Displaying items by tag: Ukraine

Ukraine: PrJSC Kryvy Rih Cement, under the initiative of Concorde Capital founder Ihor Mazepa, will build a 24MW power generation facility to ensure continuous plant operations, according to Interfax Ukraine. The project will reportedly cost around US$15m, with a payback period of three to four years.

Ihor Mazepa posted on Facebook "This is a necessary measure to keep business from stopping. In general, I see the prospect of investing in energy projects. Therefore, in a short period we will build 40MW of storage capacity, which will balance the energy market. We see a good return on investment in the amount which can reach up to 30% depending on the market development scenario."

Ukraine: Companies belonging to the Ukrcement association increased their cement production by 46% year-on-year in the first quarter of 2024, producing 1.48Mt, according to the Ukrcement press service. This nearly matches the pre-war production levels of early 2021, which saw 1.56Mt of cement produced. However, clinker production fell by 9% to 878,500t during the same period.

Before 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. 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: The cost to rebuild Ukraine post-war is projected at US$487bn, according to a report commissioned by the United States Agency for International Development. The report states that to support the reconstruction, Ukraine must produce 15-16Mt/yr of cement for three years, a significant increase from current capacities. Protectionist measures in place since 2019 have restricted cement imports and a decline in production and a shrinking market could lead to an increase in construction costs, according to the Kyiv Independent.

Amid these projections, CRH, which operates three plants in Ukraine, announced in summer 2023 that it aims to purchase two more from Buzzi's subsidiary Dyckerhoff. This deal is valued at €100m, with the company stressing the importance of its investments in Ukrainian cement plants to boost the country’s domestic production to 15Mt/yr, according to Forbes Ukraine. The deal is reportedly under scrutiny by Ukraine's Anti-Monopoly Committee due to market concentration concerns, which could drive up cement prices and overall reconstruction costs.

Serhiy Pylypenko, CEO of the Ukrainian building supplies firm Kovalska, Ukraine’s largest cement user, said “We need more players and to diversify the market instead of making it more compact because the competition is very weak. Market concentration allows uncontrolled pricing and the cost of construction and the cost of recovery to skyrocket."

Ukraine: CRH has invested €465m in Ukraine since entering the country in 1999, €74.5m of it since the start of Russia’s invasion in February 2022. CRH Central and Eastern Europe president Guillaume Cavalier noted the double role of locally-produced cement in generating employment and state revenues.

Cavalier said "Investing in the expansion of production now is crucial to ensure the potential growth of the Ukrainian cement market following its integration into the EU."

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.

Poland: The Association of Polish Cement Producers has expressed increasing concern over quadrupled year-on-year growth in cement imports from Ukraine, to 330,000t in 2023.

Zbigniew Pilch, the head of the association, highlighted the contrasting rise in imports and 12% fall in domestic production, to 16.6Mt. He said “The scale of imports from Ukraine is growing almost every month, reaching nearly 50% of total imports in January 2024. These volumes are deeply concerning.”

A primary issue raised by the association is the difference in environmental regulations faced by Ukrainian and Polish cement producers. The association argues that Ukrainian producers are not subjected to as rigorous climate policies as Polish producers, leading to an uneven playing field. Additionally, the localised nature of the cement market means eastern Polish producers are particularly affected by the ‘influx’ of Ukrainian cement.

Ukraine: The Ukrainian government has approved the construction of the €35.6m Galicia building materials complex in Kalush, Ivano-Frankivsk Region. The complex will include a cement plant. Business World News has reported that the government expects the Galicia complex to generate 1000 new jobs.

Italy: Buzzi recorded consolidated sales of Euro4.32bn in 2023, up by 8.1% from Euro4.32bn in 2022. This came in spite of a 7% year-on-year drop in the company’s cement sales volumes, to 26.3Mt. In its domestic market of Italy, Buzzi raised its sales by 13% to Euro818m. In the US, sales grew by 9.5% to Euro1.74bn, in Mexico by 33% to Euro1.03bn, in Germany by 9.2% to Euro872m, in the Czech Republic and Slovakia by 1.8% to Euro205m, in Poland by 11% to Euro157m and in Ukraine by 43% to Euro85.6m. On the other hand, Buzzi’s sales fell by 5.6% in Luxembourg and the Netherlands, to Euro214m, by 2% in Russia to Euro285m, and by 1.6% in Brazil to Euro394m.

The company said “The increasingly evident effects of monetary restriction, the worsening of consumer and business confidence, and the uncertainties dictated by the growing geopolitical tensions in Ukraine and the Middle East continue to weigh on the international economic framework. In fact, in the last part of 2023, global economic activity weakened further, with international trade contracting in the third quarter.”

Ukraine: The Antimonopoly Committee of Ukraine (AMCU) has launched an investigation into Ireland-based CRH's acquisition of certain Central-Eastern European assets of Italy-based Buzzi Unicem. The assets in question include two Ukrainian cement plants. The AMCU will assess the potential impacts of the consolidation on the cement market in Ukraine. The parties concluded the deal in June 2023, and expected to conclude it in September 2024. The AMCU first rejected CRH's application to it in September 2023, but subsequently agreed to reopen its examination of the deal in October 2023.