Domestic cement and concrete producers are able to increase their capacity to meet the needs of recovery in any scenario, according to a survey of cement producers and consumers conducted by CBR last year.
“The study showed that even in a situation of high uncertainty, as it is now, with reduced international financing 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 recovery demand,” said CBR researcher Tatiana Sytnyk at a meeting of the Confederation of Builders of Ukraine during the presentation of the results.
Cement production has partially recovered since 2023, but consumption is heavily dependent on government funding
According to the CBR study, in 2022, cement production fell significantly due to a decline in domestic consumption – to 5.4 million tons compared to 11 million tons in 2021. However, in 2023-2024, production stabilized, reaching 7.4 million tons and 7.97 million tons respectively. Moreover, according to the interviewed experts, the volume of 8 million tons was the maximum value during the war. After the war is over and the recovery begins, peak cement production can reach a maximum of 12 million tons, but the industry will reach this level in the third or fourth year of recovery.
The main question being discussed by the professional community is whether there will be enough cement to meet the challenges of recovery. It was made more acute by a study conducted in 2022 by the State Foreign Expertise Service, which was based on an optimistic scenario that assumed that there would be enough money for the recovery and that the entire process would take three years, said Pavlo Kachur, chairman of Ukrcement.
“Such calculations assumed a shortage of construction materials, particularly cement. But now the trade union community is assessing the challenges for the industry, taking into account the experience of three years of war and predicting that the recovery will begin primarily with demining, strengthening the demarcation line, and restoring energy facilities. We will start large-scale construction in about the third or fourth year,” he commented to Interfax-Ukraine.
Currently, cement plants are unevenly utilized: facilities in western Ukraine have better utilization, while those in the south and east have worse utilization. In 2022, cement plants operated at a loss, with production not covering fixed costs, but the companies retained their staff. In 2023, they reached break-even operations, as production allowed them to cover fixed costs.
As for cement consumers, the study surveyed producers of concrete, aerated concrete and other building materials representing businesses of various sizes, from small to large businesses, from all regions.
“The study showed that our cement is quite acceptable for producers in terms of quality and even price. It rose in price by 20% in 2023 and by 10% in 2024, in line with inflation,” Kachur said.
Two-thirds of the surveyed cement consumers reported that they increased production in 2023, 20% returned to the pre-war production volume, and there were even those who exceeded it (concrete for infrastructure facilities). However, a year later, in 2024, when the survey was conducted, the mood of cement consumers was rather restrained: they identified the risks of a reduction due to the instability of government funding.
The industry is ready to invest in modernization
According to Kachur, in general, the market experienced a slight decline in cement consumption in 2023, as large-scale protection and restoration projects depend on government funding, and civilian developers are not ready to resume full activity at this stage. Thus, residential and commercial real estate projects have significantly decreased compared to pre-war levels. The expert also called the issue of human resources critical for the industry. New specialists need to be trained to replace mobilized and relocated industry employees.
“This (training, design, and fundraising) will take some time, which will be enough for cement producers to fill the market. First of all, to invest in modernization and expansion. In particular, there are already two ready-made projects for the construction of new kilns to meet the highest modern requirements in Kryvyi Rih and Ivano-Frankivsk and the resource of the Baltsem plant (before the war, it produced about 200 thousand tons of cement with a capacity of 4 million tons),” he said.
The study notes that it is unlikely that completely new plants will be built, but a year is enough to modernize the kiln. It is estimated that at least two plants will launch additional furnaces, which will produce 2 million tons. For example, Kryvyi Rih Cement has already received a special permit to develop the Maryansky limestone deposit (60 km from the plant) and has a plan to build a kiln in the quarry itself to produce clinker. Modernization of the Kramatorsk-based Garmata (nationalized) and Balakliya (Baltsem) plants is also possible.
“Cement companies are ready to make rapid investments in modernization and launch additional kilns when the recovery begins to be the first to respond to the market. The companies are waiting for signals to start the expansion. This could be news about the allocation of funds for recovery and/or demand reaching the level of 9.5 million tons,” explained Sytnyk.
Domestic cement competes on equal terms with European cement
Among the reserves for the critical high demand for recovery, experts also mention the possible return of cement imports to Ukraine. Currently, Ukraine does not import but exports this product.
“We must honestly admit that during the war, exports actually save our industry. Before the war, in 2021, total cement exports amounted to about 56 thousand tons, and in 2024 – 1.7 million tons, which is about 15% of what we produce, which is a large share. We are constantly telling our neighbors: “As soon as Ukrainian consumption picks up, 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 will become relevant,” Kachur says.
The CBR study states that if reconstruction projects are mainly funded by the EU, there is a high probability of an increase in cement imports from Europe, primarily for infrastructure projects.
The expert recalled the possible risks for the industry at this stage, as there is an overproduction of cement in the world today. Therefore, most developed countries can fully cover all the needs of recovery projects, which can harm domestic producers.
“I want to voice my position publicly: the market (at the recovery stage) of Ukraine should be localized as much as possible with domestic products and available only to countries that supported us during the war. Because we have to apply strict measures to countries that support the aggressor country during the war but want to join the recovery to protect their market,” Kachur emphasized.
