CEMENT INDUSTRY OF THE REPUBLIC OF BELARUSinvestinbelarus.by/docs/-31106.pdf · Cement production in Belarus 2008-2014 production volume, th.tonnes Cement Industry of the Republic

CEMENT INDUSTRY OF THE REPUBLIC OF BELARUS

Production.

The cement industry in Belarus is represented by three state-owned cement plants. Until 2012, the total

production capacity of the plants amounted to 4.5 million tonnes per year. During the last 6 years the volume of

cement production was increasing in average by 3.7% annually, despite the decline of growth rates since 2009.

In 2014, 5618.3 thousand tonnes of cement or just 66% of total production capacity was produced. The growth

rate amounted to 11.1%. As of the end of January-September, cement production in Belarus decreased

compared to the same period in 2014 by 15.4% to 627.5 thousand tonnes. The expected amount of cement

production in 2015 is around 5000 thousand tonnes.

In Belarus, three state-owned enterprises are engaged in cement production:

1. Krasnoselskstroimaterialy, OJSC – KSM (Volkovysk, Grodno area). The state share is 91% (significantly

increased since 2002, when the state share was equal to 50%), the share of other shareholders is 9% (legal

persons (958 companies, mostly represented by collective farms) and natural persons (3671))

2. Belarusian cement plant, OJSC – BCP (Kostyukovichi, Mogilev area). The state share is 100%.

3. Krichevcementnoshifer, OJSC – KCSH (Krichev, Mogilev area). The state share is 100%.

6,000

5,000

4,000

3,000

2,000

1,000

0

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

2008 2009 2010 2011 2012 2013 2014

4,218 4,3504,531

4,6044,906 5,057

5,618

3.1%

4.2%

1.6%

6.6%

3.1%

11.1%

Cement production in Belarus2008-2014

production volume, th.tonnes

Cement Industry of the Republic of Belarus

The plants are listed in the register of the

companies that occupy a dominant market

position (25% limitation of profitability).

Since its listing, the plants when pricing of the

goods supplied to the domestic market have to

include the profit that does not exceed the

specified limits to the total cost.

It should be noted that

Krasnoselskstroimaterialy was

transformed into a joint-stock

company in the 90s, two other

enterprise were incorporated in

early 2012.

Source: Uniterrate of increase, %

The structure of cement produced by typeKrasnoselskstroimaterialy, OJSC, 2014

47.3%0.1% 32.4%

20.2%Cement without additives

Sandy cement

Cement containing granulated slag

Cement containing stone screeing dust

The structure of cement produced, Belarusian Cement Plant, OJSC, 2014

Cement without additives

Sandy cement


41.2% 56.7%2.1%

The major share of cement products belongs to cement without additives. The plants also produce other types

of cement products: cement containing granulated slag, to a lesser extent, sandy cement and small share of

cement containing stone screening dust.

The structure of cement produced,Krichevcementnoshifer, OJSC, 2014

Cement without additives

Sandy cement


portland-cement asbestos

31.4%

0.1%62.3%

1.2%


The layout chart shows the plants that use cement in their production process, as well as those that

manufacture products needed for cement production. The plants are situated close to each other, which

reduces time and transport costs.

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

2010 2011 2012 2013 2014

Cement production in Belarus, 2008-2014

Exports of cement, USD thousand

Cement .............................. 6.5 mln tonnes

Building lime ...................... 0.7 mln tonnes

Ferroconcrete and concrete

products and structures: ....... 6.1 mln m³

Products of industrial

house-building ...................

(panel housebuilding plant, integrated home-building factory)

Ready-mixed concrete

and mortars ........................ 5.8 mln m³

Asphalt concrete ................. 9.2 mln m³

Dry building mixes .............. 0.7 mln tonnes

Lime-sand brick .................. 0.6 bln pieces

Cellular concrete blocks ....... 4.4 mln m³

Expanded clay concrete

blocks ................................ 0.4 mln m³

Asbestos cement products ..... 33.6 mln m²

(slate and other things)

