BusinessCem 2009: Russian cement industry developments

BusinessCem 2009: Russian cement industry developments
Published: 20 April 2009

BusinessCem 2009, being held at the President Hotel, Moscow, Russia got off to a flying start with Mr Sedov AG, of the Russian Industry and Infrastructure department giving a good overview of the recent developments in the Russian economy and their impact on the country’s construction industry.

He said that GDP had fallen by eight per cent YoY in January-February 2009, while industrial production had dropped by about 15 per cent, with the greatest slowdown seen in the construction materials, chemicals and raw materials sectors.

Overall construction has declined by 20 per cent. Despite these gloomy statistics, he was optimistic, saying that a return to growth is expected by the end of the year, partly thanks to planned anti-crisis measures by the Russian government, including the spending in 2009 of RUB3trn on social programs, helping businesses with finance, boosting demand for local products and cutting restrictions on entrepreneurial activity.

He encouraged cement producers by saying that spending on housing construction is expected to double as the result of the package and that President Medvedev has recently stated that he wants to see annual construction rise to 1m2 per Russian citizen, over double the current rate. There are over RUB300bn in direct subsidies and guarantees for the construction sector in this year alone.

Mr Skorokhod MA, the president of Eurocement followed. He commented that in recent years, Russia had shifted away from being a net exporter of cement to being a net importer, but as a result of the global downturn, this trend appears to be reversing. According to his presentation, Russian cement demand grew by a mere one per cent in 2008 and 7.5Mt of cement was imported.

The efforts of importers to undercut the domestic market have resulted in a 61 per cent drop in price and as a result, the industry is struggling to attract investment. This is a real concern, given the fact that demand is likely to grow significantly by 2015. Mr Skorkhod indicated that current projections based on the results of the first quarter (in which 6.8Mt of cement was sold) suggest that cement consumption in 2009 will be 45Mt, down 26 per cent YoY. However, given the actions of the government, the final result could well be different.