Displaying items by tag: Ukrcement
Update on Ukraine, May 2024
15 May 2024Before Russia invaded mainland Ukraine on 24 February 2023, many predicted that full-scale conflict would be averted. When the attack began, Russian President Vladimir Putin himself expected a 10-day war, according to think tank RUSI.1 15 May 2024 marks two years, two months and three weeks of fighting, with no end in sight.
Ukrcement, the Ukrainian cement association, recently published its cement market data for 2023, the first full year of the war. The data showed domestic cement consumption of 5.4Mt, up by 17% year-on-year from 4.6Mt in 2022, but down by 49% from pre-war levels of 10.6Mt in 2021. In 2023, Ukraine’s 14.8Mt/yr production capacity was 2.7 times greater than its consumption, compared to 1.4 times in 2021. Of Ukraine’s nine cement plants, one (the 1.8Mt/yr Amwrossijiwka plant in Donetsk Oblast) now lies behind Russian lines. Four others sit within 300km of the front line in Eastern and Southern Ukraine. Among these, the 4.4Mt/yr Balakliia plant in Kharkiv Oblast, the largest in the country, first fell to the Russians, but was subsequently liberated in September 2022.
Before the war, Ukrcement’s members held a 95% share in the local cement market. Their only competitors were Turkish cement exporters across the Black Sea, after the Ukrainian Interdepartmental Commission on International Trade successfully implemented anti-dumping duties against cement from Moldova and now-sanctioned Belarus and Russia in 2019. Since then, Turkish cement, has also become subject to tariffs of 33 – 51% upon entry into Ukraine until September 2026. The relative shortfall in consumption has led Ukraine’s cement producers to lean on their own export markets. They increased their exports by 33% year-on-year to 1.24Mt in 2023, 330,000t (27%) of it to neighbouring Poland.
Russia’s invasion has made 3.5m Ukrainians homeless and put the homes of 2.4m more in need of repair. In a report published in Ukrainian, the US Agency for International Development (USAID) set out its three-year rebuilding plan for the country. USAID projects an investment cost of €451bn, with the ‘main task’ besides homebuilding being to increase the share of industrial production in the economy. Ukraine is 90% equipped to produce all building materials required under the plan. Their production, in turn, will create or maintain 100,000 jobs and US$6.5bn in tax revenues. Reconstruction will also involve the Ukrainian cement industry returning to close to full capacity utilisation, producing 15 – 16Mt/yr of cement.
CRH, an established local player of 25 years, looks best set to claim a share of the proceeds. Stepping down an order of magnitude from billions to millions, Global Cement recently reported CRH’s total investments in Ukraine to date as €465m. Since war broke out, the company has more than tripled its rate of investment, to €74.5m. The Ireland-based group is in the protracted administrative process of acquiring the Ukrainian business of Italy-based Buzzi. If successful, the deal will raise its Ukrainian capacity by 56%, to 8.4Mt/yr – 57% of national capacity. This unusual clumping of ownership may be made possible by the participation of European Bank for Reconstruction and Development in partly acquiring the assets, as per a mandate letter signed with CRH in 2023.
Leading Ukrainian cement buyer Kovalska Industrial-Construction Group bemoaned the anticipated increase in market concentration. On the one hand, this sounds like a classic tiff between cement producers and users with shallow pockets. On the other hand, an antebellum allegation of cement industry cartelisation should give us pause for thought. Non-governmental organisation The Antitrust League previously reported Ukraine’s four cement producers to the government’s Anti-Monopoly Committee for alleged anticompetitive behavior. This was in September 2021, when Ukraine was barely out of lockdown, let alone up in arms. With all that has happened since, it may seem almost ancient history, yet the players are the same, CRH and Buzzi among them.
Ukrcement and its members have secured favourable protections from the Trade Commission, and, for whatever reasons, evaded the inconvenience of investigation by the Anti-Monopoly Committee – a state of affairs over which the Antitrust League called the committee ‘very weak.’ The league says that producers previously raised prices by 35 – 50% in the three years up to 2021. In planning a fair and equitable reconstruction, Ukrainians might reasonably seek assurance that this will not happen again.
All these discussions are subject to a time-based uncertainty: the end of the war in Ukraine. A second question is where the finances might come from. The EU approved funding for €17bn in grants and €33bn in loans for Ukraine on 14 May 2024. Meanwhile, countries including the UK have enacted legislation to ensure Russia settles the cost of the conflict at war’s end. If Ukraine achieves its military aims, then the finances may flow from the same direction as did the armaments that demolished Ukrainian infrastructure in the first place.
