As one of the BRICS countries, Russia is a very rapidly industrializing country. Russia's cement industry is also steadily advancing in the 21st century. In the past few years, Russia's economic growth has been affected by economic sanctions, and the country's large cement industry is gradually adapting to this change and modernizing.
I. Introduction to Russia
The Russian Federation covers 40% of the eastern part of the European continent (west of the Ural Mountains) and almost the entire northern part of Asia. It inherited 75% of the territory of the former Soviet Union. At present, its territory is bounded by Norway in the west, the Korean Peninsula in the east, the North Sea in the south and Siberia in the north. Russia's vast expanse includes a range of different climates and terrains.
Of Russia's 144 million people, 76% live in the European region of Russia, where the capital Moscow is located; the remaining 24% live in the territory of the Asian part of Russia, with an average population density of only 2.5 people per square kilometer, only 10% of the population density of the European region of Russia.
Two, the Russian economy
Russia's economy has been on a roller-coaster ride since the collapse of the Soviet Union in 1991. Initially, the economy began to suffer from the impact of the real market economy, all the way down, so Russia experienced several years of economic recession. It was not until 1997 that Russia's economy began to grow, and then, affected by the 1998 economic crisis, the economy fell sharply again, but then Russia began to grow continuously for nearly 10 years.
Oil and natural gas have been by far the most powerful drivers of economic growth in Russia, where the per capita gross national product is now seven times that of the Soviet Union. With the continuous growth of the economy, Russia has also become the eighth largest economy in the world. After entering the 21st century, the only time Russia's economy fell sharply was in 2008, which was also caused by the global financial crisis, in which most countries fell into economic crisis. Although Russia's economy has grown substantially in the past decade, the new wealth has not been equally distributed in society, and the gap between the rich and the poor has been widening.
In 2016, Russia's GDP fell by 5.8% to $1.28 trillion from $1.33 trillion in 2015, down 33% from $2.06 trillion in 2014, mainly due to the sharp decline in oil prices in recent years compared with those before 2013. In addition, because Russia annexed Crimea in 2014, it was subject to economic sanctions from Europe, the United States and other countries. Russia's gross domestic product has fallen by 42% from its peak of $2.32 trillion.
III. Cement production in Russia
3.1 Cement production in Russia in recent years
As in other countries, the cement industry in Russia was adversely affected by the 2008 global financial crisis. Many public and private sector construction projects have been shelved, but the average price of cement has risen from $82 per ton in mid-2007 to $162 per ton in 2008.
It was not until 2009 that the impact of the financial crisis on the cement industry really began to emerge. In 2009, there was a sharp decline in cement consumption in Russia, which lasted until the spring of 2010, when the situation improved slightly. In 2010, Russia's cement industry began to recover, and the annual cement output increased compared with 2009, reaching 50.4 million tons. By 2011, Russia's cement production rose to 56.2 million tons, an increase of 10.3% over the previous year. Since then, this trend has continued to grow by 10% in 2012 to 61 million tons, and by 8% to 66.4 million tons in 2013. By 2014, Russia's cement production reached the peak of 68.5 million tons at this stage, and then Russia's cement production began to decline, falling sharply to 61.7 million tons in 2015, and continued to decline by 7 million tons to 54.7 million tons in 2016.
Figure 1: Cement production in Russia from 2000 to 2016 (10,000 tons)
Source: U.S. Geological Survey, Tradingeconomics. Com.
3.2 Output by region in 2016
Cement production in all eight federal districts of Russia fell in 2016 compared with 2015. The Central Federal District is the largest of the eight federal districts in Russia, with a total output of about 14.2 million tons in 2016, accounting for 26% of the country's total output. The second largest producer is the Volga Federal District, which produces 11.9 million tons, accounting for 22% of the country's total output. The third largest producing area is the Southern Federal District, which produces 8.9 million tons, accounting for 16% of the total output. See Figure 2 for more details of cement production in each federal district of Russia in 2016.
Figure 2: Cement output of each federal district in Russia in 2016 (10,000 tons)
Source: Soyuzcement. Ru.
3.3 Import and export of Russian cement
Compared with the scale of Russian cement industry, the import and export scale of Russian cement is not large. From Figure 3, we can see that Russia was a net cement importer in 2012-2014. Since then, with the decline in demand, the import and export of Russian cement have fallen considerably. In 2016, Russia imported 1.93 million tons of cement and exported 950,000 tons, with a net import of nearly 1 million tons.
