Facts and figures characterizing the condition of the Russian cement market do not offer much ground for optimism. But it is quite possible to solve all of the market’s problems, and it is not only experts who are speaking about it.
In spite of all of the current difficulties and negative circumstances, the cement market might stop stagnating and start to grow annually. But its protagonists must take a number of steps.
Having evoked evil…
Our internet-magazine often writes about the problems in the cement market, which is one of the key bellwethers for the whole construction industry.
We are sorry to say that expert prognoses on the decline and probable further stagnation of the cement market previously published in our magazine have almost all come true. The reasons are evident and several.
First of all, the actual income decrease of the population (and not only because of the ruble’s depreciation) and the fall of the effective demand for housing should be mentioned.
If construction freezes, it does not need cement
The reduction of mortgage loan lending in spite of the state program has resulted in a noticeable decrease in housing construction. According to CM PRO’s prognosis, in 2016 — 2017 the rates of housing construction growth may be even negative. This is quite likely, as the majority of developers are not starting new construction now and are completing their current objects. That is to say, there is no groundwork for the future, without which construction soon comes to a halt.
It is clear that in these conditions the economic crisis enveloping the whole construction industry has seriously impacted upon the domestic market for cement.
To remind you, at the beginning of the year cement production volumes decreased by 9%, and in April there was a new record: a 16.3% fall.
The situation immediately influenced imported volumes: in the first quarter of 2015, only 147,000 tons were imported from Turkey, Iran, China, Latvia and Sweden, a mere 2—3% of the market volume.
According to RD construction analysts, cement production volumes in the industry on the whole in January—July of 2015 went down by 10—12% as compared with the results of the second half-year of 2014. But not so long ago, in 2010—2013, the cement market showed an annual growth of 5—15 %. We can only dream of this at the moment, and hope for the best.
Somebody falls, somebody rises
This year, by expert assessments, the cement market has some peculiarities. One may observe differently directed movements: some large players are decreasing their volume of production, whilst others are using the situation to increase theirs. According to the RF State Statistics Committee, the cement volume produced in September 2015 totaled 6,364,300 tons. In August it was 5.7% higher.
If we analyze the statistics of federal districts, the September data are as follows: the North-Western federal district has improved on its August results by 5.6%, the Southern by 3.1%, and Crimea by 1.8%. But the Volga federal district has decreased its output of cement by 15.6%, the Central by 13.8%, and the Ural by 12.5%.
Experts explain this both by a cement production investment decrease and a corresponding investment decrease in the industry, and by a demand decrease for the product as well. At the same time, despite the crisis, cement is becoming more expensive following energy suppliers’ tariffs growth. According to RD Construction, this adds a monthly 1.5% to the price on average. By the end of the year the growth will total 15–17% compared with the prices in December, 2014.
One should not forget that the majority of construction materials are transported by heavy trucks, the fleet of which now totals about half a million units. The payment introduced on November 15th for trucks heavier than 12 tons on federal roads may significantly impact upon the prices of transported product, cement in particular.
Might everything change?
Nevertheless, there are optimists among the experts. They are sure that in spite of all negative circumstances, the cement market might stop stagnating and instead start growing by 3—4% a year. For example, analysts from the largest international companies think that the output of cement in Russia may reach 86—87m tons a year by 2020 (to remind you, in 2014, 68.5m tons were produced). The RF Ministry of Construction, Housing and Utilities predicts even higher results. According to them, the cement output volume in Russia will be 97.8m tons by 2020.
For all the forecasts to come true, it is necessary to develop the industry at the expense of consolidating enterprises and thus attracting foreign investments for updating industrial capacities.
It is necessary to decrease prices for the cement to be bought. What resources are to be used? First of all, the decrease of the primary cost and the decrease of production expenses, changing the obsolete, energy-consuming “wet” method of production at 80% of domestic enterprises with the usage of modern technologies.
(with the use of data from analytic agencies)