The bear bounces back

World Cement (WC): Can you provide an overview of the current Russian cement market?

Mikhail Skorokhod (MS): There are about 10 major cement producers in Russia, including international companies, as well as a number of local players. The Russian market has 65 cement plants and the overall cement production capacity is 113 million tpy. At the same time, consumption, having reached a peak of 71 million t in 2014, has decreased to 55 million t in 2017. Regarding the results of 2018, the consumption is expected to remain at the same level as last year.
EUROCEMENT Group, the largest Russian company, is one of the five largest private cement companies in the world. It has 19 cement plants in Russia, Ukraine, and Uzbekistan. The companies of EUROCEMENT Group have a combined production capacity of more than 60 million tpy of cement.
In 2002, a number of Russian cement companies decided to combine their efforts in order to develop and enhance the competitiveness of the industry both in the domestic and international markets. They created a non-profit organisation: the Union of Cement Producers (SoyuzCement). Today, Soyuzcement includes EUROCEMENT Group, Gazmetallproekt, HeidelbergCement, LafargeHolcim, Sibirskiy Cement, Sebryakovcement, Vostokcement, Yuzhno-Uralskaya GPK, Sukholozhskcement, and industry representatives from Belarus, Kazakhstan, and Kyrgyzstan.

WC: What developments have been seen recently in the Russian cement market?

MS: In the past 10 years, over US$15 billion have been invested in the modernisation of the sector, with the result that 36 million tpy of modern cement production capacity has been brought online and the share of dry-process cement manufacturing in the total capacity has increased to 70%. The industry managed to boost productivity by more than 50%.
The peculiarities of the customer market in our field dictate the need to optimise all production processes and improve customer service. Leading companies are focusing their investments on modernisation to ensure long-term competitiveness.
Specifically, EUROCEMENT Group created modern logistics complexes and introduced automated product shipping systems. Automation at this stage allows the reduction of unskilled labour and the lowering of costs for customers, while speeding up the process of loading cement into transport.
Another important area where EUROCEMENT Group has invested is in-house power generation. Small power plants can drastically boost the efficiency of production by reducing the cost of finished products and allowing comprehensive use of the heat generated by the power units.
Cement companies are also investing in innovations. Digital technologies and solutions are being introduced to optimise production processes. At the same time, where it is advisable companies, are building new highly-efficient production lines that use the dry-process cement production.

WC: What is the market outlook for Russian cement demand?

MS: In the medium term, by 2023 we expect to see cement consumption in Russia grow to 85 million tpy and, in the worst-case scenario, we think it will grow to 72 million tpy. Over the next five years, better availability of bank credit and an increase in infrastructure construction and housing renovation should serve as powerful drivers of cement construction growth. If the oil price increases and the sanctions are lifted, further economic growth is to be expected and, as a result, we should see an increase in construction.
The key trends we have been seeing in Russia have been the stabilisation of cement consumption after the decline that started in 2015. In 2018, we expect to see roughly the same sales as last year.
As for the future, we can see some growth drivers there. The main one is the gradual growth of the construction sector and the increase in the amount of new residential housing being commissioned. In recent years, we have seen an increase in the use of construction technologies that rely on cement in residential housing construction, such as cast concrete construction and the use of concrete blocks. Meanwhile, the share of residential housing in total cement consumption has gone up 15%, or 8 million tpy, over the same period. In 2017, 40% of all cement consumed in Russia went on residential housing construction.
In addition, the growing integration between Eurasian Economic Union member states is another positive factor helping drive the growth of the construction sector in the region.

WC: How is the Russian cement industry adapting to the challenges around sustainability and climate change?

MS: It is our duty to protect and preserve the environment for future generations. Making cement production more environmentally friendly and more energy efficient is a top priority for the global cement industry and a key area of investment for cement companies, equipment manufacturers, and research institutes.
Both the EU and Russia are introducing ever stricter environmental regulations and requirements. The fines for failure to comply with environmental requirements are getting bigger and there is increasing pressure being put on the industry by communities, consumers, and regulators. It is reasonable and thus we must respond to it adequately and effectively.
In the past decade, we have made significant progress in this area: consumption of fuel per tonne of cement produced fell by 20%, from 200 kg to 160 kg of standard fuel, while CO₂ emissions fell by a third, from 850 kg to 560 kg/t of clinker. We are using an increasing amount of alternative fuels and are introducing the best available technologies. There is still a lot that has to be done.
At the same time, at the global level, 2018 saw a milestone in the development of the cement industry. The largest global manufacturers, including Russia’s EUROCEMENT Group, set up the Global Cement and Concrete Association (GCCA). In just one year the new organisation has already earned a reputation as an authoritative representative of cement and concrete producers in the world. Now at the global level, we are going to address strategic development issues in cement and concrete construction, including the environment, innovative technologies, and sustainable development issues.
To solve these problems, we needed a common venue for communication, so that companies, industry associations, and leading research centres, as well as representatives of related industries, such as architects, engineers, construction companies, and scientists, can all join forces and work to address common problems together. Now we have such a venue, we are confident that the GCCA will be able to affirm the strategic significance of the cement and concrete sectors in the new conditions.

WC: Digitalisation/Industry 4.0 are a major theme across industry at the moment. How are they impacting the Russian cement industry? How are cement producers adopting these to improve plant operations?

MS: We have some very ambitious long-term goals build a digital economy in the cement industry and make it the part of the fourth industrial revolution.
Speaking of specific targets, under the current industry development strategy, by 2035 the cement industry should increase the output per worker from the current 1600 tpy to 10 000 tpy. Fuel consumption should come down from the current 160 kg of standard fuel per tonne of clinker to 95 kg per tonne of clinker, while electricity consumption should fall from 125 kWh/t to 70 kWh/t of cement. CO₂ emissions per tonne of clinker are to be reduced from 560 kg to 290 kg, while the share of alternative fuels should grow from 1.5% to 40%.
Thus, we want to see a great leap in productivity, while drastically reducing fuel and electricity consumption, as well as the environmental impact of our production facilities. And all these targets fall within the strategic development priorities of the country, identified by the President of Russia.

WC: Do you see any other challenges facing the Russian industry? What are the opportunities?

MS: We are now seeing a trend that, as cement consumption grows in residential housing construction, it tends to simultaneously decline in other sectors. It prompts us to look for new market growth drivers and new uses for our products.
The specific sectors of construction where additional growth in cement construction is possible are the construction of bridges and interchanges; soil stabilisation in the construction and repairs of roads (a process that can significantly reduce the cost and timeframe of the work and drastically extend the service life of roads); and roads made of cement-concrete mixes (according to the strategy for the development of the construction materials industry to 2030, the share of cement and concrete motorways in total motorway construction in Russia should be brought up to 50%).
3D printing deserves a special mention. The technology has been developing in leaps and bounds with dozens of new projects implemented in Europe, the US, Asia, and the Middle East. Russia’s also taking an active part in the development of additive fabrication.
Cement and concrete are construction materials that people have been using widely for centuries and they are one example of how a classic material can serve as a great foundation for innovations. These construction materials have all the right properties to meet the demands of the 21st Century from the point of view of environmental friendliness, health and safety, availability, strength, and reliability, as well as aesthetics, assuming the concrete is given proper finishing.

About the author

Mikhail Skorokhod is Chairman of the Management Board of SoyuzCement, the Russian Union of Cement Producers, and President of leading Russian cement producer, EUROCEMENT Group.

Read the article online at: https://www.worldcement.com/special-reports/10012019/the-bear-bounces-back/