State University (KSU) near Russia’s border with Kazakhstan, in which several hundred students enrolled.
NPAA also took the initiative to join with the Polish Association of Industrial Fittings to create an inter-university cooperation agreement between KSU and the Wrocław Technical University.

   Too often, specialists at Russian plants are educated only in the operation of mechnical valves and not “smart” electronically controlled equipment. Thus, enterprises that are not under pressure to buy the latest equipment will buy domestic. These plants are however becoming fewer in number with each passing year.

   On the pipeline side of things, Victor Domozhirov, Assistant Director for Science Research at NPF CKBA, another Russian domestic valve producer, said that many pipelines still run with fittings installed 20 to 30 years ago. This creates yet more demand considering that fittings usually last only 30 to 40 years.
Quality control of metal used in valve manufacturing is important, particularly with regard to corrosion control on non-rotating surfaces, hydrogen cracking, and ageing.

   To address the problem, NPF CKBA is researching the dynamics of impact strength variation in materials and brittle failure mechanisms.
Ironically, while the economic downturn has put pressure on manufacturers needing capital, there is a bright side as well. The crisis has all but pushed out of the market the multitude of intermediary sellers, some of which traded in second-hand valves and fittings at dumping prices and with dubious documentation that clouded facts about how long the valves had sat in warehouses. Also out of the market now are low-cost Chinese fittings that flooded into Russia two years go but quickly lost their appeal because of high failure rates.

   Only serious-minded players intending to invest and to develop their business remain. Inefficient producers manufacturers that try to sustain themselves by selling out-dated products will simply be pushed out of business.
As to what else can be done to support domestic manufactuers, Alexander Myshonkov suggests that ball valve producers should look at higher temperature applications as well as capabilities of operating in environments with large amounts of mechanical impurities.

   New materials and flame spraying of coating on the valve plug and seat or stellite-weld depositions will be applied in high-temperature environments. Use of environmentally-friendly metal-ceramics is feasible in contaminated environments in lower temperatures. Those who can commercialize such products will find a ready market in Russia.

   A big disadvantage to gate valves is that solids can accumulate below the wedge, thus affecting the valve’s operation. Ball valves or full-bore valve gates provide a virtually ideal run-in clearance.

   Valves are categorized into roughly two groups: the lower-tech check valves and high-tech control valves, there are some enterprises manufacturing both types, but as a rule, manufacturers specialize in a particular type. Among Western maufacturers of control valves, five companies dominate: Fisher (Emerson), Dresser, Nelis (Metso), Samson and Flowserve. Fisher company repesentative Sergei Kondratiev estimates the size of the global market at around $3 billion. And in terms of growth, Russia is one of the more perspective corners of the world, particularly given the attention that the state has placed on refinery and chemical plant reconstruction. Despite the global financial crisis, Russia’s quest to become an exporter of Euro-standard gasoline by 2012 remains a priority for state-owned plants.

   Though large manufacturers tend to sell a wide range of products, varieties of valves are so many that many players are able to enter the market and carve their own narrow niche.

   Practically all segments of the Russian market of pipeline valves are highly competitive – that’s true both for the simple general purpose valve segment, as well as for complex valves. And this tendency is getting more distinctive from year to year. New foreign valve makers appear in Russia every year. Italian companies and East European manufacturers are getting more active. Supply tenders have gotten more transparent with information readily available on prices, terms of delivery, technical properties of equipment, form of payment and service system.

   Western producers hold the advantage with respect to their high engineering standards and the reliability of their equipment. For example, Emerson has been willing to provide an additional 10-year warranty for the payment of an extra 3 percent of the price of the components, according to Sergei Kondratiev, Regional Sales Engineer for the Fisher Valve Division, Emerson, LLC in Surgut, West Siberia.

   Russian manufacturers compete by appealing to the customers’ sense of patriotism and offer lower prices. But some Russian firms have also beaten the competition by joining the competition. Take the case of after sale service, an achilles heel for many foreign companies who chose to sell imports into Russia but not establish a real Russian presence.

   In 1997, DC Controls based in the city of Novgorod the Great, was created as a joint venture between U.S. valve manufacturer Dresser, Inc. and the Russian company Splav. Over the last 12 years, DC Controls has been able to establish a well supported service and maintenance system throughout Russia including in-situ diagnostics, maintenance and a variety of other services demanded by their customers.

   Fisher Valves and Instruments, a division of Emerson Process Managment in the U.S., is reported to be in process of establishing a service network throughout Russia that would function not unlike the company’s U.S. model . In the United States, Fisher is said to have around 100 service contractors throughout the country.

   Moscow-based RUST-95 has its own Service Department that visits customers on demand. Founded in 1995, RUST-95 was the first domestic manufacturer of stelloy valves and fittings for corrosive environments with automated control equipment, according to www.oil-gaz.biz. It was also Russia’s first manufacturer of control technologies supporting the HART Protocol.

   “You do not have to wait two months until spare parts are brought and the company representative arrives requiring per-hour payment. In those cases it can be more feasible to buy a new valve instead of repairing it,” said Mikhail Zilonov, General Director at LG Automatica, who also believes that service is the key to success.

   Russia offers the global and domestic fitting industries tremendous upside. For example, the mainline section of the ESPO oil pipeline currently under construction will be placing orders for hundreds of valves of up to 1,400 mm diameter and over 100 kgf /sq. cm pressure. And whether domestic manufacturers play the “patriot card”, the “price card” or sell on the efficiency of their after sale service, in the long term, Russia needs a well-thought-out program of industrial development that would create modern valve manufacturing entities equipped with up-to-date facilities that could compete with foreign manufacturers. Such a program would require government support.
Next Issue: A further look at Who is Who in the Russian Valve and Fittings market.

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