With an 11% growth in cement consumption in 2010 and a further 12% growth expected for 2011, cement producers in the countries of the former Soviet Union have been able to forget about the dramatic events of 2009, when there was a reduction of more than 20% in the consumption of cement in the region. The countries’ vast infrastructure development and housing needs are to be addressed by the governments in the near future, which should boost per capita cement consumption in most of the CIS countries. In anticipation of growing demand, local producers are busy raising their cement production capacities and also investing in the sustainability of their plants.
Russia, Ukraine, Kazakhstan, Belarus, Uzbekistan, Azerbaijan, Moldova, Turkmenistan, Georgia and Armenia are former Soviet Union countries sharing numerous links, with a total population of more than 260 million and a total area of 22 million square kilometres. In both 2006 and 2007, the annual increase in the monetary value of cement consumed in these countries was close to 80%, reflecting a steep rise in cement prices and an ongoing construction boom in these countries. In 2008, the increase in the combined value of the cement markets in the region slowed to 6%, and this was followed by a steep, almost 50%, contraction in the CIS cement market, a result of tumbling prices and falling demand.
In terms of volume, the combined consumption of cement in the ten countries grew at an AAGR of 14% between 2003 and 2007 and reached a peak of 100 million tonnes in 2007. This was followed by a slight, less than 1%, reduction in 2008. During the following year, the majority of cement producers in the region witnessed a dramatic reduction in demand for their produce, with the steepest declines seen in Russia and Ukraine, the two largest CIS cement markets, as well as Moldova. On the other hand, countries such as Uzbekistan and Turkmenistan proved resilient to the global downturn and saw their cement consumption grow by 25% or more that year. Overall, total consumption of cement in the ten former Soviet Union countries has fallen by almost a quarter. Demand in the region was satisfied mostly by produce from local plants, along with additional supplies from countries such as Turkey and China.
The cement markets in the region recovered in 2010, with a nearly 11% year-on-year increase in combined consumption for the whole year. This will be followed by an even more substantial increase of 12% in 2011 and an 8.5% growth in 2012, which will be prompted by the numerous projects carried out as part of the preparation for key events to be held in the region, such as the 2014 Sochi Winter Olympics, as well as the implementation of ambitious road infrastructure and housing development programmes rolled out by the governments, especially in the countries rich in natural resources such as Russia and Kazakhstan. As a result, combined cement consumption in the region should exceed 100 million tonnes as soon as next year.
Until 2008, cement production in the ten countries in question grew by more than 10% each year, as cement plants strove to meet growing demand. As a result, output in 2007 exceeded the figure observed four years before by more than 50%. In 2008, however, the 90 cement plants operating in the region reduced production levels to just over 90 million tonnes – with Russia accounting for 60% of total output – in order to adjust to the more modest demand for, and increased imports of, cement to the region. This was followed by an 18% reduction to fewer than 76 million tonnes in 2009, as construction activity declined substantially across the CIS. The growth in cement production was resumed, at 10%, in 2010 and in the current year production will keep pace with cement consumption and grow by 12%.
In anticipation of increased demand in the future, cement producers have – sometimes with government support – embarked upon numerous cement production capacity upgrade projects. By and large, the goal is to replace imports of cement with domestic production, and possibly increase export volumes at the same time. This strategy, applied simultaneously in several countries, could, however, lead to cement overcapacity in the CIS region in the next few years.
This press release is based on information contained in the latest PMR report entitled “Cement market in the CIS countries 2011 – Development forecasts for 2011-2014”.