Italian cement producer Buzzi, through its subsidiary Dyckerhoff GmbH, has reached an agreement to sell part of its business in Eastern Europe to CRH, a leading provider of building materials solutions, for EUR0.1 billion, according to an official website on Tuesday.
As clarified in the release, the deals include a business in Ukraine and assets for the production of ready-mix concrete in Eastern Slovakia. Completion of the deal in Ukraine depends on obtaining the necessary regulatory approvals and is expected in 2024.
Buzzi Unicem SpA (Italy) combines businesses producing cement, concrete, sand, crushed stone, etc. The main activity of the group is the production of cement, which is produced in its own enterprises in Germany, the USA, Luxembourg, the Czech Republic, Poland, Russia and Ukraine. Dikerhoff Cement Ukraine PJSC, the Ukrainian branch of Buzzi, has branches set up at Volyn-Cement (Zdolbuniv, Rivne region) and YuGcement (Olshanske, Mykolaiv region) plants. The group also operates in the ready-mix concrete sector in Kiev, Odessa and Nikolaev.
Buzzi operates six ready-mix concrete plants in Eastern Slovakia.
It was reported in March 2023 that Italian cement producer Buzzi Unicem was listed by the National Agency for Prevention of Corruption (NAPC) as an international sponsor of war. Buzzi operates in Russia through OOO SLK Cement, which owns two cement plants, Sukholozhskcement and Korkino, a terminal in Omsk and the transport company Cemtrans. According to the NAZK, the company is one of the five leaders of the Russian cement industry.
Irish CRH Plc, the largest manufacturer of building materials in the world, in Russia owned six plants of building mixes, announced its withdrawal from the Russian market.
CRH entered the market of Ukraine in 1999, acquiring Kamenets-Podolsky cement plant in Khmelnitsky region. At the moment CRH also includes Odessa cement plant and Nikolaevcement (Lvov region).
A separate direction of CRH business in Ukraine is the production of concrete and reinforced concrete products. PoliBeton Energo’s Bila Tserkva Concrete Plant is a specialized enterprise that produces supports for power transmission lines. The PoliBeton concrete unit in the north of Odessa joined CRH in 2020.
Cement production in Ukraine in 2022 decreased by 51% compared to 2021 – to 5.4 million tons, while its consumption was 35% of the indicator of the previous year, according to the association “Ukrcement”.
“Eight enterprises of the Association in 2022 produced cement strategically important for the country, which was primarily used on important construction sites of defense value. The decline in cement consumption led, respectively, to a decrease in production. At the same time, January 2022 was a record for cement production in the last six years”, – said Liudmila Krypka, executive director-head of the scientific and technical information department of the association “Ukrcement”.
According to her, export of products to the European Union helped slow down production decline. For example, cement exports for the year decreased by only 3.7% and amounted to 935 thousand tons, while imports decreased 14.8 times to 39 thousand tons.
In the structure of imports last year, 46.5% were ordinary cements, 41.6% – white cements, 10.9% – other hydraulic cements, 1% – alumina.
“The dynamics of cement exports 2022 indicates that the Ukrainian producers have fully provided the domestic market and continued to support their production with deliveries to other countries, mainly to the EU,” – said the expert.
In turn, Ukrainian companies in 2022 produced 16 types of cement, among which the most popular were cements with slag. At the same time manufacturers continue searching for ways to increase the efficiency of Portland cement while reducing the share of clinker, which is one of the main factors of reducing CO2 emissions, emphasizes Krypka.
The association is also considering using shredded construction waste from demolished buildings (linoleum, carpets, polyethylene, rubber, wood, plastic, roofing felt etc.) to burn in cement kilns as an alternative fuel, which can reduce the need for energy.
Last year “Ukrcement” in cooperation with SE “GosdorNII” published “Album of standard designs of rigid road clothes”, which contains information on variants of road clothes taking into account the category of roads, region, soil, technology.
“Road construction is a material-intensive production with a high proportion of the cost of raw and basic materials. Lack of bitumen forces us to switch to the best practices and domestic construction materials. Detailed characteristics of each construction are collected in the album, as well as technologies of restoration or strengthening of road with cement concrete”, – points out the executive director of the association.
Association “Ukrcement” was created in January 2004 by reorganization of Ukrainian concern of enterprises and organizations of cement and asbestos cement industry “Ukrcement”.
The volume of domestic cement consumption in Ukraine by late 2021 may reach 10 million tonnes for the first time since 2014, Head of the Ukrcement association Pavlo Kachur has said.
“We have production data for nine months, and we can predict with slight optimism that this year, for the first time since 2014, we will move to more than 10 million tonnes of cement consumed in the domestic market. If there are no emergencies, we will reach 10.5 million tonnes,” Kachur said in an interview with Interfax-Ukraine.
According to Ukrcement, in January-September 2021, cement production increased by 15.2% compared to the same period last year. At the same time, over the past four years, the volume of the cement market amounted to 9 million tonnes per year.
“Our market capacity is small. For the last four years, it is up to 9 million tonnes per year. In Poland, comparable in terms of population, which is much smaller geographically, the volume of consumption in 2020 amounted to 18.9 million tonnes – twice as much. Therefore, we have room to grow. Our factories operate at two-thirds of their actual capacity,” Kachur said.
According to him, the increase in cement consumption is associated with a positive period in the construction market, including active road construction.