The first piece of Ukraine annexed by Russia was Crimea in February 2014, making the invasion over a decade old. Against such a weight of tragedy, the country cannot lose sight of the coming restoration work, and of the need to ensure that it best serve Ukrainians.
Ukraine: Data from Ukrcement, the Ukrainian Cement Association, show that cement consumption grew by 17% from 4.6Mt in 2022 to 5.4Mt in 2023. Pavlo Kachur, the head of Ukrcement, said that consumption is expected to continue growing modestly in 2024, according to Interfax-Ukraine. He added that the country exported 1.24Mt of cement in 2023.
Before Russia invaded the country in 2022 it reported consumption of 10.5Mt in 2021. It has a production capacity of 13.6Mt/yr. Despite the ongoing war the local cement sector says it is considering plans to meet future market demand such as repairing plants in Balakliya and Kramatorsk and even, potentially, building new production lines.
Ukraine raises eight-month cement production so far in 2023
20 September 2023Ukraine: Cement companies produced 4.75Mt of cement during the first eight months of 2023, up by 30% year-on-year from eight-month 2022 levels. Interfax-Ukraine News has reported that producers are operating at 60% production capacity.
Liudmyla Kripka, executive director of the Ukrainian cement association, Ukrcement, said “If we compare it with last year, when the country’s economy was in shock from Russia’s treacherous attack on Ukraine and the start of the full-scale war, the situation has improved somewhat. Cement production in the first half of 2023 grew by 26%, and in the first eight months by 30%, compared to last year.” Kripka added “We are still far from the indicators of 2021, but the dynamics are encouraging. Once there was a prospect, work for the future began. Cement producers, even in war conditions, are investing in Ukraine and the economic restoration of the regions. This expands the production capacity of the industry as a whole and contributes to the creation of new jobs.”
Update on Ukraine, February 2022
23 February 2022International tensions reached a new high this week with Russia’s formal recognition of the breakaway Donetsk and Lugansk regions in eastern Ukraine and its decision to deploy troops accordingly. However, what of the local cement industry in Ukraine going into the current crisis?
Ukrcement, the Ukrainian Cement Association, says that its members reported a record 11Mt of cement production in 2021. Clinker production totalled 8.11Mt during the same period. The cement figure is close to Ukrcement’s forecast in the autumn of 2021 of 11.5Mt, a rise of 17% year-on-year from 9Mt in 2020. At that time association head Pavlo Kachur added that the local cement industry operated at 66% capacity utilisation in the first nine months of 2021.
The big industry story locally was the start of tariffs on cement imports from Turkey that was announced in September 2021. After much complaining by local producers and an investigation the year before in 2020 the Interdepartmental Commission on International Trade (ICIT) introduced anti-dumping duties of 33 - 51% on cement imports from Turkey for five years. Other than this the usual energy preoccupations have been present in Ukraine. In an interview with Interfax in November 2021, Pavlo Kachur expressed alarm that the price of coal had tripled from the start of 2021 to August 2021. At the same time he explained that the biggest driver of cement consumption was infrastructure projects.
CRH, the largest producer locally, rebranded its subsidiary as Cemark in November 2021 with the intention to start shipping cement bags with the new marking from January 2022. It operates three integrated plants at Mykolaiv, Podilsky and Odessa. It reported that its local operating profit grew year-on-year in 2020, despite a “challenging pricing environment” as cost savings initiatives and lower fuel and logistics costs resulted in improved performance. In September 2021 CRH said that sales were up due to growing cement sales volumes resulting from market demand. Although once again it complained about competitive pricing forcing it to lower its prices. Despite this though lower maintenance costs and cost controls had boosted its operating profit.
Buzzi Unicem runs two integrated cement plants in Ukraine, Volyn and Yugcement, as well as terminals at Kiev and Odessa through its Dyckerhoff Ukraine subsidiary. In 2021 it noted recovery in the construction sector, helped by government stimulus and the introduction of tariffs on imports from Turkey. It said that prices fell in the first half of the year before recovering in the second half. Ready-mixed concrete output showed more growth. Dyckerhoff Ukraine’s net sales rose by 9.4% year-on-year to Euro127m in 2021 even despite negative currency exchange effects.
