Cement Firms Slashing Expansion

bloombergLafarge is proceeding with plans to build new cement factories in Russia in the face of an industry slowdown.
Worldwide cement producers active in Russia, including global major Holcim, are slashing their expansion plans as demand from property developers shrinks because of the credit crisis, Kommersant reported last week.

Only 15 percent of the projects now in the planning phase will be carried out, the business daily reported, citing the head of the Russian cement makers' union, Vyacheslav Boltenko.

France's Lafarge, the other European major working in Russia, is moving ahead with development plans despite the downward trend in demand, the Kommersant report said.

Lafarge has plans to build several new cement factories in Russia at a cost of around 1 billion euros.

European majors rushed to set up production in Russia as prices more than doubled in the 18 months to June of this year, reaching $215 per ton to become the highest in the world after a decade of steady growth.

But the lifting of cement import tariffs in January led Turkish and Chinese producers to flood the market, pushing prices sharply downward and undermining the profit assumptions for the future.

The average price for cement in Russia fell 38 percent to 3,200 rubles a ton since peaking in March, Boltenko told Bloomberg last week. Demand plummeted in southern and central Russia, while Siberia is "relatively stable," he said.

The global financial crisis is now cutting off funding for major construction projects, leading to a sudden drop in demand for cement and further downward pressure on the price. Between June and November of this year, cement prices are set to fall by a third.

Italcementi Group's 600 million euro deal to sell its Turkish unit, Set Cimento, to Russia's Sibcement is also at risk of collapsing, Kommersant reported.

Reuters, Bloomberg, MT