Capacity, 2015

3.2 mln m² of housing

Polotsk

Novopolotsk

Vitebsk

Braslav

Druya

GorodokObol

Ruba

Postavy

Glubokoye

Lepel

Novolukoml

Kokhanovo

Vileyka

Smorgon

Molodechno Borisov

Smolevichi

Mogilev

Shklov

Orsha

Gorki

Chausy

Krichev

BykhovKlimovichi

Kostyukovichi

Minsk

Bobruysk

Osipovichi

Dzerzhinsk

Stolbtsy

ElizovoNovogrudokGrodno

Lida

Berezovka

Krasnoselskij

VolkovyskSlonim

Ataliez

Zaslavl

Fanipol

Lyuban

Smolgovo

Soligorsk

Slutsk

Radoshkovichi

Pukhovichi

Chist

Zatish'e

Gomel

Mozyr

Zhlobin

Svetlogorsk

Rechitsa

Kalinkovichi

Rogachev

Dobrush

Khoyniki

LoyevPetrikov

Glushkevichi

Brest

Baranovichi

Pinsk

Kobrin

Bereza

Luninets

IvatsevichiGantsevichi

Mikashevichi

David-Gorodok

Beloozersk

Chernavchitsy

Kostukovka

Layout chart of building materials production capacities

Krasnoselskstroimaterialy, OJSC

Belarusian Cement Plant, OJSC

Krichevcementnoshifer, OJSC

Total


Source: Niptis

In 2014, export share increased up to 31.5%, showing a 3.5 percent growth compared to 2013. Belarus exported

1773 thousand tonnes of cement in 2014 which was 23% more than earlier. The main reasons for export growth

were production growth, weak domestic market dynamics accompanied by the state policy to expand exports

of construction materials. Most of the cement was exported to Russia. Nevertheless, in 2014, Belarus managed

to expand the sales geography, exports to Russia decreased, while to Lithuania and Ukraine exports increased

by 4%.

2010 2011 2012 2013 2014

The volume of production, USD million

500

400

300

200

100

0

Krasnoselskstroimaterialy, OJSC

Belarusian Cement Plant, OJSC

Krichevcementnoshifer, OJSC

Total

Structure of cement export destination in 2014

1% Others

5% Latvia

7% Lithuania

8% Ukraine

79% Russia


Source: Niptis

In 2008-2014, excl. 2010, exports were outstripped by imports. At the same time, due to the rapid growth of

housing construction and lack of domestic production during the summer time, the deficit was covered by

imports. In 2010, imports of cement doubled up to 599 thousand tonnes that exceeded exports by 124

thousand tonnes. In 2014, instead of the growth, imports declined by 18 thousand tonnes. In 2014, the sales

geography was constricted: most of the cement was imported from Russia (90%), Lithuania – 6% and

Poland – 4%.

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

2010 2011 2012 2013 2014

Imports of cement, USD thousand

Imports are projected at about 0.6 mln tonnes in 2015.

The average selling prices of cement PC 500 D0 USD/Tonne (FCA net of VAT) in the Republic of Belarus and in the markets of bordering countries,

freight rail costs per tonne October, 2015

Minsk

Russia

Moscow

Saint-Petersburg

RigaLatvia

Lithuania

VilniusKaliningrad

Poland

Warsaw

Bialystok

Grodno

Brest

Vitebsk

Gomel

Mogilev

Ukraine

Kiev

Estonia

Tallinn

Russia

PC 500D0 FCA(net of VAT) $49.6-53.6

OJSC Krasnoselskstroimaterialy

OJSC Belarusian cement plant

3,0 mln tonnes

3,0 mln tonnes

OJSC Krichevcementnoshifer

1,8 mln tonnes

PC 500D0 FCA(net of VAT) $52.4






Source: Niptis

The share of foreign and national producers in the Belarusian market

January-September, 2015, 0.48mln tonnes

16%

foreign producers

84%

national producers

Consumption

During 2008-2014, the domestic cement market was growing by 2% per year, though in 2013 a 1.6 percent

decrease was observed. Nevertheless, cement consumption started to grow again by 3% in 2014. Cement

consumption is closely related to the volume of construction and installation works. During the recent years,

fluctuations in volume of construction and installation works have been observed. In spite of a 10 percent fall in

2012, in 2013 the volume of construction and installation work was almost restored to the level of 2011.

However, due to irregular demand in 2014 it decreased again by 5.4%. The growth of domestic cement

consumption in 2014, despite reduction in imports, was related to the growth of domestic production output.

