Is a new apartment now a luxury? Against the backdrop of the armed aggression of the Russian Federation, housing restoration in Ukraine is gaining momentum, but the cost of building materials does not stand still and has grown at least twice as much as in the pre-war period. Among the reasons, experts cite the monopolization of the cement market by large players. Of course, since the demand for cement reaches at least $2 billion.
Who exactly decided to profit from the restoration of Ukraine as a result of Russian shelling? And is the Ukrainian construction market really de facto controlled by the cement “cartel”? Read more about this in a new investigation by StopCor journalist Alla Legeza .
Reconstruction is raging in the Kiev region : repair and construction work continues in war-torn Bucha, Gostomel, Irpen and other settlements in the region. However, it is impossible to cover all destroyed or destroyed objects in the region at once, notes the governor of the Kiev region, Ruslan Kravchenko . After all, funds for restoration go out of the budget, and it is quite limited. 13 thousand objects have been reconstructed in the region to date , that is, slightly less than half.
“Yes, I would like to simultaneously rebuild everything in the entire Kyiv region and declare that we have rebuilt it. This is 28 thousand objects. But we proceed from what we have: the government allocates it, we restore it ,” Kravchenko noted.
The amounts needed are considerable: for example, more than 50 million hryvnia are allocated for the restoration of just one five-story building in Makarov. And there are almost 30 thousand such houses. In general, it is estimated that more than UAH 100 billion will be needed of the Kyiv region And throughout Ukraine, according to the Kyiv School of Economics, this amount is more than 151 billion dollars or 5.5 trillion hryvnia.
“The amount doesn’t fit either on the calculator screen or in my head. And this figure is not yet final, because, firstly, shelling occurs every day, and secondly, the cost of building materials is growing by leaps and bounds, and especially rapidly since the beginning of the war,” the journalist comments.
Why is the price of construction and renovation growing by leaps and bounds, and new housing is becoming an unaffordable luxury for ordinary Ukrainians?
The fact is that a significant part of construction and repair products contains cement. In particular, according to manufacturers of building materials, it is 40% , approximately 40% , almost 15% in reinforced concrete and even approximately 10 % in plaster. To study how the cost of this material changed, StopKor took data from the Shulgin State Road Research Institute as a basis.
Thus, in August of this year, the average price for M-500 cement was UAH 5,238 per ton . In October 22, it cost around 3978 UAH per ton. That is, over the year, the average cost of this material, according to our calculations, increased by almost 32%. Oleg Sirotin , executive director of the Association of Autoclaved Concrete Manufacturers, who are one of the largest consumers of cementitious materials, also shared with us the dynamics of cement prices from 2019 to 23 In particular, before the war, this industry bought about 360 thousand tons of cement per year.
“Since 2019, as of now, the cost of cement has increased by about 85%. That is, in 2020 compared to 2019, the cost of cement increased by about 4%. In 2021, the cost increased by 5%. cement for our industry increased by 37% And in 2023, as of now, the cost of cement has increased by 24% ,” states Sirotin.
Consequently, the cost of most materials containing cement increased proportionally.
According to the general director of the Kuznechnaya industrial and construction group Sergei Pilipenko , in 2021 the average cost of a cubic meter of concrete was about 1,600 UAH. For now – 2000-2500 UAH. That is, in two years the price has increased by 50%.
Against this background, house repairs have also become more expensive. As a representative of one of the capital’s repair companies said, the cost of their work, only at the stage of preparing walls for painting or wallpapering, depending on the thickness of the layer, has increased since the beginning of a full-scale war from 300 UAH per square to 500.
An increase in the price of cement-binders directly affects the cost of construction services, since we provide comprehensive services, this includes both work and turnkey materials. As you know, cement is the main binder in construction mixtures, when there are screeds, cement-sand plasters, and so on. Before the war, plaster mixtures cost 130 UAH, and after the start, in the summer of 2022, they cost 350 UAH. That is, the price has not even doubled, but almost tripled ,” explains Vitaly Karpenko , project manager of the Teplodom company.
Price fluctuations for repair and construction materials are strongly reflected in the real estate market.
True, in this industry, the cost per square meter does not grow directly proportionally, because when there are no requests for new apartments, developers artificially hold back prices for some time, comments Anna Laevskaya .
