Since the turn of the century, Russia has been undergoing a construction boom fuelling a need for raw materials and major growth in both the consumption and production of cement in the country. Spurred by the construction boom, consumption of cement reached over 55 million tons in 2007, a value of over 7.5 billion USD. Between 2003 and 2006, cement consumption expanded by one-third, and by 7% in 2007 alone. Cement demand will maintain its rapid growth as the Russian economy continues to develop at a fast pace, and the country’s construction boom continues.

In order to satisfy growing demand, cement plants in Russia are working at maximum capacity. Many plants are using technology which is over 20 years old, and created during the former Soviet era. In 2006, 54.7 million tons of cement were produced in Russia, 12.8% more than in 2005. In 2007 production increased by more than 20% resulting in roughly 66 million tons produced in the country Russia. In 2006, almost one-third of Russia’s total cement production, roughly 16.9 million tons, was produced in the Central Federal District. The Central Federal District was followed by the Volga and Southern federal districts, and the Belgorod Province which had produced 10% of Russia’s total cement output.

Although local deficits of cement were reported in certain regions of Russia, roughly 6% of Russian cement production is exported. In 2006, 3.2 million tons of cement was sold abroad, mostly in Kazakhstan, China, and Ukraine. At the same time, 663,000 tons were brought into Russia, 80% more than in 2005. Growth in both exports and imports of cement was observed in 2007, and is expected to grow in the future.

High demand for cement provoked by the construction boom has led to an unprecedented rise in cement prices, which have more than tripled since 2003. The rapid rise in prices is expected to continue until suppliers are more capable of satisfying growing demand. Cement prices differ depending on the region and season of the year, the highest being in Moscow and the Moscow Province and during the summer months, the peak season in construction. In early 2007, the average price of cement was approximately $340, although prices had a wide range of variations throughout the country. In addition to surging demand for cement, the rising prices for utilities such as gas and energy have also contributed to rising cement prices in Russia. Due to the fact that fuel and energy account for over 60% of total cement production costs in Russia, rising utility prices in the country have impacted cement prices.

At present Russian construction companies are facing several difficulties with cement supplies. Current projections of Russian cement consumption show that it will potentially outstrip Russian cement production within the next few years. Projections of growth in the Russian construction sector estimate that it will continue to grow at a 15-20% rate annually through 2010, leading to a 12-20% per year increase in cement consumption. At the same time, production growth is expected to grow at only 3-5% per year, meaning that consumption growth will surpass output growth. It is estimated that cement shortages in Russia could reach 10 million tons as early as 2010. In order to meet growing demand for cement in the construction industry, it will be necessary for Russia to increase its annual production of cement to 85-90 million tons. This could be an extremely daunting task as the Russian cement industry has lacked investment for years, leading to woeful conditions in many cement plants.

Russian cement plants are predominantly outdated and decrepit state. Although many Russian cement plants are still managing to boost production levels, but growth in production will peak in the near future. Roughly 70% of the manufacturing equipment in over 50 active Russian cement plants is dated and overused. Furthermore, Russian cement plans suffer from low worker productivity. While in Western European countries, output of cement per employee stands at 6,000 tons per year, that figure is only slightly over 1,000 tons per year in Russia. Finally, as much as 85% of cement in Russia is still produced by means of the energy intensive wet process, and even those plants which produce the remaining 15% via the dry process are also using old, ineffective technologies. As a result, fuels and energy account for as much as two-fifths of total cement production costs, exacerbating production problems as fuel and energy costs lead to higher production costs. The issues facing the Russian cement industry are highly problematic for the industries future as demand for cement increases.

Many Russian industrialists are considering opportunities for developing cement plants and increasing Russian production capacity, but many plans will only begin development after 2010. As shortages occur in Russia, the country will need to look to import cement to meet demand. However, several neighboring countries including Turkey and China are also experiencing several problems with cement supplies. It is therefore uncertain whether Russia will be able to avoid the multi-million-ton cement deficits predicted by some analysts for the period around 2010.