A LOOK AT RUSSIA S CONSTRUCTION MATERIALS INDUSTRY

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1 A LOOK AT RUSSIA S CONSTRUCTION MATERIALS INDUSTRY F I N D E T R A O Y P.O.B. 27 FIN Tampere, FINLAND tel Bank: Nordea VAT reg. no. FI Trade reg. no

2 Copyright Veikko Kärnä and Findetra Oy Findetra Oy

3 3 TABLE OF CONTENT TABLE OF CONTENT GENERAL TREND OF RUSSIAN CONSTRUCTION MARKET Russian construction market development Machinery imports for construction industry are growing Foreign construction companies are penetrating the market THE RUSSIAN CONSTRUCTION MATERIALS PRODUCTION Cement production in Russia Aggregate production in Russia A DETAILED LOOK AT THE CONSTRUCTION MATERIALS PRODUCTION The construction materials production in Leningrad region Construction materials production in the Republic of Karelia Natural resources of the area of Voronezh Aggregate production in Belarus and Ukraine THE MARKET FOR CONSTRUCTION MATERIALS IN RUSSIA Construction market Cement market CONCLUSIONS... 9 LIST OF TABLES... 10

4 A LOOK AT RUSSIA S CONSTRUCTION MATERIALS INDUSTRY Findetra Oy

5 5 1 GENERAL TREND OF RUSSIAN CONSTRUCTION MARKET 1.1 Russian construction market development In 2006 the Russian construction industry accounted for 7% of the total Russian GDP, and construction materials industry additionally 2%. Thus, one can say they play a huge role in the current booming growth of Russian economy fuelled by the high oil prices. According to the forecasts made by the Russian Ministry of Economic Development and Trade, the construction industry will be growing at a faster pace than the Russian economy as a whole in 2007, reaching 7.8% of the Russian GDP. The expected growth rate for the construction industry in 2007 is about 15%, exceeding the level of previous years. 1.2 Machinery imports for construction industry are growing 1.3 Foreign construction companies are penetrating the market

6 2 THE RUSSIAN CONSTRUCTION MATERIALS PRODUCTION After the collapse of Soviet Union the Russian construction materials market developed in the early nineties, when imported building materials started to outsell rather expensive, low quality domestic made products. The amount of imported construction products grew, and by the mid-nineties domestic manufacturers started to attract investments for the modernization of production in order to keep pace with the growing demand. 2.1 Cement production in Russia 2.2 Aggregate production in Russia

7 7 3 A DETAILED LOOK AT THE CONSTRUCTION MATERIALS PRODUCTION As already noticed the rising prices of apartments, houses and buildings are partly caused by the industry of construction materials. A comment from an observer On the housing market the reason for the rise in the prices is a quick rise in the cost prices of the building which is a consequence from the change of the prices of building materials, among others. Those materials which have risen significantly include the sand which is the main component of concrete and brick production. 3.1 The construction materials production in Leningrad region 3.2 Construction materials production in the Republic of Karelia 3.3 Natural resources of the area of Voronezh 3.4 Aggregate production in Belarus and Ukraine

8 4 THE MARKET FOR CONSTRUCTION MATERIALS IN RUSSIA 4.1 Construction market 4.2 Cement market

9 9 5 CONCLUSIONS Russia s construction and construction materials business is developing rapidly. There are both domestic and foreign companies doing business in both spheres of industry. Western construction materials producers have acquired assets in Russia. Examples of such are Gips Knauf, who have a network of mines, quarries and processing plants excavating and producing gypsum in Russia, and Basalt Ag, who have penetrated to the Russian aggregate market in Leningrad region. However, the main producers of aggregate are Russian companies, which dominate the business. The same tendency can be seen in the construction business. For instance Finnish YIT and Swedish Skanska have established their units in Russia s big cities, and are offering apartments, office buildings and building residential object. The Russian construction industry is attractive to foreign companies because most Russian companies possess considerable potential for increasing their assets. This is due to the possibility of streamlining their structures, improving management systems, introducing information technologies, lowering capital costs and achieving economies of scale through consolidation. The old Soviet traditions can partly hindering the positive process going in on the marketplace. The Regulirovka of rail roads cars can stop the deliveries of aggregate from the quarries to Moscow instantly if somewhere in Russia there is an urgent need for railroad cars to transport coal. Furthermore, the lack of capacity of railroads cars in Karelia is delaying the investments into the construction materials industry there. The Russian railroads need to improve their actions to secure the safe and constant deliveries of materials to the customers, who might be waiting for them. If demand for construction materials will continue, Russia needs to invest into its infrastructure.

10 LIST OF TABLES Findetra Oy

11 11 About Findetra Oy Findetra provides reliable market intelligence for business professionals interested in Eastern European countries. The focus in on Russia and other CIS countries, and Findetra Oy analyses in particular the construction, mining and communal sectors. To find out more about Russia and other CIS countries please visit

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