As for the other producers, NEQSOL Holding Ukraine filed an application to the Antimonopoly Committee of Ukraine (AMCU) in October 2021 to acquire a stake in Ivano-Frankivskcement. Azerbaijan-based NEQSOL Holding also operates the Norm Cement plant near Baku in Azerbaijan. HeidelbergCement used to operate in Ukraine, including the Amvrosiyivka Plant in the contested part of Donetsk region, but it sold up in 2019 to local investors. Its two former integrated plants now operate under the Kryvyi Rig Cement brand. Finally, Russia-based Eurocement runs two plants in Ukraine, at Balakleya in Kharkiv region and Kramatorsk in Donetsk region, under its Balcem subsidiary, which formed in 2019. However the status of the second plant is currently uncertain. Balcem said that the Balakleya plant resumed full cycle production in March 2021 when it restarted kiln two. Kiln one was restarted in June 2021 after a down period since 2008. The plant currently has a production capacity of around 1Mt/yr.
Ukrcement’s Pavlo Kachur said that the cement market in Ukraine was experiencing a positive period in November 2021. Whether this continues is very much in the balance given events in the east of the country. The wider implications for cement producers in the rest of Europe and Russia are the fallout from the economic warfare between both sides. A number of countries have started to react to Russia’s actions with the US, European Union, UK, Japan and Australia announcing economic sanctions and Germany halting approval of the Nord Stream 2 gas pipeline. However, Russia supplies a significant share of Europe’s gas supply. All of this could disrupt energy supplies and force input costs up. This has already been reflected in higher oil prices.
Meanwhile, one aspect of the current situation to watch is how multinational cement producers with a presence in Russia will cope. Moving money in or out of the country is likely to become harder. HeidelbergCement told Reuters this week that it did not expect any major impact on its Russian operations, even if the conflict escalated. Its three cement plants supply local markets and do not export outside of Russia, it added. Other companies straddling the potential sanctions divide include Holcim, Buzzi Unicem and Eurocement.
The crisis continues.
Ukrainian cement consumption forecast to rise to 10.5Mt in 2021
05 November 2021Ukraine: The Ukrainian cement association Ukrcement has forecast a 17% year-on-year rise in domestic cement consumption in 2021 from 9Mt in 2020. Business World Magazine has reported that demand previously exceeded 10Mt in 2014.
Association head Pavlo Kachur said that the Ukrainian cement industry operated at 66% capacity utilisation in the first nine months of 2021. He added “Therefore, we have room to grow.”
Ukraine: Ukrcement, the Ukrainian cement association, has lobbied for cement to be excluded from a free trade agreement being arranged between Ukraine and Turkey. Pavel Kachur, the head of Ukrcement, said that he had informed the Ministry of Economy and the trade representative of Ukraine about the association’s view, according to Interfax-Ukraine. He said that the local cement sector was able to fully provide consumers with cement. He also noted the significantly higher cement production capacity in Turkey compared to Ukraine. In mid-2020 the Interdepartmental Commission for International Trade explored a complaint by local cement producers including Buzzi-Unicem subsidiary Dyckerhoff, HeidelbergCement subsidiary Kryvyi Rih Cement and CRH subsidiary Podilsky Cement into imports of cement from Turkey.
Cement import shortcuts
20 January 2021Cement imports were one of the themes in this week’s news, with stories on the topic from South Africa and Ukraine. The former concerned the latest chapter in that industry’s saga on slowing down imports. The International Trade Administration Commission (ITAC) has started a review on tariffs imposed on cement from Pakistan that were introduced in 2015.
Local producers in South Africa have experienced mixed fortunes since 2015, such as PPC and AfriSam’s failed merger attempt or the introduction of a local carbon tax, and were starting to complain again about imports even before the effects of coronavirus in 2020. This led the Concrete Institute to lobby ITAC in 2019 about rising imports from other nations, principally Vietnam and China.
Back in 2013 cement imports from Pakistan to South Africa were 1.1Mt. This represented the vast majority of all imports to the country. Tariffs of 14 – 77% were imposed on Pakistan-based exporters in mid-2015, initially for six months, but this was then extended. Roughly a year later in mid-to-late 2016, Sephaku Holdings said that imports of cement had ‘significantly’ declined on a year-on-year basis, particularly from Pakistan. By the end of June 2016 approximately 0.16Mt had been imported compared to 0.5Mt in the previous period. However, it noted that 75% of the volume was from China. Since then imports started to creep up. Cement imports reportedly rose by 84% year-on-year in 2018 and then by 11% in 2019. Data from construction industry data company Industry Insight suggests that Vietnam accounted for 70% or 0.47Mt of the 0.68Mt of cement imported into South Africa in the first nine months of 2020. The remaining 30% or 0.20Mt came from Pakistan. In this kind of environment it seems unlikely that ITAC will do anything other than extend tariffs.