More than 1/3 of consumed cement in Belarus is used in concrete goods production, including panel

housebuilding. Less than 1/3 of cement is used for commercial concrete and cement mortar production. For

production of cellular concrete, expanded clay and other aggregates 8.1% of total cement production is used,

6.2% of cement is sold by retail


Source: Colliers

1,100

1,000

900

800

700

600

500

400

300

200

100

0

Office property market

2008-2014

377

2008 2009 2010 2011 2012 2013 2014 2015`9

Forecast

76

93Th

ou

sa

nd

sq

ua

re m

etr

es

New construction

76

5832

94

217

1,300

1,200

1,100

1,000

900

800

700

600

500

400

300

200

100

0

Retail property market

2008-2014

377

182

2008 2009 2010 2011 2012 2013 2014 2015`9

Forecast

75

131

56

54

5137

Th

ou

sa

nd

sq

ua

re m

etr

es

New construction


Source: Colliers

Source: Colliers

1,100

1,000

900

800

700

600

500

400

300

200

100

0

Warehousing property market

2008-2014

2009 2010 2011 2012 2013 2014 2015`9

Forecast

3138

Th

ou

sa

nd

sq

ua

re m

etr

es

New construction

93

137

152

230

270

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

3785.5

Total area, thousand sq m

Property delivery of residential buildings

4087.5

4660.7

5082.9

5710.5

6629.9

5480.1

4482.8

5220.4

5523.0

16.017.4

16.3 17.0 17.117.1

13.6

9.5

12.712.3


Source: National Statistical Committee of the Republic of Belarus

Source: Colliers

'The program of effective use of capacities of the organizations of the cement industry for 2015-2020' (hereinafter the

'program'), and the instructions given by the Head of State stipulate for a significant increase in the use of domestic cement

in the construction of concrete roads and streets, approach roads to facilities (driveways) in cities and major population

centers.

Depending on the use of cement as a main binding agent in concrete mixes when building road bases and surfaces, as well

as pedestrian areas, its utilization can be divided into three areas:

- Use of cement for the production of concrete when arranging monolithic concrete roads (streets, driveways and

platforms) with concrete bases.

- Use of cement in the production of piece concrete goods (paving slabs and road panels) to surfaceroads, driveways and

pedestrian zones.

- Use of cement for the production of concrete to manufacture ferroconcrete products and structures when building road

constructions and facilities (concrete structures of bridges, over bridges, water drains, curbstones, etc.)

The National Infrastructure Plan

The National Infrastructure Plan developed by the Inter-institutional Infrastructure Coordination Council assesses the

need for the infrastructure until 2030. In general, the plan includes 100 Public-Private Partnership projects.

The projected average annual volume of expenses for the development of Belarusian infrastructure would be around 1.8

billion US dollars.

Competiveness of the domestic cement

Transfer wholesale prices for cement portland cement in October 2015 in the Republic of Belarus and neighbouring

countries, having regard to the relatively high logistical costs, allows to confirm the sufficient price protection of the

internal market.

The volumes of cement imports from Russia (to 400 thousand tonnes in 2015) are stipulated by the approved balance of

the mutual foreign trade turnover of cement of the Union State for 2015 and favourable for the Republic, because the

positive balance of the physical volumes of cement supplies is more than 1 mln tonnes.

It became possible due to the drastic (more than twofold compared to 2013) cost reduction of the production based on

returned to service and developed capacities.

Reduction in expenses in the process of cement manufacturing occurred because of the transition to pulverized coal fuel

and elimination of the investment component from the cost structure. The deactivation of the old wet-method facilities

and relief of non-core assets exercised a significant influence on the increase of the competitive price sustainability of the

domestic cement in the internal and external markets.

As a result of the purposeful actions on the increase of the domestic cement competiveness, the internal transfer prices

per 1 tonne of portland cement have declined from 100 USD in 2013 and 86 USD in 2014 up to 53 USD in the current year.

Cement market forecast for 2016

Providing a zero growth rate of investments in the fixed capital (favourable forecast of the Ministry of Economy) in 2016,

the condition of the domestic cement market and foreign trade operations will be likely to repeat the situation of the

current year (in general).

However, if the GDP growth turns negative, it should be borne in mind that each percent of reduction in GDP leads to the

decline in demand for cement in the domestic market by 4-5% and corresponding decline in the marketable production

volume.

In 2016, it is planed to maintain the volume of cement deliveries to the Russian Federation, and should any unfavourable

situation in the Russian construction market appear, compensate the exports decline in a given direction by the increase in

supplies to Poland.

НИПТИС


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CEMENT INDUSTRY OF THE REPUBLIC OF BELARUSinvestinbelarus.by/docs/-31106.pdf · Cement production in Belarus 2008-2014 production volume, th.tonnes Cement Industry of the Republic