The majority of cement producers in Ukraine are forced to work with minimum margins due to the rise in coal prices by more than two times, the Ukrcement association has reported.
“The price swing for coal this year did not pass us by. The supply contracts were signed last year at an average price of $60 per tonne, and in August, suppliers agreed to ship coal at a price of at least $175 per tonne. This creates significant pressure on the pricing policy. It is impossible to make cheap goods out of expensive components,” Chairman of the Ukrcement association Pavlo Kachur said in an interview with Interfax-Ukraine.
According to him, the cost of energy is 52-55% of the cost of clinker required for cement production. At the same time, all Ukrainian cement plants have previously been modernized and switched to coal due to the high price of gas.
The situation with the rise in prices for cement in Ukraine due to the rise in prices for coal is not unique and is observed in the markets of other countries, Kachur said.
“For example, Turkish cement producers sharply raised cement prices in July due to the rise in the cost of coal. We proceeded from the fact that we must take into account the needs of consumers. Therefore, some companies significantly minimized margins in order to go through this difficult period with minimal costs for cement plants and the construction market as a whole,” he said.
The introduction of antidumping duties on imports of Turkish-made cement may lead to an increase in prices for Ukrainian products by 50%, as well as lead to an increase in prices for repairs, housing, construction of infrastructure facilities, former state commissioner of the Antimonopoly Committee of Ukraine (AMCU) and founder of the League of Antitrust Ahia Zahrebelska said.
“Two years ago, the Ministry of Economy has already introduced duties on Russian, Belarusian and Moldovan cement, as a result of which the price for Ukrainian cement has grown to 40%. After the introduction of duties on Turkish cement with a simultaneous rise in the price for energy resources, the price may rise by another 50%, “she wrote on Facebook.
So, with an increase in cement prices, the budgetary costs for construction of roads, infrastructure projects under Big Construction will increase, the cost of real estate, the prime cost of which includes the cost of cement, as well as individual repair work using cement will increase, the expert said.
According to Zahrebelska, the share of imports in the Ukrainian cement market is only about 10%, but this creates competitive pressure on Ukrainian producers and restrains the growth of their prices. At the same time, the next introduction of import duties will allow large national producers to increase prices for their products.
The expert notes that the AMCU previously sent recommendations to PrJSC Kryvy Rih Cement, PrJSC Mykolaivcement, PJSC Podilsky Cement, and PrJSC Ivano-Frankivsk Cement, which occupy 90% of the market, not to raise prices in anticipation of antidumping measures. At the same time, Zahrebelska points to a significant increase in prices and profits of enterprises after the introduction of duties on imports of cement from Russia, Belarus and Moldova.
According to her, the League of Antitrust (NGO Union for the Protection of Competition and Consumers) has prepared an appeal to the AMCU regarding monopoly high prices for cement.
“The League of Antitrust is convinced that the Antimonopoly Committee can stop the manipulations if it starts investigating violations in the actions of the cement association members and stops the unreasonable rise in prices observed in recent years,” the organization said in the appeal.
Ukrcement proposes to exclude from the agreement on a free trade zone (FTA) with Turkey commodity items that are fully provided by its own manufacturer, head of the Ukrcement association Pavlo Kachur told the Interfax-Ukraine agency.
“The signing of an agreement on a free trade zone with Turkey for the cement industry poses a serious threat. We have transferred our position to the Ministry of Economy and the trade representative of Ukraine,” Kachur said.
The expert emphasized the need for a particularly balanced government policy in the context of the global economic crisis, so that under the slogans of free movement of goods not to lose their own manufacturer and not to leave tens of thousands of Ukrainians without work.
“The established production capacity for the production of cement in Turkey is 140 million tonnes of cement per year. In Ukraine, this figure is more than 10 times less. Turkey’s own cement consumption is about 60 million tonnes. This means that an importer with such capacities that Turkey has, playing with price policy, can easily destroy the production of cement in Ukraine,” said Kachur.
He emphasized the effectiveness and efficiency of the Big Construction program in the fight against the crisis.
“This program has become a lifeline for the entire construction industry during the global economic crisis. In the event of the signing of an FTA agreement with Turkey, the funds allocated from the budget of Ukraine, the funds of Ukrainian taxpayers, will support the producers of the neighboring state, instead of supporting their own,” he said.
He stated that the cement industry in Ukraine is able to fully provide consumers with high-quality cement that is competitive in the European market.
“The cement industry is developing and modernizing. Billions of dollars are invested to maintain high quality products, reduce emissions, reduce CO2 emissions. In March 2021, the cement plant in Balakliya resumed clinker firing, the kilns of which were shut down by the former Russian owners for ten long years. This will further strengthen the ability of the cement industry of Ukraine to provide its own market with cement,” Kachur summed up.
The head of the Ukrcement association expressed hope that the manufacturers’ arguments will be heard.
In September 2020, the Interdepartmental Commission on International Trade launched an investigation into the import of Portland cement and clinker cement from Turkey to Ukraine.
The import of these items in 2019 increased nine times, and according to the results of January-August 2020 – 13 times compared to the same period of the previous year.
According to the State Statistics Service of Ukraine, in 2020 the volume of exports to Turkey decreased slightly – to $2.436 billion (by 7% compared to 2019), imports increased slightly – 2.415 (by 2.5%).
