The building materials market - 2022: a sharp increase and a rapid fall

Yekaterina Maksimova

In 2019-2020, in Russia, due to the reform and introduction of escrow accounts, developers began to build fewer residential buildings, Kirill Kholopik, head of the Unified Resource of Developers portal, noted in an interview with Novye Izvestia . In 2021, on the contrary, an increase in the output of new projects was recorded.

Cement costs a stake

This was an excellent signal for the building materials market for the next few years. And cement producers ended the first quarter of 2022 with a positive: production increased by almost 21% (to 10.8 million tons).

“However, with the beginning of the SVO, the growth rate of cement production slowed down significantly,” said Alexey Semenov, General Director of GS-Expert LLC. According to him, in the "hottest" construction months, the growth rate of cement production was 2.3%, 0.4% (June!), 1.7%. In September, the figures fell to 0.4%, and manufacturers finished October with a reduction of 5%.

“Similar trends are observed in the consumption of cement. And the main volume of consumption is domestic products, the share of imports does not exceed 3%,” adds Alexey Semenov. By the beginning of the fourth quarter, the consumption of the main building material in Russia had already decreased by 5.4%.

According to SMPRO, following the results of 11 months, the dynamics of cement shipment by rail was also negative (-3.4%). A decrease in cement consumption is observed in all federal districts of the country. But the Far East, Volga, Siberian and Ural districts became the anti-leaders, where the fall varied from 6.4% to 4.2%.

“The slowdown in the growth rates of cement production and consumption began against the backdrop of the SVO and was due to several factors. This is the general decline of the Russian economy against the backdrop of sanctions pressure, and the withdrawal of a number of foreign companies from the Russian market, and the fall in real incomes of the population. Plus, the difficulties that have arisen with the supply of imported components, consumables, general economic uncertainty, etc.,” adds Semenov.

According to him, taking into account the prosperous first quarter, the cement industry will still end the year with an increase of 1-1.5% (about 60.6-61 million tons of cement). Consumption of cement will also grow by about 1% to 61.0 million tons. This is despite the fact that Russian plants in total can produce up to 100 million tons of cement per year.

The annual results of housing construction have not yet been summed up, but as Aleksey Belousov , a member of the board of the Association "National Association of Builders" believes, the record of 2021 will be broken in housing commissioning, taking into account individual housing construction. “In general, we have grown in terms of square meters compared to last year, I think, by five percent,” Belousov believes.

Last year, 92.6 million square meters were built in Russia. meters of housing. According to Rosstat, more than 60 million square meters were commissioned in the first half of 2022. At the same time, almost half of the housing, which does not fit into the statistics of past years, was built by the Russians themselves. According to the agency, the population accounted for 38.07 million square meters. m, or 62.8%.

According to Belousov, next year will not be a period of failure, since the construction cycle, taking into account the activation of developers in 2021, is 2-3 years. “The projects that have been started must be completed, but in 2024, with a decrease in construction volumes, we will feel pressure, which will be significant,” Belousov concluded.

Dmitry Pozharov, director of the national association Union of Concrete Producers, has a pessimistic forecast for 2023. “In the fourth quarter of 2022, a 15% decrease in volumes with a clear trend towards an even greater decline in December. In part, the decline slows down and to some extent compensates for infrastructure construction with public funding. In 2023, we expect a decrease in output by 3-7%,” Pozharov believes.

Failure of the year

The most significant losses at the end of the year were among domestic glass producers.

“In the sheet glass segment, output decreased by 12%. The decrease in production volumes is largely due to the fact that a significant part of Russian glass was traditionally shipped for export, and with the start of the SVO, supply chains were disrupted, plus there were problems with payment, insurance, etc. due to the imposed sanctions,” explained Alexey Semenov, General Director of GS-Expert LLC.

The dynamics of rail shipments (and the share of rail shipments to the domestic market is about 20%) for the first nine months fell to -6.6%. Negative consumption results were shown by all federal districts, except for the Southern Federal District (+13.4%) and the Far East Federal District (+5.5%).

Rubble saved the roads

As Aleksey Belousov noted, this year, crushed stone, as one of the main components of road construction, "lasted" due to serious investments in road construction. Aleksey Semyonov agrees and adds: according to the results of three quarters, the production of crushed stone increased by 6% (up to 192 million m3). But even here the first quarter helped the producers.

“Production growth rates in the first quarter were also quite high - 5-18% mom. In the 2nd quarter, the growth rate slowed down significantly - to 1-3% mom, and then began to increase again, exceeding 10% in October. The growth in the consumption of crushed stone in the summer and autumn periods was just associated with the implementation of programs for the construction and repair of roads, ”adds Semenov.

Consumption of crushed stone, according to "SMPRO", has sharply increased four federal districts: the North Caucasus Federal District (+46.8%), Volga, North-Western and Siberian. The most significant drop was recorded in the Southern Federal District (-19.7%).

Evgeny Vysotsky, executive director of SMPRO, an expert on the building materials market, emphasizes that only construction can support manufacturers of building materials, but there are practically no factors for increasing demand, Vysotsky believes.

“Moreover, they are already talking about the abolition of preferential mortgages, as well as the termination of near-zero mortgage programs. And this means that the demand for housing will fall (by at least 10%, following the example of previous years). Consequently, the demand for building materials will also decrease. As a rule, the depth of the decline in the building materials industry is more significant. For example, the cement industry sank by 27% during the crisis of 2008, and by 25% in the period of 2014-2018. So far, the market has not returned to the level of 2012. Now we understand that it will not return until 2030,” said Evgeny Vysotsky.

His forecast: the trend of autumn 2022 indicates the beginning of a downward movement, which will most likely continue in the following periods.