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Reinforcement market: plants work direct-to developers

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Reinforcement market: plants work direct-to developers

Why does the reinforcement prices’ growth in Moscow and Saint-Petersburg differ from Russia-wide indices?

Each element of a reinforced concrete structure contains building bars.  The elements of housing and industrial buildings are reinforced in different modes of construction: solid-cast, panel, etc.  This analytical review of production and consumption of deformed reinforcing bars shows the actual dynamics’ level of the construction sector of the economy.

 

Production of non-alloy steel deformed reinforcement in the RF, tons

Reinforcement market: plants work direct-to developers

 

To begin with, we shall consider the production of steel deformed reinforcement last year. As it is clear for the scheme, the all-Russian production of steel deformed reinforcement was relatively steady during the whole period, and only in the first quarter was there a slight decrease due to lower rates of construction, and some projects were frozen, especially in individual housing construction.

At the same time, concrete product casting to be stored is rather insignificant. Quite large funds are invested in raw materials for reinforced concrete production, and producing goods to be stored is not profitable because the turnover slows down. Besides, the majority of plants producing reinforced concrete take out credit to purchase large batches.  

Lastly, metal products reinforcing concrete structures are subject to corrosion. That is why, when calculating the primary cost, one should take into account the expenses on storage, registering and other additional charges.

In general, reinforced concrete goods are produced according to the structural plans for each project. They may produce casting to be stored but not so much of a definite type for it to be sold, for sure, at the peak of the construction season.

Production in federal districts, 2016, tons

Reinforcement market: plants work direct-to developers

 

In 2016, the production of reinforcing bars had a variety of trends. Thus, during the year the output volume was growing constantly in the Central FD, and the Ural FD, although being a leader led to a decrease in the output volumes since September. 

 

Production of non-alloy steel deformed reinforcement in the RF, the accrued total, tons 

Reinforcement market: plants work direct-to developers

 

Production of non-alloy steel deformed reinforcement in the RF, with respect to the accrued total, demonstrates positive dynamics. But analysis of how it is throughout the federal districts shows different tendencies. 

As such, the Central and the Ural federal districts have a significant excess of the production over the Southern and North Caucasian Federal Districts. It is mainly due to the availability of the base of raw materials for the production of rolled steel and plants’ location on the territory of the districts.

 

Production of non-alloy steel deformed reinforcement in the RF federal districts, the accrued total, tons

 

Reinforcement market: plants work direct-to developers

Production of non-alloy steel deformed reinforcement in the RF federal districts, tons 

 

The production of non-alloy steel deformed reinforcement in the RF federal districts in 2014—2015 has the same dynamics. The lowest production was in the North Caucasian FD, and the highest one was in the Central FD. The Ural and Siberian FD then follow.

 

Production of steel deformed reinforcement in the RF federal districts in 2014, %

Reinforcement market: plants work direct-to developers

Production of steel deformed reinforcement in the RF federal districts in 2015, %

Production of steel deformed reinforcement in the RF federal districts in 2016, %

Reinforcement market: plants work direct-to developers

 

Dynamics of the steel deformed reinforcement production in the RF from 2014 to 2016, tons

Reinforcement market: plants work direct-to developers

 

While analysing the dynamics of the total production of steel deformed reinforcement in the RF it can be seen that since 2014 production has been decreasing: when comparing the decrease between 2015 and 2014 it reached 4%, and in 2016 it was 13%. At the same time, the prices from the producers and consumers for such goods began to come closer.

 

Indices of prices for construction deformed reinforcement bought by constructors since the beginning of the year compared with the same period of the previous year 

Since 2012, the index of prices began to decrease, which highlighted a steady economic situation in the Russian construction industry.

However, the sharp fall of the rouble at the end of 2014 impacted on the prices of rolled steel. Therefore, from the very start of 2015 the year characterised by a maximal growth of prices and the dynamics were absolutely different from the previous year.

This was due to the construction rates slowing down all over the RF since the beginning of 2015. It was also the period when mortgage rates grew sharply, which in turn decreased the population’s purchasing power and the selling of flats in the housing sector of the construction industry. By the beginning of 2015, developers had partially frozen their projects.

If we consider the index over the federal districts we can see that it had different trends in dynamics, and it was only in January 2015 that a sharp growth of prices was registered which straightened out by the autumn of the same year in all of the federal districts.

 

Indices of prices in % since the beginning of the year compared with the same period of the previous year in federal districts 

 

Indices of prices in % by December of the previous year for reinforcing bars

A slight decrease of the index of prices in percent by December of the previous year, during 2012—2013, confirms the stability of the consumption of steel reinforcement elements in the construction industry, and additionally this sector of the economy is insignificantly influenced by the increased price for energy resources, plus the expenditures for fuel and labour resources.