“If we talk specifically about concrete and cement, the cost has doubled compared to the pre-war period. Fluctuations in prices for these materials directly affect the cost of constructing residential buildings. We rather have a decrease in the margin and profitability of developers and construction projects, since it is not possible at the moment to translate the increase in the cost of materials into the price of a meter ,” she noted.
One way or another, the price per square meter has already changed since the beginning of the full-scale invasion, and the situation may worsen significantly as soon as demand for housing resumes. Denis Sudilkovsky , marketing director of the well-known real estate search company “Lun,” shared current data on the primary housing market in the capital
“The average price among all classes offered for sale is UAH 47,300 per square meter. Before the full-scale invasion, this price was 35,400 UAH per square. As soon as people return even more actively to the capital, we will be able to observe a renewal of demand, and accordingly, this should affect the rise in prices ,” he added.
But why or who caused the prices for building materials to soar so rapidly?
There are many factors influencing pricing: rising costs of fuel and electricity, disruption of logistics, increased wages, and general inflation.
“But in the process of preparing the material, we paid attention to another significant factor - the oligopolization of the cement market, which, according to manufacturers of building materials, occurred due to the lack of imported cement in Ukraine ,” emphasizes Alla Legeza.
As Oleg Sirotin explains, the cost of cement grew slowly in 2020 and 2021, because when the anti-dumping duty was introduced on Moldovan and Belarusian cement, there was still one more imported cement left on the Ukrainian market - from Turkey . And its price was lower than the domestic product. But in 2021, an anti-dumping duty was introduced on Turkish cement, and in the next two years one could observe a rapid increase in prices for domestic cement from Ukrainian producers.
According to manufacturers of building materials, the restriction of import competition was one of the reasons for the rapid increase in the cost of cement.
This issue was also investigated by the public organization Antitrust League, which in September 2021 submitted an application to the AMCU demanding to stop the unreasonable increase in the cost of cement by 35-50% over three years. Consequently, in the same period there was a corresponding increase in the price of construction and repair materials and square meters, which is confirmed by the dynamics of prices for “primary materials” in Kyiv.
Who controls the cement market in Ukraine?
5 cement groups operating in Ukraine which included factories in different regions of Ukraine. These are the companies Cemark , IFCem , Buzzi , Krivoy Rog cement and Balcem . The latter, unfortunately, is not operational today due to the war and temporary occupation of the Kharkov region, but the other four are working at full capacity and together produced almost 5.5 million tons of cement in 2022. The expected production figure by the end of this year, according to our data, is about 7 million tons . For comparison: at their peak, in 2021, domestic producers collectively produced more than 11 million tons .
Elena Shulyak, head of the parliamentary committee on urban planning and chairman of the Servant of the People party, noted in a comment to Stopkor so it is expected that requests for cement and building materials will only grow.
“Ukrvneshekspertiza together with the support of USAD international partners have done a very interesting study. They calculated that in order to restore what was destroyed, Ukraine would need at least $64 billion specifically for the production of building materials,” the people’s deputy emphasized.
This study contains another interesting conclusion: cement alone is needed to restore more than 35 million tons , which in monetary terms experts estimate at almost $2 billion .
“According to our data, the maximum annual capacity of Ukrainian cement plants today is 13.6 million tons of cement. Therefore, according to the developers, this will not be enough for restoration and it is clear that the demand for cement in Ukraine will be simply insane,” the journalist states.
And where demand exceeds supply, the price can skyrocket.
“In conditions of, or rather, an increase in construction volumes and the subsequent restoration of the start of new construction projects, existing supplies and production volumes will not be enough, and this will lead to a fairly significant increase in the cost of these materials and components ,” comments Anna Laevskaya.
The fact that cement production capacity is not enough to cover demand during the recovery phase is also noted in the above-mentioned study. It can be assumed that Ukraine today needs large investments to build new factories. But in practice the situation is still the opposite. StopCor undercover reporters investigated that massive layoffs are already ongoing at existing cement capacities. We are talking, in particular, about the Dickerhoff , where, according to legend, our “agents” planned to find work.
What are Dickergoffi’s production volumes and what is happening to the company?