In 2016, the main exporters of Russian cement were Kazakhstan (520,000 tons), Belarus (240,000 tons), Georgia (85,000 tons) and Finland (84,000 tons). In 2016, Russia imported cement from Belarus (1.44 million tons), Kazakhstan (210,000 tons) and Baltic countries (87,000 tons).
Figure 3: Import and export of cement in Russia from 2012 to 2017 (million tons)
Source: Soyuzcement. Ru.
The price of cement in Russia has a strong seasonality, which is also related to the climate characteristics of Russia. The cold winter is not suitable for construction, and construction can only be carried out in late spring and summer. As a result, cement prices in Russia tend to fall to the bottom in January and February, and then peak in the summer consumption peak. Despite weak demand over the past two years, Russian cement prices have risen steadily. In June 2015, the price of cement in Russia was USD 69.09/t, which rose to USD 70.38/t in June 2016. This year, the price of cement in Russia continued to increase, which was USD 74.3/t in June, and reached a peak of USD 75.67/t in July.
3.5 Cement production in Russia in the first half of 2017
Cement production in Russia has continued to decline so far in 2017. Total cement output in the first seven months of this year was 30.71 million tons, down 3.6% year-on-year from 31.8 million tons in the same period of 2016. If the current decline rate is maintained throughout the year, Russia's cement production is expected to be 52.7 million tons in 2017.
Figure 4 shows the change of cement production in 8 federal districts of Russia in 2016 and the first half of 2017. Only two federal districts, Volga and the Far East, saw an increase in cement production. Cement production in all remaining federal districts continued to decline in varying degrees, from 2% in the North Caucasus to 18.9% in the Northwest Federal District. Overall, Russia's cement production in the first half of this year fell by 3% compared with the same period in 2016.
Figure 4: Cement production in Russia in 2016 and the first half of 2017 (10,000 tons)
Source: Soyuzcement. Ru.
IV . Russian Cement Industry
4.1 Russian Cement Plant
Russia currently has 79 integrated cement plants in operation, under construction and to be built. Among them, 69 cement plants in operation have a capacity of 110 million tons per year. Most of them are located within 1000 kilometers of Moscow, the capital of Russia, and only seven cement plants are located in the Far East.
This distribution pattern actually reflects the distribution pattern of population and construction activity in Russia. Cities with very active construction activities are also the main areas of cement production capacity distribution in Russia, such as Moscow, St. Petersburg, Novosibirsk, Chelyabinsk, Nizhny Novgorod and other cities with very high cement production capacity. In recent years, the Sochi Black Sea Resort has also seen intensive construction activities due to the 2014 Winter Olympics, and the region continues to develop around tourism, with the former Olympic Park hosting Formula One racing.
Due to the neglect of environmental and resource protection in the former Soviet Union, many industries used backward resource-intensive models to develop, resulting in some industries lagging behind international standards after Russia took over the assets left by the Soviet Union. The same is true of the cement industry, where wet kiln technology gained popularity for much of the 20th century. But at present, this trend is changing, although the world's wet kiln capacity still accounts for 62% of the world's total capacity. In 2016, 37 wet kiln cement plants worldwide are being upgraded to advanced new dry process technology. In Russia, Eurocement is the most active investor in the upgrading of wet process kilns, although it now appears that the project will take longer than expected.
4.2 Major cement producers in Russia
At present, the most important cement producer in Russia is European Cement Group, which has 13 cement plants in Russia, with a total capacity of 33.2 million tons per year, accounting for 30% of Russia's total capacity.
In addition to Eurocement, there are several other smaller national producers, including GK RATM Group, which owns Iskitimcement in the Novosibirsk region, GC Park Group, which owns three cement plants in the Far East, and JSC Mordovcement, which owns three cement plants in the Republic of Mordova. In addition to local enterprises, three large multinational cement producers are also involved in the Russian cement market. Lafarge Holcim has three cement plants in Russia with a total capacity of 8.1 million tons per year, Heidelberg Cement operates two cement plants with a total capacity of 6.2 million tons per year, and Buzzi Unicem has three cement plants in Russia. The total production capacity is 8.1 million tons/year.
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