The growth of the index of prices in percent since January 2014, when compared with December of the previous year, illustrates the appearance of negative factors in the economy. The growth of the same characteristics in 2016 was due to the increase of logistics’ expenses and other economic factors.

 

Indices of prices in % by December of the previous year over federal districts for construction deformed reinforcement 

Reinforcement market: plants work direct-to developers

 

The index of prices in percent in relation to last December has the same dynamics in all federal districts and grew significantly by the end of 2016. Thus, it added 9% in the Central FD, 15% in the North Western FD, 17% in the Southern FD, 15 % in the Volga FD, 25% in the Ural FD, 12% in the Siberian FD and 14 % in the Far Eastern FD.

On the whole, the prices for deformed reinforcement all over the RF grew by 13%. As a reminder, by the end of December during the previous years, the price grew by 1—3% at the most, or even went down by 1—2 %.

 

Average prices for profiled bars in the RF, roubles/ton

 

Analysis of the prices for reinforcement during 2012— 2016 showed a sharp growth starting in March, 2016. In March the Russian producers’ average price was 20,365 roub./ton, and in December it was already 30,736 roub./ton. Accordingly, we can see an increase of over 51%.

 

Average prices of producers for hot-rolled, extruded and drop-forged profiled bars in federal districts, roub./ton

 

Consumers’ average prices for AIII class deformed reinforcement in the RF, roub./ton

 

Analogous with producers’ prices, starting from February – March, 2016, there was an increase in prices on construction deformed reinforcement for consumers. The growth of consumer prices, however, began earlier than the growth of producers’ prices.

This is explained by the fact that during the process of concluding shipment agreements a producer announces a new price. Respectively, traders immediately increase the price for consumers, which is followed by a new growth of prices for raw materials.

 

Consumer price growth for AIII class deformed reinforcement, percent, in federal districts

Federal District

Average growth of consumer price, %

Central

22%

North-Western

36%

Southern

31%

Ural

42%

Volga

28%

North-Caucasian

2%

Far - Eastern

36%

Siberian

42%

 

Average consumer prices for AIII class deformed reinforcement in federal districts, roub./ton

Reinforcement market: plants work direct-to developers

 

Comparison of average producer and consumer prices over the RF in 2012—2016

 

Average producer prices, roub./ton

Average consumer prices, roub./ton

Average excess of purchase price over producer price, roub./ton

Average excess of purchase price over producer price,%

2012

22 520

27 653

5 133

23%

2013

20 018

26 058

6 040

30%

2014

21 372

26 230

4 858

23%

2015

25 311

28 854

3 543

14%

2016

26 196

30 161

3 965

15%

 

 As is clear in the table, since 2012 the average excess of the purchase price over the producer price has both been decreasing due to the recession in the construction industry and an increase of competitiveness in this sector of the economy.

 

The maximal trade mark-up (including logistics and other expenses) was registered in 2013, when it reached 30% and construction volumes were mostly steady and maximal in all regions of Russia.

 

Later, the average excess of the purchase price over the producer price started to go down to 4,858 roub./ton in 2014 and 3,965 roub./ton in 2016 (respectively, -23% and -15%). Since 2015 factories and producers have concluded direct treaties with large developers, whilst previously they preferred working via traders. 

 

 

Dynamics of average consumer and producers’ prices for AIII class deformed reinforcement in the RF, roub./ton 

 

Average consumer prices for AIII class deformed reinforcement in Moscow and Saint-Petersburg in 2012—2016, roub./ton

 

Reinforcement market: plants work direct-to developers

 

One may see in the graph, that average prices in Moscow and Saint-Petersburg started rising at the end of 2016. Both cities have maximal dynamics in the consumption of this kind of roll product when compared with other cities.  Thus, the consumer price for construction reinforcement increased by 41% in Moscow and by 37% in Saint-Petersburg.

 

This effect is caused by the insignificant increase of the producer price, the growth of logistic expenses (including automobile fuel), and the first signs of the activation of the construction sector.

 

Unfortunately, the price growth of construction materials is followed by the growth of the price of ready buildings and premises, thus leading to the increase of housing prices and realty rent prices, etc. 

 

Dynamics of average consumer and producers’ prices for AIII class deformed reinforcement in the RF, roub./ton

Reinforcement market: plants work direct-to developers

 

Average consumer prices for AIII class deformed reinforcement in Moscow and Saint-Petersburg in 2012—2016, roub./ton

Reinforcement market: plants work direct-to developers

 

Elena TUYUKINA,

 

Schemes and tables by the author

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