The editors of StopCor tried to find out this directly from the company by sending a request, but the answer was not only provided without numbers, generalized and did not answer all questions, but they also demanded that it not be disclosed. Which surprised the journalists.
Theoretically, the reduction in capacity could explain the sale of the Ukrainian Dickerhoff by the parent Italian company Buzzi, which, according to NAPC, has been included in the list of “International War Sponsors” since March 2023.
Buzzi an agreement with the Irish company CRH for 100 million euros on the official website in June of this year. By the way, CRH also had facilities in the Russian Federation, but in March 2022 the company announced its exit from the Russian market.
The deal numbers are also quite interesting. The sale of two operating Dickerhoff for only 100 million euros looks like a Black Friday discount, because, according to our data, building one cement plant in Ukraine today costs from 250 to 300 million.
For now, this agreement between the world's cement giants is under consideration by the Antimonopoly Committee of Ukraine.
As stated in responses to Stopkor's inquiries, at first the AMCU did not accept applications for permission to companies to buy/sell shares of Dickerhoff , and after the documents were received again, they started a concentration case in October, since there is a threat of monopolization or a significant restriction of competition. Today, a very interesting combination is playing out in the cement industry, says People's Deputy of Ukraine Sergei Nagornyak .
CRH takes over the Italian company Buzzi , as of today the Irish already have 32% of the market. They plan to carry out a deal to purchase another 14% of the market from an Italian company, and will already have 46%,” notes the parliamentarian.
According to StopCor data, the cement market among giant companies in Ukraine is now distributed as follows: Ivano-Frakovskcement had a market share of 34% before the full-scale war, Cemark (CRH) was in second place with 28%, Dickergoff – 15% and about 12% in Krivoy Rog Cement.
So, if the purchase and sale deal between CRH and Buzzi is finally agreed upon, Cemark will become the leader in the market and will dictate its own prices and its own rules of the game.
And in view of the business practices of the mentioned giant companies in other countries, they cannot always be called honest. For example, as they wrote in 2003 in the publication “Zerkalo Nedeli”, the international group CRH was among the companies that were investigated by the European Commission for creating a common market.
And in 2009, a German court fined 6 large cement producers 330 million euros for cartel conspiracy. Companies, among which was Dickergoff, already known to us, bought up products and competitive enterprises, suspended their work and kept the price of their own cement high. An almost similar situation involving CRH was recorded by the authorities in Hungary in 2020, as reported on the website of the local competition authority.
And there are many such examples of global market monopolization and the closure of production with a significant increase in the price of cement.
In addition, according to data obtained by StopCor from its own sources, the Dickerhoff factories in Ukraine are also already under threat of closure, because they work using outdated technology - the wet process, and this contradicts CRH’s environmental goals. So what will happen if the said purchase and sale transaction is agreed upon is an open question. By the way, CRH ignored him and did not respond to the editorial request.
It is difficult to predict how much the cost of cement may increase if this market is absorbed and monopolized. But it is obvious that the price will rise, according to manufacturers of building materials and developers.
“If building materials rise in price by 30-40%, perhaps developers will transfer some additional 5-6% to sales prices, but again, if the demand for this housing is ensured, if the market situation allows it,” suggests Anna Laevskaya .
Will the global practice of monopolizing the cement market by giant companies repeat itself in Ukraine and what will the Antimonopoly Committee of Ukraine decide?
It is likely that the decision will not be easy to make, given the open support of CRH by the country's leadership.
According to our information, during the meeting of Vladimir Zelensky with the Prime Minister of Ireland Leo Varadkar in Kiev, they discussed the resumption of Ukraine and the participation of Irish business in this process, in particular the CRH .
StopCor sent a request about this to the Office of the President , but within a month we have not received a response. The Cabinet of Ministers did not comment in any way on the public support of CRH during Denis Shmygal’s with the head of the Irish government. However, there are also positive signals from these meetings. They also talked about attracting new investments in the construction of cement plants in Ukraine, and this, according to people’s deputies, is one of the ways to solve the problem of monopolization of the cement market.
In the meantime, senior officials will negotiate to attract investment, StopCor continues to monitor developments. In particular, the Antimonopoly Committee officially included our representatives in covering information about concentration in the form of the acquisition by CRH of the Ukrainian capacities of Dickerhoff .
