Thanks to strong demand from the construction industry, the Ukrainian market for PVC windows and doors is extremely dynamic, especially in the region surrounding the capital city of Kiev, says a report from the German Office for Foreign Trade (bfai, Cologne; www.bfai.de). For some time, the country´s nearly 1,000 domestic manufacturers have had the fast growing domestic sector largely to themselves, with a more than 99% share – USD 150m in terms of sales – in 2003. Some of the largest manufacturers are Stekloplast (Dnipropetrowsk), Wysash (Shytomyr), Esko and WiknoPlast (both Kiev), Paritet (Odessa) and Karat (Riwne).

While up to now there has been virtually no demand for imported finished products, modules and parts used for subsequent assembly – including profiles – are a different matter altogether. These have been imported largely from western Europe. However, there are signs that the traditional western suppliers of PVC window profiles may be losing market share to local plastic converters, particularly in the important Kiev area.

According to bfai´s figures, the number of Ukrainian PVC profile manufacturers has risen from two to six within one year. Newcomers include Gewys (Kramatorsk, Donezk), Leks (Luhansk), OblTorgSerwis (Tscherniwzy) and Integlast (Charkiw). EcoPlast (Riwne) and a smaller manufacturer at Pissotschin in the Charkiw region have been active in the market for some time. Local profile manufacturers have one major problem – as there are as yet no PVC resins producers in Ukraine; they must import the resin or engage in cross-border contract processing.

Imports of rods, bars and profiles made of PVC into Ukraine still play a major role, increasing significantly in value terms over the past few years – from USD 26m in 2003 to USD 30.8m in 2004, for example. Germany was by far the most important foreign supplier in that period, increasing its exports from USD 15.3m to USD 16.6m.

Until now, most importers of profiles have supplied the high- or the low-price ends of the market, with European companies on the higher end and Turkish, Russian and Chinese firms at the lower end. The market for premium products has suffered recently from intense competition between the manufacturers of ready-to-assemble plastic and plastic/aluminium windows. Their profit margins have fallen within a few years from 50% to 15-20%. Since the beginning of 2003, prices for the finished products have stagnated or even softened slightly, while prices of components and materials have risen by as much as 5-70%.

The consequence of this price gap is that Ukrainian window manufacturers are beginning to use profiles from the medium and low-price segments. In view of this, well-known German manufacturers have apparently begun to scale down their marketing activities in the country, with makers of the "Schüco", "Knipping" and "Plustec" brands leading the way. According to bfai, Schüco has closed its representative office in Kiev.

The low-price segment looks quite different. Here, products from the previously mentioned countries dominate the scene with a market share of around 30%. A large proportion of these goods enter the country illegally, either falsely declared or invoiced at artificially low prices to circumvent customs duties and import taxes. If the new Ukrainian government is successful in its efforts to repress the hidden economy, price increases of at least 20% in this segment and the importers of such products would lose market share.

Double-digit growth in the Ukrainian PVC window profiles business is likely have continued in 2005, and bfai sees growth as unlikely to slow down in the near future. However, because of the levels already achieved, the German foreign trade office says it seems improbable that the high growth rates of 2003 and 2004 – with nominal increases of 25-30% – can be topped. For the window and door profile market altogether, economists are calculating nominal growth of 15-20% a year. Observers expect a major wave of concentration and consolidation among window and door manufacturers to begin soon, with numerous small companies having no alternative but to quit the market or concentrate on the retail end.