Russia's current decline in housing construction threatens to result in a significant drop in domestic cement consumption. The volume of cement consumption in the country in 2025 is expected to decrease by 10-15 per cent compared to this year's figures, predicts Denis Usoltsev,who leads the Marketing and Strategic Analysis Department at Cemros JSC, one of Russia's leading cement producers. As the mass housing construction sector is showing no growth, the hopes of the country's cement producers are now pinned on major infrastructure projects, repair work and consumer demand.

The negative trend in the cement market began after the relatively stable results of the industry for January-September 2024, when, according to the country's cement association, Soyuzcement, production increased by 3.7 per cent YoY to 50.9Mt, while consumption saw a rise of 3.3 per cent to 52.6Mt.  

Housing construction decline

According to Mr Usoltsev, market players are currently particularly concerned about the decrease in housing construction activity. At present sales of apartments in new buildings in Russia are falling, as 76Mm², or 65 per cent of the total supply of developers, remain unsold.

Meanwhile, Dataflat.ru reports that apartment sales in Russia's largest cities – Moscow and St Petersburg – have fallen by an estimated 53 per cent YoY this year, which puts a considerable pressure on cement markets in both cities. In the 1H24 a total of 276,200 residential and 7700 non-residential buildings were commissioned. 

Oksana Kozhayeva, sales director at Vostokcement, spoke with the Russian Kommersant business paper, saying that the company already expects a reduction in cement demand in the short term. Alexander Ruchyev, president of "Osnova", one of Russia's major developers, also sees conditions for a decrease in demand for cement from the construction industry of Russia, as, according to him, the volume of industrial housing construction in the country is sliding, and the implementation of large infrastructure projects is coming to an end. In his opinion, the decline will last for three to four years. Maxim Lazovsk, the owner of Dom Lazovsky, another major Russian construction company, also plans to reduce cement purchases next year by 25 per cent YoY.

The value of the Russian construction market is forecast by GlobalData to decline by 4.2 per cent in real terms in 2024, having grown by 3.5 per cent in 2023. The infrastructure market has dropped by 1.3 per cent this year.

Cement industry analysers and developers believe the cement sector is focussing on the negative experience of 2014-18, when the prolonged impact of the high key interest rate of the Central Bank led to a drop in cement consumption by 24.8 per cent over four years. In 2025-26, the effect may be comparable, while the Russian Central Bank plans a further increase of the key interest rate.

Imports are creeping up

In the meantime, cement imports into Russia remain an additional problem for cement producers. According to Soyuzcement, the import volume in January-September 2024 amounted to 3Mt, increasing by 17.7 per cent YoY.

In the far east of the country, the situation is complicated by supplies from manufacturers in China and Vietnam, which can import up to 100,000tpa of product, according to Ms Kozhayeva. At the same time, markets in central Russia are affected by supplies from Belarus, while in the south of the country, cement enters the country from Turkey and Iran. Finally, Kazakhstan has significantly increased the supplies of its cement to the markets of Urals and Siberia, which puts an additional pressure on local producers.

Plant closures and price rises expected

Local analysts predict the decrease in cement production in Russia will lead to the mothballing of a number of technological production lines. According to analyst data, cement capacity utilisation rates are currently only at 60 per cent and these figures continue to decline. The expected drop of cement consumption in Russia by at least 2-3 per cent is expected to lead to massive closures of some medium-sized cement enterprises and a significant growth of cement prices for domestic customers.

Since the beginning of the current year cement prices in Russia have already demonstrated a significant growth, which sparked serious concerns from the Russian government. Deputy Prime Minister of the Russian Federation, Marat Khusnullin, who oversees the development of cement and construction sector, earlier commented: "We are concerned that cement has risen in price once again." The price of ordinary Portland and slag cements rose from RUB8344/t (US$85.9/t) in April to RUB8357/t in May and again to RUB8699/t in June.

Published under Cement News