Production Recovery and Market Consumption
In 2022, Ukraine's cement production fell sharply to 5.4 million tons due to the decline in domestic consumption, nearly halving from 11 million tons in 2021. However, in 2023-2024, production gradually stabilized and increased, reaching 7.4 million tons and 7.97 million tons respectively. The maximum production capacity during the war can reach 8 million tons, while the cement production during the peak period of post-war reconstruction is expected to reach 12 million tons, but this will take time and is expected to be achieved in the third or fourth year of reconstruction.
At present, cement consumption is closely linked to state funds. In 2023, despite the recovery of production, consumption growth was fatigue, mainly relying on large-scale protection and recovery projects supported by government funds. Civil developers have not yet fully resumed their activities, resulting in a significant reduction in the number of residential and commercial property projects. In addition, labor resources are also a key issue facing the industry, and new employees need to be trained to replace the mobilized and migrated employees.
Market competition and import risks
Ukrainian cement is attractive to producers in terms of quality and price. The price of cement will rise by 20% in 2023 and 10% in 2024, which is comparable to inflation. Nevertheless, there are still uncertainties in the market, especially the instability of state funds. In terms of
market competition, there is a potential competitive relationship between Ukrainian cement and European cement. At present, Ukraine's cement export volume has increased significantly, reaching 1.7 million tons in 2024, accounting for 15% of the total output. However, if reconstruction projects rely mainly on EU funds, European cement imports may increase, especially in infrastructure projects. This will pose a threat to domestic cement producers, as there is a global overcapacity in cement and many developed countries have the capacity to meet the demand for reconstruction, which could hit the Ukrainian cement industry.
Industry Investment and Modernization
Despite the challenges, Ukraine's cement industry has demonstrated a strong willingness to invest and potential for modernization. Two new kiln construction projects are ready, one in Krivoirog and the other in Ivano-Frankivsk, with the highest modern standards. In addition, the Balcem plant also has resource potential, with pre-war production of about 200,000 tons and capacity of 4 million tons. The
kiln modernization can be completed within a year, and at least two plants are expected to start additional kilns, adding 2 million tons of capacity. For example, "Krivoirog Cement" has been granted special permission to develop the Maria nske limestone deposit and plans to build kilns in the quarry to produce clinker. In addition, the Pushka plant in Kramatorsk (nationalized) and the Balcem plant are likely to be modernized.
Cement companies are ready to invest quickly in modernisation and the start-up of additional kilns when reconstruction begins, in order to respond to market demand at the first opportunity. They are waiting for the signal that the reconstruction will start, such as the news of the allocation of funds or the demand reaching the level of 9.5 million tons.
Localization and market protection
In the context of the current global cement overcapacity, the Ukrainian market is expected to be localized as much as possible during the reconstruction phase, giving priority to domestic products and opening up only to countries that supported Ukraine during the war. For those countries that supported Russia during the war but now wish to participate in the reconstruction, strict market protection measures may be implemented to ensure the sustainable development of the domestic cement industry.
To sum up, Ukraine's cement industry has shown some resilience and potential in the process of reconstruction, but it also faces challenges such as capital instability, labor shortage and import competition. By investing in modernization, expanding production capacity and implementing market protection measures, the industry is expected to remain competitive and sustainable while meeting domestic reconstruction needs.
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