Rising imports pressurise Russian cement producers

Cement imports to Russia are steadily growing. Belarus and Iran have been increasing supplies and local cement producers have seen their market shares fall and come under pressure. The situation for Russian cement manufacturers is expected to become more acute as cement consumption is likely to decline in 2024, forcing some to increase exports.

According to a report by Daria Martynkina, executive director of Russia's cement association, Soyuzcement, cement imports rose to 3.4Mt in 2023, up from 2.2Mt in 2022 and could grow to 5Mt in 2024, which represents a 47.1 per cent increase YoY. This would see the share of imports in Russia's cement consumption rise to 7.7 per cent of the 65.35Mt of domestic consumption – the highest share of imports in recent years. Since 2018, this share has hardly exceeded 3.6 per cent, although in 2023 it increased to 5.2 per cent.

Cement imports expected to continue to rise

Belarus is the main cement importer to Russia, accounting for 2.47Mt or 72.7 per cent of Russian imports in 2023. Iran's share increased from 6.5 per cent in 2021 to 16.7 per cent in 2023, amounting to 564,000t (see Table 1).

Simultaneously, other major importers have significantly reduced their dispatches to Russia. Ukraine supplied 7.2 per cent of imports in 2021, Kazakhstan’s deliveries fell from 12.5 to 9.5 per cent and Turkey reduced its supply from 4.7 to 1.24 per cent, as post-earthquake reconstruction efforts diverted cement supplies to Turkey's domestic needs.

Analysts believe the increase in imports from Belarus and Iran can be explained by an excess of domestic production and their need for roubles. Furthermore, the Belarus economy is tied to Russia, while Iran increasingly exports to Russia as it faces international sanctions from the West. In addition, the cost of cement production is significantly less in Iran compared to Russia. Supplies from Iran primarily affect the south and north Caucasus region, where products are delivered across the Caspian Sea to Makhachkala and Astrakhan.

Meanwhile, imports create risks for Russian business, claims Soyuzcement. According to its data, Russian cement capacity is currently 76.8Mta while the design capacity is 104Mta, but in reality cement production only reached 63Mt last year. Local producers have seen their market share declining, primarily from Belarussian imports in central and southern regions, where the share of imports has increased from 8.9 to 10.7 per cent. Soyuzcement experts and producers have declared that this is causing businesses to reduce investments in Russian cement production capacity. 

Russian cement consumption falls

Soyuzcement forecasts cement consumption in Russia to fall by 1.5-2 per cent this year. The situation is complicated by the composition of individual housing construction in Russia, which tends not to contribute to an increase in cement consumption, as the use of cement in in the country's residential construction is relatively low. 

Soyuzcement analysts also draw attention to the decline in cement demand in the Russian construction industry in general, as this material is replaced by newer technologies. According to market data, cement consumption per m³ of concrete is reduced by 2-3 per cent per annum, due to an increase in the share of additives and other minerals.

While most producers and analysts do not expect a sharp drop in Russia's cement consumption, as the existing state support measures continue to stimulate demand for new buildings, there are serious problems in terms of logistics. The central part of Russia saw cement consumption drop by seven per cent YoY in May and by eight per cent for 2023.

Russian cement producers could be dumping cement in Ukraine

Soyuzcement does not see conditions improving amid the high Central Bank interest rate and the reduction in mortgage issuance volumes. Furthermore, Russian producers are under investigation by Ilyashev & Partners for dumping cement in Ukraine. The review has been initiated by the Interdepartmental Commission on International Trade (ICIT) on behalf of Ukrainian cement producers in light of the expiration of anti-dumping measures in June 2024. Russian cement producers are suspected of being under pressure to find an outlet for their product with the ongoing influx of cement into their country from Iran and Belarus.