Ukrainian cement and concrete producers are capable of increasing capacity to cover reconstruction needs under any scenario, according to the results of a survey of cement producers and consumers conducted by Ukrainian research agency Consumer Business Research (CBR).
"The study showed that even in a situation of strong uncertainty, like now, with reduced international funding and extremely limited resources of the Ukrainian budget, cement producers and consumers are ready to quickly restore and expand capacity, ready to invest to meet the demand for reconstruction," CBR researcher Tetyana Sytnyk told a meeting of the Confederation of Builders of Ukraine during a presentation of the results.
Cement production fell significantly in Ukraine in 2022 following the Russian invasion due to a decrease in domestic consumption, dropping from 5.4Mt compared to 11Mt in 2021. However, in 2023-2024, production stabilised and 7.4Mt and 7.97Mt were produced respectively. Moreover, according to the surveyed experts, the volume of 8Mt is the maximum value while the conflict continues. After its end and with the beginning of reconstruction, peak cement production may reach a maximum of 12Mta with three to four years of reconstruction.
However, questions remain among industry professionals as to whether there will be sufficient cement to meet those reconstruction challenges, given that forecasts were based on a 2022 study conducted by the State External Expertise Service that there would be enough money for reconstruction and the entire process would take three years, according to Pavlo Kachur, head of Ukrcement.
"Such calculations assumed a shortage of building materials, in particular cement. But now the trade union is assessing the tasks for the industry in light of the experience of three years of war and predicting that reconstruction will begin primarily with demining, strengthening the demarcation line, and restoring energy facilities. We will reach large-scale construction in about the third or fourth year," he commented to the Interfax-Ukraine news agency.
Mixed picture
Utilisation of cement plants across the country is uneven; while plants in western Ukraine have better utilisation those in the south and east of Ukraine are operating at a reduced rate. In 2022, cement plants operated at a loss, production volume did not cover fixed costs, but the enterprises retained personnel. In 2023, they reached break-even operation with increased production volume.
Although prices rose by 20 per cent in 2023 and 10 per cent in 2024 this remained in line with inflation. According to the survey, cement consumers are satisfied with both the quality and price of the cement.
Two-thirds of the surveyed cement consumers reported that they increased production in 2023, 20 per cent returned to pre-war production volumes, there were even those who exceeded (concrete for infrastructure facilities). However by 2024, at the time of the survey, the mood of cement consumers was more restrained: they identified risks of reduction due to instability of state funding.
Modernisation
Ukrcement’s Kachur noted that cement consumption noticeably declined in 2023 given that large-scale protection and restoration projects depend on state funding, and civilian developers at this stage are not ready to resume activity in full. Projects in residential and commercial real estate have also significantly decreased compared to pre-war indicators. One factor in this is a need for new specialists to be trained and replace those who have been mobilised and relocated as part of the war efforts.
Moreover, there is a need to invest in the modernisation and expansion of facilities, albeit building completely new plants might not be feasible before reconstruction begins. The plants of Kryvyi Rih and Ivano-Frankivskcement (Ifcem) are already undertaking upgrade projects that should increase production capacity by a combined two million tonnes, while modernisation of the Baltsem (which before the war had a capacity of 4Mta) and Kramatorsk Pushka (which was seized by the Ukrainian government and nationalised last year) plants is also possible, the study says.
"Cement companies are ready to quickly invest in modernisation and launch additional kilns when reconstruction begins in order to be the first to respond to the market. Companies are waiting for signals to start expansion. This could be news about the allocation of funds for reconstruction and/or demand reaching the level of 9.5Mt," Sytnyk explained.
Foreign competition
Presently, Ukraine does not import any cement and its exports market is credited with saving the industry, although Poland has expressed concerns about the impact on its own domestic cement production.
“Before the war, in 2021, total cement exports were about 56,000t, and in 2024 - 1.7Mt, that is, about 15 per cent of what we produce - this is a large share. We constantly tell our neighbours: "As soon as Ukrainian consumption rises, the situation will change dramatically, it will be more profitable for us to transport cement to construction sites in Ukraine, and the issue of imports becomes relevant," said Kachur.
The CBR study states that, provided that reconstruction projects are predominantly financed by EU funds, there is a high probability of increasing cement imports from Europe, primarily for infrastructure projects.
However, Kachur emphasised the need to protect Ukraine’s industry first and foremost. “The Ukrainian market (during the recovery stage) should be as localised as possible with domestic products and accessible only to countries that supported us during the war. Because we must apply strict measures to protect our market to countries that support the aggressor country during the war, but want to join the reconstruction,” he said.
