Russia’s biggest producer of the building material, Eurocement has cut its official prices around Moscow by as much as seven per cent, with the financial crisis is reportedly dampening construction growth.
According to Bloomberg, the company lowered the price to RUB4200 (US$160) a ton on the 9th October. Russia’s worst financial crisis since the 1998 default has reportedly dampened a construction boom, putting pressure on building materials makers.
Eurocement, which controls 50 per cent of Moscow’s market and about 30 per cent across Russia, set an average price of RUB3402per ton in August, the last data available. Basel Cement, a unit of Russian billionaire Oleg Deripaska’s Basic Element, may match Eurocement’s move to cut prices, marketing chief Denis Usoltsev is also reported as saying.
Falling demand by local construction companies is the biggest factor pulling down on prices, said Usoltsev. Residential construction in Moscow fell 51 per cent to 1.16Mm2 in the first half compared to the same period last year, Russia’s Federal Statistics Service reported in August.
The current market situation is also being aggravated by rising cement import levels.First-half year import volumes to Russia increased to 4.7Mt, according to Russia’s Federal Customs Service compared to just 250,000t in the same period of 2007."
We are seeing a convergence of negative factors as excess supply from Europe and elsewhere has flooded the Russian market, and the financial crisis is now beginning to strain the economy," said Mikhail Kiselyov, deputy head of Soyuzcement, a trade association of Russian cement makers.
Under current conditions, the majority of about 70 new projects to develop cement production in Russia are likely to be shelved or delayed, said Kiselyov. Russia’s production of the material may also decrease to 55Mt this year from 59Mt the previous year, he said. Russian developers have abandoned or scaled back projects as the global credit squeeze pushed Russian loan rates to as much as 25 per cent. Austrian builder Strabag, 25 per cent owned by Deripaska, cancelled plans last month to establish a cement unit in Russia.