Stanislav Bashirov, the Head of LLC “MOSKERAM”, answers questions from our magazine.
— Mr. Bashirov, analysts forecast a significant reduction of construction volumes in the near future. Has the crisis influenced the construction materials market at the beginning of the construction season of 2015?
— The authorities are currently doing everything possible in order for the crisis not to result in the collapse of housing construction. I hope that the program of mortgage rates subsidy assistance aimed at decreasing the rates will prevent a decline in multi-storey construction and a decrease in volume. We had such fears in February, and in March the decline started.
If we compare rates of construction materials sales with the same period last year, some companies have suffered a decrease of up to 50%. We ourselves have already lost about 20-25%. By the beginning of the construction season, many producers have a zero balance, which was not the case at the beginning of the year. Ceramic “stores” are about 20-30%.
The current brick sales decrease is connected with the December rush, the period of the steepest ruble fall. But many household consumers, having bought brick before New Year’s Eve, still do not know if they will have a house built or if it even makes sense to do it now.
Neither we nor the producers have a clear understanding of what will occur in a month or two. There is a common worry that “winter will change places with summer” and there won’t be the usual keen seasonal summer demand. It means that pricing will change and production prices will decrease, as was the way two years ago.
— By the way, what’s going on with prices for construction materials?
— The main producers haven’t changed their prices significantly yet. Some companies have raised them by 5-15%, and a lot of companies want to follow suit. This is stimulated by the increase of the main currency rates and the necessity to import some components for brick production – the so called admixes. Calcareous clay, which is necessary for brown brick production, is bought abroad, and its price was and is 1,200 dollars a ton. But in rubles it is quite a different sum. Many companies tried not to raise prices by using left-over stock bought before the crisis, but in February the price for brown brick rose because imported raw material became more expensive. And this will continue.
— How much of the market of main construction materials is comprised of imports?
— Brick import from Europe (Germany, Holland, Belgium, and the Baltic countries) is about 17%, and practically all of it is in the premium segment. About 6% of imports come from Belarus and Ukraine; the quality is rather good. Clinker tile rather than brick is imported from China: it is actively produced there. Prices for imported production have remained in our currency. If imported brick used to cost 1.1 — 1.5 euro a unit - that is, an average 50 rubles - now it is 80-90 rubles or even up to 100 rubles a unit. Developers and clients are not ready psychologically to buy a brick for 100 rubles.
— But if people can not countenance the price of 100 rubles for a brick, even if it is very good, it means that the premium-class ratio decreases…
— Of course. Many traders are now switching over to Russian producers, though they used to go with foreign producers on the market not so long ago. Everybody knows: say what you like but this year will really be a failure for imported product.
— So import substitution is in process on the market?
— No doubt. And many constructors who would have formerly used only imported brick are now considering Russian production as a substitute.
— Is there great rivalry on the construction materials market? What is the situation on the capital market?
— In the Moscow region there are about 10 major players, dozens of medium-size ones and hundreds of small ones. Besides this there are prominent regional players who deliver their product to the premium market – that of the capital. Everybody is trying to get a foothold here. Even retailers from the Southern Federal Region often sign treaties with plants in the Moscow region on brick production, but sell the production on the spot – it is more profitable for them than to deliver it to their region.
— How are major traders, medium-size players and small local sellers acting on the market? Who has the best chance to stay afloat?
— It is clear that the major traders will stay anyway. The times are uneasy, and they may turn medium-sized. Small dealers have the opportunity to be taken under the wing of either a medium-sized or large player. Some companies will try to buy out somebody else’s assets. General instability will influence salaries, bonuses and other things. So we can expect turnover of staff.
— Will the quality of Russian construction materials grow significantly?
— The quality of Russian materials is growing as new production lines are being bought in Europe. The lines are installed and technologies develop. But we are still lagging behind our foreign colleagues. And a house constructed of quality European brick looks more expensive and interesting than one made of Russian brick.
Generations have worked there for many years: many producers are family companies, dynasties going back hundreds of years. They have their own secrets, that’s why they sometimes forbid guests from taking photos at their plants. The diversity of their production makes an impression. And there are not many employees. Our plants have a lot of people, low productivity and few kinds of production. Of course, we are moving forward, we’re not staying still.
— And the main thing is that, even if produced on a modern production line, our brick is of inferior quality…
—That’s it. We buy an Italian line, they come, install it, and regulate it. Then time passes, and it all goes wrong… Even clay is a very capricious material; it has different compositions. And it is necessary to study, control, and regulate constantly - in fact, one must constantly carry out scientific work.
— Is there any area in which we trump foreign producers?
— As far as brick is concerned, hardly. Maybe in price, but only on the internal Russian market.
— Give me advice as an expert - what should I pay attention to while choosing face brick?
— If we speak of Russian production, the main thing is a sloped edge occurrence and an absence of spalls while brick layers are working. The house will be nicer if you use sloped edge brick with no spalls on the face surface, with good geometry. The strength quality is no lower than 150 for all types, but the higher it is, the better. The water absorption standard is 8-12%, but for the humid climate of the North-West of Russia I would recommend Russian brick with a lower level of water absorption.
— The traditional question to end our interview: how do you spend your leisure time, what are you fond of?
— I try to spend all my free time in my cottage.
— I hope it is made of brick?
— It is made of blocks, with brick as veneer. I spend my leisure time with my family. On weekends I like to ride a quad bike in summer and a snowmobile in winter.
Andrei Chernakov asking questions