Meanwhile in the northern hemisphere, in Ukraine this week a court in Kiev dismissed a challenge by the Belarusian Cement Company to remove cement import tariffs from Russia, Belarus and Moldova that were introduced in mid-2019 for five years. Notably, a law firm representing Dyckerhoff Cement Ukraine, HeidelbergCement Ukraine, Ivano-Frankivsk Ukraine and CRH subsidiary Podilsky Cement commented favourably upon the court’s decision to uphold tariffs. These producers form UKRCEMENT, the association of cement producers of Ukraine. However, the association doesn’t include Russia-based Eurocement, which operates Ukraine’s largest cement plant at Balakleya. Relations have been poor between Russia and Ukraine since a war between the countries that started in 2014. So any trade tariffs implemented upon Russia and/or Commonwealth of Independent States (CIS) members will inevitably carry the whiff of geopolitics. Yet, in Ukraine’s defence, it also started an anti-dumping investigation into cement imports from Turkey in September 2020. Nationalism may be relevant but let’s not discount hard-nosed economics just yet.
Turkey’s involvement in Ukraine leads to last week’s presentation at Global Cement Live by Sylvie Doutres, DSG Consultants on cement and clinker trade in and out of the Mediterranean region. Readers can watch the presentation here but the headline story here was the trend of reducing exports away from southern European countries such as Spain, Italy and Greece, to greater exports from North African countries and Turkey over the last decade. Turkey particularly has pushed its share of exports even more in 2020 despite (or perhaps because of) a tough domestic market. The general trend here away from southern Europe has been blamed on European Union-based (EU) producers becoming less competitive often against newer plants in nearby countries.
Battles between producers and government tariff policies are a perennial feature of any market in commodities such as cement. The ebb and flow of import and export markets cover many factors including production costs, distribution networks, tariff structures and more. Distinctive features of cement trading, for example, are the high cost of transporting heavy building materials over land and the world’s chronic cement production overcapacity. In the EU’s case one reason that often gets blamed is the emissions trading system (EU ETS) and the mounting cost it is imposing upon cement production. For example, today’s story that Holcim España wants to convert its integrated Jerez plant into a grinding unit has been blamed on falling exports and a reduction in ETS credits. It is noteworthy then that the EU ETS rate breached the Euro30/t level in December 2020. This may be good news for the sustainability lobby but the exodus of exports away from Southern Europe tells its own story. What form the EU ETS carbon border adjustment mechanism takes as part of the EU Green Deal will be watched closely by producers both inside and outside the EU.
Global Cement Live continues on 21 January 2021 with Kevin Rudd, Independent Cement Consultants, presenting 'Independent or third party factory acceptance testing of major cement plant equipment and critical spare parts and the challenges of Covid’
Ukrcement says that most wrongly labelled cement is counterfeit
19 September 2018Ukraine: Ukrcement, the Ukrainian cement association, has found in a study that over 80% of cement with the wrong labelling was counterfeit. The research was conducted on 50 cement bags for the consumer market, according to Interfax. 82% of cement proved to be counterfeit, over 50% of the samples were below the declared weight and 56% had weaker strength and did not comply with the В.2.7-46 -2010 national standard for minimum compressive strength.
The association said that the risks of using counterfeit cement vary from loss of time and revenue in smaller projects to a direct threat to human life in larger projects such as high-rise buildings. Local regulations require that cement bags include five items: the name of the producer, the conventional designation of cement, the designation of the normative document, the net weight and a conformity mark.
Counterfeit cement on the wane in Ukraine
08 February 2018Ukraine: The share of counterfeit products on the cement market in Ukraine dropped to 8.0% in 2017 from a staggering 21.5% in 2014, according to a press release from the Ukrcement association of cement producers, with reference to a study by GfK Ukraine. Ukrcement believes that change was prompted by the signing of a memorandum on the quality of cement between Ukrcement, the Union of Consumers and large distributors of construction materials in 2017.
Ukraine: Pavel Kachur, the head of the Ukrainian cement producers association Ukrcement, has accused imports of cement from Belarus of not following the proper certification process. He said that imported cement had not been tested properly in an independent laboratory, according to Interfax-Ukraine. He also complained about energy subsidies for Belarusian cement that make it more competitive internationally and noted that Belarus is closed to exports of cement from the Ukraine.