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🔍Cement Market in Ukraine: Perspectives of Consumers, Producers, and Policymakers

A study commissioned by the Confederation of Builders of Ukraine was conducted to assess the demand for cement in Ukraine and to forecast the development of the cement market for 2023-2027.  

📊 Referring to the dynamics of the cement market over the past few years, several trends can be observed. In 2022, there was a sharp decline in construction volumes and, consequently, in cement demand. To compensate for losses, producers increased exports.  

In 2023-2024, demand recovered, particularly due to the eOselya (eHousing) program and the construction of shelters, but it did not reach previous levels. It remains significantly dependent on fluctuations in public financing. Accordingly, the reduction in public funding in 2024 led to a slowdown in growth.  

The main factor determining the baseline trend in demand for concrete and concrete products, and hence for cement, is residential construction. Individual infrastructure and non-residential construction projects may create "spikes" in demand but do not provide stability.  

💰CEMENT PRICE INCREASES AND CONSUMER RESPONSE

About 20% of surveyed cement consumers experienced a direct impact from the war (facilities were either lost or severely damaged). Other widespread issues included uncertainty, staff shortages, and rising costs.  

For most consumers, cement is an extremely critical raw material without which their businesses would come to a halt and which has no substitutes. Cement content in various construction materials ranges from 30% to 60% of the volume.  

In the case of a constant price increase, consumers will not reduce their purchase volumes. Instead, the most common strategy for adapting to price increases is passing the price growth on to the end consumer.

One possible solution could be the use of imported cement, but there are obstacles:  

❌ the need to adjust technology for imported cement and conduct tests;  

❌ high logistics costs;  

❌ uncertainty about quality.  

Some companies are also considering adopting a strategy of technological change: switching to cheaper cement grades, abandoning slag-free cement, or revising formulations.  

🚞 Another significant issue related to cement procurement difficulties is logistics.  

Railways are the primary means of transporting cement over long distances. Road transport is possible for short distances (up to 150-200 km). However, railway transport requires traction, railway capacity, wagons, as well as unloading sites or warehouses with rail access on the consumer's side.  

An interesting trend is the development of logistical capacities — competition among cement producers for the eastern region, where the largest-scale reconstruction is expected.  

When commenting on factors for choosing suppliers, consumers did not mention price, which is approximately the same for all producers. Instead, logistics costs play a more significant role, as they depend on territorial location and the possibility of railway delivery.

Consumers appreciate the opportunity to work directly with manufacturers, bypassing dealers, as this avoids dealer markups and allows for negotiating the supply of required cement volumes. Dealer services are typically used by cement consumers who lack their own logistics capacities (unloading and storage).  

FACTORS DRIVING CAPACITY EXPANSION AND MARKET ENTRY: 

✔️ prospects for reconstruction and growing demand for cement;  

✔️ availability of deposits and transparent acquisition opportunities;  

✔️ possibilities for brownfield projects.  

BARRIERS TO MARKET ENTRY:

❌ current cement supply exceeds demand;  

❌ existing market players have the capacity to meet reconstruction needs and are ready to expand their capacities if necessary. However, in the event of a sharp increase in reconstruction demand, cement plants would not be able to quickly expand capacity — launching a new kiln requires at least a year;  

❌ conservative assessment of reconstruction scales.  

🛣️One possible direction for the development of the cement industry is the use of cement-concrete technology for the reconstruction and construction of new roads in Ukraine. Currently, asphalt-concrete technology, which requires bitumen, predominates in Ukraine. However, this material is fully imported, with no domestic production. Since the onset of the full-scale invasion, its price has risen significantly, making asphalt-concrete technology more expensive.  

By switching to cement-concrete technology, it would be possible to localize the production of necessary construction materials, thereby increasing the production and sales of cement plant products in Ukraine.  

The advantage of cement-concrete roads is their longer service life. At the same time, a major obstacle to adopting cement-concrete technology is the lack of specialized equipment, technology, and trained personnel among contractors. Purchasing equipment requires investment, while training personnel demands time.

📜 The Government of Ukraine views the construction and building materials sector as one of the priorities for attracting investments and supporting investors.  

State policy plays a decisive role in the long-term development of the cement market, particularly through the development of reconstruction strategies and standards. This also includes the advancement of building standards, the establishment of state market supervision for compliance, and the attraction of investments.  

The obtained analytical data will enable the effective formulation of policies to support the building materials production sector and attract additional investments.  

CBU is open to cooperation and aims to maintain ongoing constructive dialogue for Ukraine’s future reconstruction.  

✔️ The full presentation of the second part of the study will take place at the upcoming Board of Directors of the CBU on March 11, 2025. We invite you to participate and stay informed.

The study consists of two parts. The first part was presented and discussed during the round table "Cement: Opportunities and Challenges for Producers and Consumers" in December 2023. It reflects the current state of the cement industry and the barriers hindering its development.  

👉 You can view the round table results at the following link:

https://kbu.org.ua/en/news/cement-opportunities-and-challenges-for-producers-and-consumers 

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TOGETHER TO VICTORY! 

GLORY TO UKRAINE! 💙💛