This week UkrCemFor 2019 got underway in Kyiv to focus on developments in Ukraine's cement sector. While the domestic industry is well supported by the four multinational producers Eurocement, CRH, Dyckerhoff (Buzzi Unicem group) and HeidelbergCement as well as Ukraine's Ivano-Frankivskcement, it has been under great pressure from increasing imports.
Imports into Ukraine have steadily increased. Belarus was the largest supplier of foreign cement into the country in 2018, accounting for 58.6 per cent of total imports. Moldova's import share reached 38.2 per cent of Ukraine's total cement imports while Russia accounted for 3.4 per cent.
In view of the recovery of Ukraine's cement sector, the government is keen to support the industry. Following an investigation into cement dumping, which started in July 2018, Ukraine's interdepartmental commission for international trade (MKMT) introduced antidumping duties on clinker and OPC. Russian cement will now be subject to a duty of 115 per cent, a step that can be seen as part of a larger trade war with Russia. Levies were also placed on imports of cement and clinker from Belarus (57 per cent duty) and Moldova (94.5 per cent duty) and these duties will be in place for five years.
Domestic production
Meanwhile, Ukraine's domestic industry is making strides to boost its cement output. In January-March 2019, the country's cement production increased by 23 per cent when compared to the same period in 2018, according to Executive Director of the Ukrcement Association, Roman Skylsky.
"In the first quarter of 2019, the growth of the construction market was already 24 per cent, and cement production rose by 23 per cent. Exports grew by 66 per cent, imports by 2.8 times. These figures will obviously change after the introduction of a number of restrictive measures by the Ukrainian government regarding imports from neighbouring markets," he said.
The recent rise in domestic production is also supported by the latest data from the State Statistics Service (SSS) on cargo transportation in the country. Between January-March 2019 the SSS reported that transport of construction materials rose by 24 per cent and cement deliveries on rail increased by 10.9 per cent.
This marks a turnaround when compared to 2018. According to Roman Skylsky, domestic cement output in 2018 decreased by 4.5 per cent to 8.926Mt, which is associated with a slight drop in demand and the limited capacity of railway logistics, which accounts for 65 per cent of all cement transportation. Five out of seven dry clinker production lines were in operation, while five of 17 wet-process clinker lines were working in 2018 in Ukraine. The industry also had 43 of the 53 existing cement mills in operation.
"The year of 2018 showed a rise in clinker production by 4.3 per cent [to 7.428Mt], which means that producers have the reserves and resources to produce goods, but they decide not to manufacture final products due to a drop in demand or logistic restrictions on the delivery of goods to end consumers," Mr Skylsky explained.
HeidelbergCement's Ukraine divestment
The pick-up in the domestic cement sector, it has not deterred HeidelbergCement to sell off its Ukrainian assets, including the integrated plants of Kryvyi Rih (1.5Mta) and Amrosiyivka (2.1Mta), as well as the Dniprocement (0.6Mta) grinding unit.
On 14 May Cyprus-based Overin Ltd, associated with Ukrainian investment company Concorde Capital, became the owner of a 99.8 per cent controlling stake in PrJSC HeidelbergCement Ukraine.
The disposal is part of a wider portfolio optimisation of HeidelbergCement, which has seen EUR220m of disposals in 1Q19 and include a minority stake in Morocco and the El Minya plant in Egypt.
To read further on Ukraine's cement industry, see ICR's interview with Pavlo Kachur to preview the UkrCemFor 2019 international cement conference in ICR's April 2019 issue.